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Table of Contents

Introduction

About CAF Companies

CAF Year in Review: 2023

Refinance/Recapitalization Activity

Third Party Management Additions

Key Personnel Additions

Process & Operational Improvements

DOMO

Entrada Pricing/Job Costing/Utility Platform

Loan Boss

Quarterly Reporting

The Current Economic Landscape

Introduction

Top Key Takeaways from the Macro Economy in 2023

Rate Cuts on the Horizon

Dynamic Monetary Landscape

Navigating Inflation Challenges

Labor Market Dynamics and Consumer Trends

Supply Chain Resilience and Housing Market Stability

Complexities of Fiscal Management

Challenges Across Sectors

Could Unemployment Be the Next Risk

How Economic Challenges are Impacting the Multifamily Sector Occupancy by Class CAF Companies 2024 Multifamily Outlook & Strategy

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Table of Contents

New Construction Starts and Rents

Investment Sales Volume and Pricing

Multifamily Average Cap Rate & 10-year Treasury

Dry Powder vs. Historical Sales Activity

Conclusion Steering through Uncertainties: CAF’s Operations and Risk Strategy

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Property Operations: Occupancy, Collections, Trade-Outs, and Social Impact

Capital Expenditures & Property Operations

Occupancy

Collections

Lease Tradeouts (LTO)

Social Impact

Triple Threat

Interest Rates

Why Was Floating Rate Chosen

Interest Rate Caps

Insurance

Property Taxes

Property Tax Timeline in Texas

CAF Acquisition Strategy

Opportunity Looming

Best Historical Investments

Identifying Top Markets

Acquisition Strategies

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Table of Contents

Lease-Up

Core Plus/Light Value Add

Workforce Housing

Triangulating a Thesis & Conclusion

Final Thoughts

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Introduction As we reflect on the dynamic evolving multifamily landscape, it’s evident that our journey this year has been both interesting and filled with challenges. The multifaceted nature of the environment, with its nuances in economic growth, monetary policy shifts, and sector-specific challenges, has required our team to exhibit resilience, strategic thinking, and adaptability. In the face of this complexity, I am proud to acknowledge the tremendous job our team has done in navigating these uncharted waters. As we confront the challenges on the horizon, our seasoned team has demonstrated unparalleled focus and agility. Throughout the intricacies of 2023’s economic landscape, we’ve remained steadfast in our commitment to a hands-on, adaptive approach. We have proactively strategized to overcome obstacles and capitalize on opportunities through five refinanced/recapitalized deals. The complexities of this year have only strengthened our resolve, positioning us well to face whatever challenges lie ahead. Looking beyond the immediate hurdles, our emphasis is not just on weathering the storm but on ensuring the enduring prosperity of our investments. The proactive steps we’re taking to position our assets for success reflect our dedication to sustained value creation. In this 2024 edition, we’ll provide an insightful analysis of the economic landscape’s impact on the multifamily sector, offer transparency into our portfolio’s performance, and detail our strategic initiatives to navigate through uncertainties. Additionally, we’ll outline our perspective on emerging opportunities to continue driving value for our investors, even in these turbulent times. Investor relationships are the bedrock of our journey, and we hold a profound appreciation for each and every partnership. We remain laser focused on doing everything within our control to steward, protect and expand investor capital.

