315 Ballpark OM

315 BALLPARK offering memorandum 1

CONTENTS LEAD AGENTS Brian Johnston Associate Cincinnati Office D. 513.878.7704 brian.johnston@marcusmillichap.com

Jordan Dickman First Vice President Investments Cincinnati Office D. 513.878.7735 jordan.dickman@marcusmillichap.com

Nick Andrews First Vice President Investments Cincinnati Office D. 513.878.7741 nicholas.andrews@marcusmillichap.com

Austin Sum Senior Associate Cincinnati Office D. 513.878.7747 austin.sum@marcusmillichap.com

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“OUR COMMITMENT IS TO HELP OUR CLIENTS CREATE AND PRESERVE WEALTH BY PROVIDING THEM WITH THE BEST REAL ESTATE INVESTMENT SALES, FINANCING, RESEARCH AND ADVISORY SERVICES AVAILABLE.”

SECTIONS

01 - THE INVESTMENT

06

02 - local competitors

16

03 - FINANCIALS

28

04 - LOCAL MARKET

36

NON-ENDORSEMENT & DISCLAIMER NOTICE CONFIDENTIALITY DISCLAIMER THIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRAISAL. This information has been secured from sources we believe to be reliable, but we make no representations or warranties, express or implied, as to the accuracy of the information.

References to square footage or age are approximate.

Buyer must verify the information and bears all risk for any inaccuracies.

NON-ENDORSEMENT NOTICE Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation’s logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.

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4

CALABASAS, CALIFORNIA | HQ

80+ | OFFICES

2,500 | EMPLOYEES

UNRIVALED SUCCESS IN THE MIDWEST YOUR TEAM

C ORPORATE SUPPORT

JO RDA N DI C K M A N FI RS T V I CE P R E S I D EN T S DI R EC T OR , N M H G

L IZ PO PP M IDW E ST OPE R ATIONS MANAG ER

NI C K A N DR E WS FI RS T V I CE P R E S I D EN T S DI R EC T OR , N M H G

JO S H CA R UA NA V ICE PR E SIDE N T R E GION A L M A N A GER IN DIA N A POL IS | C INC INNATI | LOUISVILLE | ST LOUIS | KANSAS C ITY

AUS TI N SUM S E NI OR I N V E S TME N T AS S OC I AT E B RIAN JO H N ST O N I NVE S TME N T A S S O C I AT E AUS TI N H a l l I NVE S TME N T A S S O C I AT E ALDEN SI M M I S I NVE S TME N T A S S O C I AT E

JO HN S E BR E E SE N IOR V ICE PR E SIDENT N A T ION A L DIR E CTOR N A T ION A L M U LT I HOUSING G ROUP MICHA E L G L A S S SE N IOR V ICE PR E SIDENT M IDW E ST DIVISIO N MANAG ER N A T ION A L DIR E CTOR, MANUFAC TURED HOME C OMMUNITIES G ROUP

BROKER SUPPORT SAM PE T R O Si n o VALUA TI O N & R E S E AR C H

BR IT TA NY CA MPBE L L- KO CH DIR E CT OR OF OPE R A T ION S

SKLY E R WI L SO N CLI E NT R E LA TI O N S M AN AG ER

A L E X PA PA M A R K E T IN G COOR DIN A T OR

5

THE INVESTMENT

PROPERTY SNAPSHOT

3 1 5 B A L L PA R K Property Address: City, State, Zip: County: Year Built/Reno: Number Of Units: Avg Unit Size: Rentable Sqft: Number of Parcels: Lot Size (Acres): Density: # of Buildings: # of Stories: Current Occupancy: Parking Type: Parking Surface: Foundation: Framing: Roof Type/Age: Exterior of Building: Windows Age/Pane: Wiring:

315 Ballpark Dr. Lexington, KY 40505 Fayette 1963/2021 18 528 9500 1 0.1745 103.1518625 1 2 89% Off-Street & Street Concrete Concrete Wood Flat-Rubberized Brick Double-Hung / 2021 Copper

UTILITIES Electric: Gas: Water/Sewer: Cable/Internet: Trash:

Owner Owner Owner Tenant Owner

INVESTMENT HIGHLIGHTS

3 1 5 B A L L PA R K Marcus & Millichap is pleased to present 315 Ballpark Dr., a 18-unit apartment complex located in the Northeast Submarket of Lexington, KY. The apartment complex consists of 14 studios, 3 1-bedroom, 1-bathroom units, and 1 2-bedroom, 1-bathroom unit. The asset has received a significant amount of capital improvements ranging from new bathrooms and kitchens to new windows and new PTAC units and continues to see investment as units turn. The asset offers an investor to take advantage of the renovated apartments and push rents.

The portfolio is finishing lease-up for the remaining units and poised for strong cash flow.

SUBMARKET HIGHLIGHTS

SIGNIFICANT CAPITAL IMPROVEMENTS

•

The Lexington Northeast Submarket is highlighted by its excellent connectivity with direct access to New Circle, N Broadway Rd., and I-75

•

Chick-Fil-A was recently developed in this submarket and located off New Circle Rd. It is less than a mile away from 315 Ballpark Dr.

Between the current ownership group and the prior, there has been significant capital investment to upgrade the units with higher end finishes as well as maintain and preserve the buildings structures and mechanicals. The units have received the following upgrades (unit upgrades vary);

•

•

Nearby employers include: LexMark, UPS Distribution, Jiff Peanut Butter Factory, & Bluegrass Community Technical College Rental rates in the Northeast Submarket has seen on average 11.5% rental growth over the last 12 months

•

New Kitchen Appliances (White or Black)

•

LVP Flooring in select units/Refinished Hardwood Floors

•

New Kitchen Cabinets

•

New Locks

•

New Formica/Laminate Countertops

•

Updated Tub Surround

•

New Paint/Drywall

•

New Bathroom Vanities

•

New PTAC Units

The buildings and common areas have received the following CAPEX since July 2021 to improve the quality of the asset. The asset has received the following updates: •

All Windows Replace

•

All Plumbing Stacks Re-done

•

Implement Security System

•

Added Fencing around the Property

DEAL SUMMARY 9,500 18 528 R EN TABL E S QUA RE FEET

TOTA L UNITS

PROPERTY SUMMARY Studio

14

#1 Bedrooms

3

#2 Bedrooms

1

315 B ALLPARK

AVG SF

rent competitors

RENT COMPETITORS

c o n t i n e n ta l square a pa rt m e t n s 1508 Continental Square Dr. UNITS YEAR BUILT OCCUPANCY UNIT MIX Studio

UNITS 48

SQFT 404

RENT $900

236 1965 92.0% RENT/SF $2.23

One Bedroom

145

519

$950

$1.83

Two Bedroom

43

796

$1,045

$1.31

Apartment Interior Amenities Carpet/LVP Flooring White Appliances Dishwasher Microwave Bathroom Vanity Common Area Amenities Pet Friendly Laundry Facilities Grilling Areas

Utilities Responsibility Electric - Owner Gas - Owner Water/Sewer Owner Trash - Owner

RENT COMPETITORS

hartford place 1598 Martha Ct. Units Year Built Occupancy UNIT MIX Studio

UNITS 30

SQFT 500

RENT $630

49 1970 91.8% RENT/SF $1.26

One Bedroom

4

600

$728

$1.21

Two Bedroom

15

887

$912

$1.03

Apartment Interior Amenities Black/White Appliances Hardwood/Tile Floors Light Fixtures Bathroom Vanity Bathroom Tub-Surround Common Area Amenities On-Site Laundry On-Site Parking Property Manager On-Site Maintenance On-Site

Utilities Responsibility Electric - Owner Gas - Owner Water/Sewer Owner Trash - Owner

RENT COMPETITORS

pinewood place 1602-1616 Jennifer Dr. UNITS YEAR BUILT OCCUPANCY UNIT MIX Studio

UNITS 24

SQFT 450

RENT $675

91 1964 100.0% RENT/SF $1.50

One Bedroom

67

630

$750

$1.19

Apartment Interior Amenities Carpet/Tile Flooring White Appliances Microwaves Walk-In Closets Bathroom Tub-Surround Common Area Amenities On-Site Parking Courtyard Pet-Friendly

Utilities Responsibility Electric - Owner Gas - Owner Water/Sewer Owner Trash - Owner