Chris Faulkner CEO & Founder CAF Capital

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About CAF Companies

CAF Companies was founded in 2010 and consists of four components: CAF Capital Partners, CAF Management, CTB Multifamily, and CAF Funds. Headquartered in Frisco, TX the CAF teams consist of highly respected, seasoned, real estate and business executives, partnered with strong industry professionals and market experts with institutional backgrounds. CAF Capital Partners is a private equity real estate firm, specializing in the acquisition, redevelopment, repositioning, and subsequent sale of institutional quality multifamily real estate. CAF Management is a property management firm founded in 2015 with extensive property management experience across its growing team of professionals. The CAF Management team has grown to include 23,000+ units under management at the time of this publication. CTB Multifamily is a maintenance, construction, and valet waste company. The CTB team has over 50 years of combined property, operations, and maintenance experience with multifamily communities. CAF Funds is the subsidiary of CAF Companies behind CAF’s Workforce Housing + Social Impact Platform. The Funds division emphasizes an investment philosophy focused on complimenting property returns by implementing social resources and programming aimed at enhancing resident quality of life in our communities. CAF has completed the full cycle (acquisition to disposition) on 28 assets totaling 9,292 units worth $1.67 billion in sale price creating over $400 million worth of equity for investors. CAF’s average return to investors has been a 24%+ IRR, 1.78x Equity Multiple, with an average hold time of 3.8 years. As of this writing, CAF Companies has over 60 full-time corporate employees and 500+ onsite management personnel. CAF owns and operates 75 properties totaling 23,018 units across Dallas, Fort Worth, Houston, Austin, Corpus Christi, Oklahoma City, and Phoenix. CAF Companies 2024 Multifamily Outlook & Strategy

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CAF Year in Review: 2023 “At CAF, we’re continuing to strategically look across the company and evaluate every aspect of our business to continually evolve, improve, and enhance both our residents and investor experience. Through diligent expense management to strategic partnerships, everything is being scrutinized. From the cost of a can of paint, insurance renewal premiums, to employee healthcare, we’re constantly evaluating to maximize value to our investors.” Trent Wood, President of CAF Companies

Refinance/Recapitalization Activity •

• •

Victory North--Refinanced in April to agency five-year debt with fixed rate. Able to distribute approximately 10% invested capital back to investors. Evoke—Refinanced in May to agency ten-year debt with fixed rate. Avalon & Thornbury—recapitalized in May with a PFC structure (tax abatement in exchange for affordable housing). Investors received their 10% preferred return from the transaction. Residences at Pearland—recapitalized in June into a DST where we’ll retain management. Arbors on Oakmont—recapitalized on December 15th, 2023, with agency fixed rate debt. Investors received equity back along with 10% preferred return.

Third Party Management Additions This year, CAF Management assumed control of ten fee-managed properties (One is pending and imminent), comprising a total of 2,419 units. Notably, CAF has achieved this expansion solely through organic growth and word-of-mouth referrals, without engaging in any costly business development initiatives. If you know of anyone interested in having a conversation about our third-party management business, please have them reach out to investors@ cafcompanies.com. • • •

Landings at McCallum, 418 units, Dallas The Pointe, 96 units, Corpus Christi The Estates, 110 units, Corpus Christi

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• • • • • • •

The Waters, 89 units, Corpus Christi Tides on Westcreek, 272 units, Dallas Tides on McDowell, 274 units, Phoenix, AZ The Dahlia, 206 units, Dallas. Puerto Del Mar, 580 units, Corpus Christi. Wray North Dallas, 276 units, Dallas Ocean Drive Estates, 98 units, Corpus Christi

Key Personnel Additions CAF added Jason Geer as SVP of Acquisitions to spearhead expansion of our portfolio in new markets. Jason brings over 25 years of multifamily real estate investment experience to CAF. He joins us most recently from Invesco Real Estate where he served in a variety of capacities.

Process & Operational Improvements

DOMO: We implemented Domo, a cloud-based business intelligence platform, to bolster our data analysis and reporting capabilities. The Domo BI solution has allowed our reporting and analytics team to work more efficiently, deliver insights faster, and create more impactful data visualizations across our portfolio. By adopting this business intelligence software, we have upgraded our analytics firepower.

Entrata Pricing/Job Costing/Utility Platform: We added new Entrata platform capabilities for pricing optimization, job costing, and utility tracking. These ancillary tools integrate with our core Entrata property management system to further streamline operational efficiencies. The additional Entrata modules allow us to manage pricing, maintenance costs, and utility expenses more effectively across the portfolio. By expanding our Entrata solution, we have enhanced our operational performance.

Loan Boss: We added a debt management software platform for multifamily real estate that allows us to manage our debt smarter by providing a centralized space for us to see each loan in a quick overview but also allows us to dig into each loan for more details.

Quarterly Reporting: At CAF, we provide comprehensive quarterly reports to keep our investors closely informed on the operational and financial performance of their assets. These quarterly updates offer a valuable snapshot of how each property is progressing relative to budgets and forecasts. The reports outline key metrics across areas such as occupancy, rental rates, operating expenses, capital projects, and net operating income.