L O C AT I O N S *

1 2 3

REN T C OMPAR ABLE S 1

CONTINENTAL SQUARE

2

HARTFORD PLACE

3

PINEWOOD PLACE

STUDIO

LOCAL COMPETITORS

Studio Property Continental Square Apartments Subject Pro Forma Subject Average Effective

Year Built 1965 1963 1963

# Units 236 18 18

Avg SF 404 475 475

Avg Rent $900 $775 $734

255-257 Lyndhurst PL. Bourbon Court Apartments Pinewood Place 167 Eastern Ave. Hartford Place Preston Arms Broadway Terrace Apartments

1938 1966 1964 1966 1970 1922 1964

30 218 91 5 49 24 18

600 600 450 325 500 400 400

$725 $709 $675 $650 $630 $625 $600

Avg Rent/SF $2.23 $1.63

$1.55 $1.21 $1.18 $1.50 $2.00 $1.26 $1.56 $1.50

ONE Bedroom

LOCAL COMPETITORS

One Bedroom Property Continental Square Apartments Subject Pro Forma Subject Average Effective

Year Built 1965 1963 1963

# Units 236 18 18

Avg SF 519 650 650

Avg Rent $950 $930 $859

255-257 Lyndhurst PL. Pinewood Place Hartford Place Preston Arms Bourbon Court Apartments

1938 1964 1970 1922 1966

30 91 49 24 218

700 630 600 560 750

$825 $750 $728 $725 $709

Avg Rent/SF $1.83 $1.55

$1.43 $1.18 $1.19 $1.21 $1.29 $0.95

TWO BEDROOM

LOCAL COMPETITORS

Two Bedroom Property

Continental Square Apartments Subject Pro Forma Hartford Place Subject Average Effective Bourbon Court Apartments

Year Built

# Units

Avg SF

Avg Rent

Avg Rent/SF

1965 1963 1970 1963 1966

236 18 49 18 218

796 900 887 900 850

$1,045 $950 $912 $866 $760

$1.31 $1.06 $1.03 $0.96 $0.89

FINANCIALS

28

29

315 BALLPARK FINANCIALS

UNIT MIX SUMMARY AV E R A G E E F F E C T I V E UNIT TYPE

MARKET

NO. OF UNITS

R E N TA B L E S F

T O TA L S F

RENT/UNIT

RENT/SF

T O TA L R E N T POTENTIAL

14 Units 3 Units 1 Units 18 Units

475 SF 650 SF 900 SF 528 SF

6,650 SF 1,950 SF 900 SF 9,500 SF

$718.95 $873.33 $900.00 $754.74

$1.51 $1.34 $1.00 $1.43 SF

$10,065 $2,620 $900 $13,585

RENT/UNIT

$801.67 $930.00 $900.00 $828.52

P RO J E CT E D

RENT/SF

TOTA L R E N T P OT E N T I A L

RENT/UNIT

RENT/SF

TOTA L R E N T P OT E N T I A L

$1.69 SF $1.43 SF $1.00 SF $1.57 SF

$11,223 $2,790 $900 $14,913

$805.00 $945.00 $950.00 $836.39

$1.69 SF $1.45 SF $1.06 SF $1.58 SF

$11,270 $2,835 $950 $15,055

SUMMARY

Studio One Bedroom Two Bedroom Totals / Wtd. Averages

UNIT DISTRIBUTION

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UNIT RENTS

315 BALLPARK FINANCIALS

UNIT MIX BREAKDOWN AV E R A G E E F F E C T I V E

MARKET

P RO J E CT E D

UNIT TYPE

N O . O F U N I TS

R E N TA B L E S F

T O TA L S F

RENT/UNIT

RENT/SF

T O TA L R E N T POTENTIAL

Studio 0BR/1BA

14 Units

475 SF

6,650 SF

$718.95

$1.51 SF

$10,065

$801.67

$1.69 SF

$11,223

$805.00

$1.69 SF

$11,270

Totals / Wtd. Averages

14 Units

475 SF

6,650 SF

$718.95

$1.51 SF

$10,065

$801.67

$1.69 SF

$11,223

$805.00

$1.69 SF

$11,270

One Bedroom 1BR/1BA

3 Units

650 SF

1,950 SF

$873.33

$1.34 SF

$2,620

$930.00

$1.43 SF

$2,790

$945.00

$1.45 SF

$2,835

Totals / Wtd. Averages

3 Units

650 SF

1,950 SF

$873.33

$1.34 SF

$2,620

$930.00

$1.43 SF

$2,790

$945.00

$1.45 SF

$2,835

Two Bedroom 2BR/1BA

1 Units

900 SF

900 SF

$900.00

$1.00 SF

$900

$900.00

$1.00 SF

$900

$950.00

$1.06 SF

$950

Totals / Wtd. Averages

1 Units

900 SF

900 SF

$900.00

$1.00 SF

$900

$900.00

$1.00 SF

$900

$950.00

$1.06 SF

$950

RENT/UNIT

RENT/SF

TOTA L R E N T P OT E N T I A L

RENT/UNIT

RENT/SF

TOTA L R E N T P OT E N T I A L

31

INCOME EXPENSE

315 BALLPARK - FINANCIALS

INCOME & EXPENSES 32

GROSS POTENTIAL RENT All Units at Market Rent Gain (Loss) to Lease GROSS SCHEDULED RENT Other Income Utility Income Late Fee Income Convenience Fee Pet Rent NSF Fee Income Application Fee Income Total Other Income GROSS POTENTIAL INCOME Physical Vacancy Bad Debt EFFECTIVE GROSS INCOME NON-CONTROLLABLE Real Estate Taxes 2022 Taxes Paid Adjustment for Sale Total Real Estate Taxes Insurance Utilities Electric Gas Water & Sewage Trash Removal Total Utilities Total Non-Controllable CONTROLLABLE Contract Services Landscaping/Grounds Pest Control Total Contract Services Repairs & Maintenance Marketing & Promotion On-Site Payroll Payroll Taxes & Benefits General & Administrative Management Fee Replacement & Reserves Total Controllable TOTAL EXPENSES NET OPERATING INCOME

CURRENT RENT ROLL: AS OF JUNE 15, 2023 INCOME & EXPENSES: MAY 2022 - FEBRUARY 2023 % of GPR $178,961 RR ($21,174) 11.83% $157,787 RR

$6,818 $2,414 $1,699 $129 $35 $25 $11,120 $168,907 ($13,969) $0 $154,938

YEAR 1

Per Unit 9,942 (1,176) 8,766

$180,660 ($3,613) $177,047

% of GPR

$7,023 $2,486 $1,750 $133 $36 $26 $11,454 $188,501 ($8,852) ($1,770) $177,878

5.00% 1.00% 92.00%

390 138 97 7 2 1 636 10,472 (492) (98) 9,882

2.00%

T12 T12 T12 T12 T12 T12

4.32% 1.53% 1.08% 0.08% 0.02% 0.02% 7.05%

T3 Economic

8.85% 0.00% 79.32%

379 134 94 7 2 1 618 9,384 (776) 0 8,608

$8,018 Auditor $5,982 $14,000 $3,237 T12

% of EGI 5.17% 3.86% 9.04% 2.09%

Per Unit 445 332 778 180

$8,018 $5,982 $14,000 $7,200

4.51% 3.36% 7.87% 4.05%

% of EGI 445 332 778 400

$18,351 $2,760 $11,302 $752 $33,166 $50,403

T12 T12 T12 T12

11.84% 1.78% 7.29% 0.49% 21.41% 32.53%

1,020 153 628 42 1,843 2,800

$18,719 $2,815 $11,528 $767 $33,829 $55,029

10.52% 1.58% 6.48% 0.43% 19.02% 30.94%

1,040 156 640 43 1,879 3,057

$2,528 $119 $2,646 $7,983 $0 $11,066 $0 $4,997 $10,737 $4,590 $42,020 $92,423 $62,515

T12 T12

1.63% 0.08% 1.71% 5.15% 0.00% 7.14% 0.00% 3.23% 6.93% 2.96% 27.12% 59.65% 40.35%

140 7 147 444 0 615 0 278 597 255 2,334 5,135 3,473

$2,700 $450 $3,150 $10,800 $900 $16,200 $1,800 $2,700 $12,451 $4,728 $52,729 $107,758 $70,120

1.52% 0.25% 1.77% 6.07% 0.51% 9.11% 1.01% 1.52% 7.00% 2.66% 29.64% 60.58% 39.42%

150 25 175 600 50 900 100 150 692 263 2,929 5,987 3,896

T12 T12 T12 T12 Note 1

3.97% 1.40% 0.99% 0.08% 0.02% 0.01% 6.47%

Per Unit 10,037 (201) 9,836

YEAR 2

$186,080 ($3,722) $182,358

YEAR 3

% of GPR 2.00% 3.97% 1.40% 0.99% 0.08% 0.02% 0.01% 6.47%

Per Unit 10,338 (207) 10,131

% of GPR

$191,662 ($3,833) $187,829 $7,450 $2,638 $1,857 $141 $38 $27 $12,151 $199,980 ($9,391) ($1,878) $188,711

5.00% 1.00% 92.00%

414 147 103 8 2 2 675 11,110 (522) (104) 10,484

2.00% 3.97% 1.40% 0.99% 0.08% 0.02% 0.01% 6.47%

Per Unit 10,648 (213) 10,435

$7,233 $2,561 $1,803 $137 $37 $27 $11,797 $194,156 ($9,118) ($1,824) $183,214

5.00% 1.00% 92.00%

402 142 100 8 2 1 655 10,786 (507) (101) 10,179

$8,018 $5,982 $14,000 $7,416

% of EGI 4.38% 3.26% 7.64% 4.05%

Per Unit 445 332 778 412

$8,018 $5,982 $14,000 $7,638

% of EGI 4.38% 3.26% 7.64% 4.17%

Per Unit 445 332 778 424

$19,093 $2,872 $11,759 $782 $34,506 $55,921

10.42% 1.57% 6.42% 0.43% 18.83% 30.52%

1,061 160 653 43 1,917 3,107

$19,475 $2,929 $11,994 $798 $35,196 $56,834

10.63% 1.60% 6.55% 0.44% 19.21% 31.02%

1,082 163 666 44 1,955 3,157

$2,781 $464 $3,245 $11,124 $927 $16,686 $1,854 $2,781 $12,825 $4,870 $54,311 $110,232 $72,982

1.52% 0.25% 1.77% 6.07% 0.51% 9.11% 1.01% 1.52% 7.00% 2.66% 29.64% 60.17% 39.83%

155 26 180 618 52 927 103 155 712 271 3,017 6,124 4,055

$2,864 $477 $3,342 $11,458 $955 $17,187 $1,910 $2,864 $13,210 $5,016 $55,940 $112,774 $75,936

1.56% 0.26% 1.82% 6.25% 0.52% 9.38% 1.04% 1.56% 7.00% 2.74% 30.32% 61.55% 41.45%

159 27 186 637 53 955 106 159 712 279 3,086 6,265 4,219

UNDERWRITING NOTES

#

NOTE

1

Replacement & Reserves: added based on market norm of $255 per unit per year

33

INCOME EXPENSE

315 BALLPARK - FINANCIALS

CASH FLOW 34

CURRENT

YR 1

YR 2

YR 3

YR 4

YR 5

YR 6

YR 7

YR 8

YR 9

YR 10

YE MAR-2024

YE MAR-2025

YE MAR-2026

YE MAR-2027

YE MAR-2028

YE MAR-2029

YE MAR-2030

YE MAR-2031

YE MAR-2032

YE MAR-2033

GROSS POTENTIAL RENT All Units at Market Rent Gain (Loss) to Lease GROSS SCHEDULED RENT Total Other Income GROSS POTENTIAL INCOME Physical Vacancy Bad Debt EFFECTIVE GROSS INCOME

$178,961 ($21,174) $157,787 $11,120 $168,907 ($13,969) $0 $154,938

$180,660 ($3,613) $177,047 $11,454 $188,501 ($8,852) ($1,770) $177,878

$186,080 ($3,722) $182,358 $11,797 $194,156 ($9,118) ($1,824) $183,214

$191,662 ($3,833) $187,829 $12,151 $199,980 ($9,391) ($1,878) $188,711

$197,412 ($3,948) $193,464 $12,516 $205,980 ($9,673) ($1,935) $194,372

$203,334 ($4,067) $199,268 $12,891 $212,159 ($9,963) ($1,993) $200,203

$209,434 ($4,189) $205,246 $13,278 $218,524 ($10,262) ($2,052) $206,209

$215,717 ($4,314) $211,403 $13,676 $225,080 ($10,570) ($2,114) $212,395

$222,189 ($4,444) $217,745 $14,087 $231,832 ($10,887) ($2,177) $218,767

$228,855 ($4,577) $224,278 $14,509 $238,787 ($11,214) ($2,243) $225,330

$235,720 ($4,714) $231,006 $14,945 $245,951 ($11,550) ($2,310) $232,090

Real Estate Taxes Insurance Utilities Contract Services Repairs & Maintenance Marketing & Promotion On-Site Payroll Payroll Taxes & Benefits General & Administrative Management Fee Replacement & Reserves TOTAL EXPENSES

$14,000 $3,237 $33,166 $2,646 $7,983 $0 $11,066 $0 $4,997 $10,737 $4,590 $92,423

$14,000 $7,200 $33,829 $3,150 $10,800 $900 $16,200 $1,800 $2,700 $12,451 $4,728 $107,758

$14,000 $7,416 $34,506 $3,245 $11,124 $927 $16,686 $1,854 $2,781 $12,825 $4,870 $110,232

$14,000 $7,638 $35,196 $3,342 $11,458 $955 $17,187 $1,910 $2,864 $13,210 $5,016 $112,774

$14,420 $7,868 $36,252 $3,442 $11,801 $983 $17,702 $1,967 $2,950 $13,606 $5,166 $116,157

$14,852 $8,104 $37,339 $3,545 $12,155 $1,013 $18,233 $2,026 $3,039 $14,014 $5,321 $119,642

$15,298 $8,347 $38,459 $3,652 $12,520 $1,043 $18,780 $2,087 $3,130 $14,435 $5,481 $123,231

$15,757 $8,597 $39,613 $3,761 $12,896 $1,075 $19,344 $2,149 $3,224 $14,868 $5,645 $126,928

$16,229 $8,855 $40,801 $3,874 $13,283 $1,107 $19,924 $2,214 $3,321 $15,314 $5,814 $130,736

$16,716 $9,121 $42,025 $3,990 $13,681 $1,140 $20,522 $2,280 $3,420 $15,773 $5,989 $134,658

$17,218 $9,394 $43,286 $4,110 $14,092 $1,174 $21,137 $2,349 $3,523 $16,246 $6,169 $138,698

NET OPERATING INCOME

$62,515

$70,120

$72,982

$75,936

$78,215

$80,561

$82,978

$85,467

$88,031

$90,672

$93,392

CASH FLOW PROJECTION GROWTH RATE ASSUMPTIONS YR 1

YR 2

YR 3

YR 4

YR 5

YR 6

YR 7

YR 8

YR 9

YR 10

0.95% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

3.00% 2.00% 3.00%

7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

3.00% 7.00%

Income Gross Potential Rent (Loss) / Gain to Lease* Other Income Expenses Expenses Management Fee**

CASH FLOW PROJECTION GROWTH RATE ASSUMPTIONS Physical Vacancy Non-Revenue Units Bad Debt Concessions Allowance Total Economic Loss

YR 1

YR 2

YR 3

YR 4

YR 5

YR 6

YR 7

YR 8

YR 9

YR 10

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

5.00% 0.00% 1.00% 0.00% 6.00%

*Calculated as a percentage of Gross Potential Rent | **Calculated as a percentage of Effective Gross Income

35

LOCAL MARKET

LEXINGTON, KentuckY Lexington, city, coextensive with Fayette county, north-central Kentucky, U.S., the focus of the Bluegrass region and a major centre for horse breeding. Named in 1775 for the Battle of Lexington, Massachusetts, it was chartered by the Virginia legislature in 1782 and was the meeting place (1792) for the first session of the Kentucky legislature following statehood. Lexington in the early 1880s called itself the Athens of the West, boasting Transylvania College (1780; now Transylvania University), street lights, a public subscription library, a theatre, and a musical society. In 1817 it had presented the first Beethoven symphony heard in the United States.

38

EMERGING TECH HUB Metronet has invested over $100 million in fiberoptic infrastructure making Lexington the largest Gigabit city in the nation. The city’s highspeed infrastructure along with its low cost of living provides 1.54 times the purchasing power compared to Silicon Valley attracting talented tech professionals and startups alike.

EMPLOYERS IN THE NEWS

B O U R B O N D I S T I L L E R Y B U F F A L O T R A C E

Buffalo Trace distillery, based out of Kentucky, has made progress in its $1.2 billion expansion, which includes the construction of an additional still, more barrel warehouses, added fermenters and an expansion of the dry house operation.

Over the past year, a second still house has been built next to the existing 1930s structure. At 40 ft tall, it has doubled production capacity and holds 60,000 gallons.

• The University of Kentucky approved a purchase agreement for $6.9 Million to acquire land for construciton of a new outpatient cancer treatment center and advanced ambulatory complex. (Dec 2021) • New $37.5 million Lexington Distillery District hotel will open in spring 2023 (Dec 2021) • The University of Kentucky gives the city of Lexington 250 acres in and near the Coldstream Research Campus where office, laboratory, residential and hospitality developments are planned. A new, $15 million hightech building currently under construction will provide office and laboratory space for early-stage, high-tech companies to develop and commercialize their products and services. (Oct 2021).

• TMMK to invest $461 million in upgrades at Georgetown Toyota plant. (Oct 2021) • Buffalo Trace Distillery makes headway on $1.2 billion expansion (Aug 2021) • Lexington-based Quality Logistics LLC, doing business as Longship, opened its new office in Fayette County, a $4.3 million investment creating 155 well-paying jobs for Kentucky residents (Aug 2021) 39

the economy • Prior to the pandemic, Lexington-Fayette’s real gross metropolitan product grew at an average annual rate of 1.4% from 2015 to 2019. During that same five-year period, job growth averaged 1.2% annually, with roughly 3,100 jobs added on average each year. In 2020, COVID-19 mitigation measures and limited business activity caused the local economy to contract as much as 9.7% year-over-year in 2nd quarter.

• In the year-ending 3rd quarter 2022, the metro’s inflation-adjusted economic output contracted 0.4%. At the same time, the metro recorded a

D E M O G R A P H I C S : S TA T I S T I C S

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Population: 514,273

Average occupancy: 96.2%

Median age: 36.2

Rent growth: 12.4%

MSA median home value: $193,700

MSA median hhi: $60,729

1 - Year growth: 6.02%

1 - Year growth: 3.55%

net gain of 7,500 jobs, expanding the employment base 2.7%.

• Lexington-Fayette’s unemployment rate in August 2022 declined 0.8 points year-over-year to 3.0%, below the national average of 3.8%.

• During the past year, job gains in Lexington-Fayette were most pronounced in the Leisure/Hospitality Services sector followed by Trade/ Transportation/Utilities, despite job losses stemming from the pandemic, Lexington-Fayette’s current employment base now sits roughly 2,700 jobs or about 1% above the pre-pandemic level in February 2020.

the rent

• In 3rd quarter 2022, effective asking rents for new leases were up 12.4% year-over-year.

• Annual rent performance was above the market’s five-year average of 5.2%.

• Product classes in Lexington-Fayette, Class A led for rent performance over the past five years.

In 3rd quarter 2022, annual effective rent change registered at 12.

9% in Class A units, 12.0% in Class B units and 11. 9% in Class C units.

• Among submarkets, the strongest annual rent change performance over the past year was in Downtown Lexington/University (13.5%).

The weakest performance was in North Lexington (11.4%).

• The coming year, effective asking rent change in Lexington-Fayette is expected to slow from the current level.

S U P P LY & DEMAND • The level of new apartment completions in Lexington-Fayette were modest recently, as 252 units delivered in the year-ending 3rd quarter 2021. That annual completion volume compares to a low of 24 units and a high of 900 units over the past five years. Annual new supply averaged 357 units, and annual inventory growth averaged 0.6% over the past five years.

• Completions over the past year expanded the local inventory base 0.6% and were concentrated only in the Downtown Lexington/University submarket.

• Over the next year, inventory growth is set to accelerate with the scheduled addition of 680 units. At the end of 3rd quarter 2021, there were 866 units under construction.

• New supply over the past five years has been concentrated in South Lexington, which received 58% of the market’s total completions over that time. Scheduled new deliveries in the coming year are expected to deliver in South Lexington and North Lexington.

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MARKET DRIVERS

Market drivers are the underlying forces that compel consumers to purchase products and pay for services. These are trends that make markets develop and grow. The most common market drivers are consumer demand, government policy and demand. Before a business takes its product or service to the market, it must first understand who exactly is likely to purchase it. This is known as the target market.

1

University of Kentucky

2

Toyota

3

Baptist Health

4

Amazon.com

5

Lexmark

6

Hitachi

7

Lockheed Martin

8

Adient

9

Link-Belt

10

Webasto

11

Valvoline

12

Big Ass Fans

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Tempur- Sealy

2

8

12 10 4

13 7

5 1 3 9 11

6

Lexington O C C U PA N CY • Over the past year, occupancy lost 1.3 points, with the 3rd quarter 2022 rate landing at 96.2%.

• Product classes in Lexington-Fayette, 3rd quarter 2022 occupancy registered at 95.7% in Class A units, 96.1% in Class B units and 97.1% in Class C units.

• Among submarkets, 3rd quarter 2022 occupancy was strongest in North Lexington.

• The weakest reading was seen in Downtown Lexington/University.

• During the coming year, occupancy in Lexington-Fayette is expected to register around 96%.

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ATTRACTIONS

KEENELAND race track Lexington, the heart of Kentucky “bluegrass,” has been renowned for two centuries for horse raising and horse racing.

Shortly after the track’s completion in 1936, Keeneland Racetrack became the most conspicuous manifestation of this culture. Jack Keene, for whom Keeneland is named, was an extraordinary figure in American racing, and helped revive this industry during the 1930s when it was beginning to suffer. Keene was a descendant of a distinguished Lexington family and was known worldwide as a trainer of thoroughbreds. After training abroad in Russia and Japan he returned to Kentucky where he began laying out the Keeneland racecourse in 1916. The main track is one and 1/16th miles in circumference and has retained this length since its original inception by Keene. The grounds also include Keene’s mansion and training center. Constructed of limestone that was quarried on Keene’s farm, this building was designed with living quarters, a large clubroom and stalls. The two-story center section of the building is flanked on either side by stone arcades leading to three-story wings of the building.

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KENTUCKY HORSE PA R K The Kentucky Horse Park is a working horse farm, educational theme park and equine competition facility dedicated to man’s relationship with the horse. Set on more than 1,200 acres in the heart of the Kentucky’s famous Bluegrass region, the park is THE place to get close to horses! Featuring dozens of breeds of horse at work and at play, the park showcases the horse in daily equine presentations, horse drawn tours, horseback and pony rides, and an array of horse shows and special events throughout the year.

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HIGHER EDUCATION The innovation, creativity, quality teaching, and uplifting service underway at the University of Kentucky touch the lives of people throughout the state, the nation, and the world. This is the covenant we honor through ground-breaking research, community outreach, intellectually rigorous education, and techno- logical advances that contribute to the betterment of the Commonwealth while also fostering a cultural quality of

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Founded in 1865, the University of Kentucky is a single campus at the heart of the Blue-grass. More than 100 countries are represented in the student body at UK. UK has over 200 academic programs and last spring, there were 29,182 students enrolled. With more than 12,000 staff and 2,000 faculty, UK is one of the largest employers in the state.

UNIVERSITY oF KENTUCKY In an extensive study conducted by the Associated Press and then revealed in 2017, the University of Kentucky men’s basketball program was rated as the greatest of its kind ever. Certainly, more current NBA players have emerged from the Wildcats’ ranks than from any other college team, with DeMarcus Cousins, John Wall, and Anthony Davis just some of the University of Kentucky’s former stars.

The Wildcats also clinched the NCAA Division I Men’s Basketball Tournament in 2012 and have progressed to the men’s Final Four on four occasions since 2011.

team

fa c t s 20,500 RUPP AREA FACILITY CAPACITY 20 NCAA CHAMPIONSHIP WINS $19.5M IN TICKETS 4 FINAL FOUR APPEARANCES

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