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The Current Economic Landscape

Introduction In the current economic landscape, the U.S. economy stands resilient, surpassing expectations with a 2.0-2.4% annualized GDP growth. Monetary policy is poised for a shift as the Federal Reserve nears the end of one of the steepest hiking cycles in four decades, while inflation, though gradually improving, continues to pose challenges. Labor markets, tight yet showing signs of cooling, and the fading tailwinds for U.S. consumers paint a nuanced picture. Supply chain bottlenecks are easing, the housing market is stabilizing, and challenges loom in the commercial real estate and banking sectors. As we navigate these complexities, the multifamily housing sector faces a delicate equilibrium, balancing the impact of supply dynamics, shifting demand, and economic uncertainties.

Top Key Takeaways from the Macro Economy in 2023 We consistently evaluate macroeconomic factors, including interest rates, labor markets, and occupancy rates. Additionally, we delve into insights provided by various experts to enhance our understanding and inform our decision-making processes. The next section will navigate you through key insights from the macro environment and multifamily markets, blending both our understanding with expert sources and opinions. These represent broad nationwide perspectives and may not align with the conditions in our specific local markets, which are expected to perform more favorably. Rate Cuts on the Horizon: As a result of several consecutive meetings without any further rate increases, the markets began to recognize that there could be a change in direction with the Federal Reserve and interest rates. In December, the Federal Reserve made a notable announcement, signaling its intention to maintain the current federal funds rate while also acknowledging that rate cuts were now considered part of its base case for 2024. This marked a departure from the previous “higher for longer” stance and presented a new possibility. Now, the focus CAF Companies 2024 Multifamily Outlook & Strategy

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lies not on whether rate cuts will occur, but on when they will take place. This impending shift is poised to substantially ease the pressures currently experienced in the commercial sector, particularly concerning floating-rate debt and/or the replacement of interest rate caps. Dynamic Monetary Landscape: As the Federal Reserve nears the conclusion of its rapid hiking cycle, having raised rates by 525 basis points since March 2022, a paradigm shift is unfolding in monetary policy. The focus transitions to inflation control with ongoing quantitative tightening. The current monthly reduction of approximately $100 billion seeks to influence both markets and the broader economy by strategically reducing liquidity. As of this writing, it is becoming more and more expected that there will likely be an easing of interest rates by the Federal Reserve. Likely between Q2 and Q4. Navigating Inflation Challenges: Inflation, a persistent force, displays signs of gradual improvement on the horizon. Falling energy prices contribute to a reduction in headline inflation, while core metrics show slower but steady progress. Core goods inflation has continued to improve, however the threat of persistent inflationary pressures has kept the Fed holding firm. Labor Market Dynamics and Consumer Trends: The labor market remains tightly wound, boasting a low 3.5% unemployment rate. However, emerging challenges, including declining labor force productivity and reduced temporary employment, signal a potential cooling later in the year. Concurrently, U.S. consumer trends reveal diminishing tailwinds as excess pandemic-era savings deplete. While spending resilience persists, challenges arise from a shift towards services and the resumption of student loan payments. Supply Chain Resilience and Housing Market Stability: Supply chain bottlenecks witness resolution, marked by lower shipping costs and increased capacity. Yet, some commodity inputs linger in recovery, presenting ongoing challenges. In the housing market, stabilization follows a 30-40% decline in activity during the latter half of 2022. With 30-year fixed mortgage rates holding steady and median home values remaining elevated, stability returns to housing starts, existing home sales, and home builder sentiment. Complexities of Fiscal Management: The resolution of the debt ceiling episode in June averted a crisis but casts a shadow on economic growth in 2024 and 2025. Fitch’s downgrade of the U.S. rating to AA+ from AAA reflects concerns about higher government borrowing levels and recurring fiscal challenges. Challenges Across Sectors: The banking sector anticipates potential headwinds to economic activity as regional banks foresee slower loan growth in 2023. Despite diminished volatility, lingering uncertainties persist. Simultaneously, the $4.5 trillion commercial real estate sector faces intensifying challenges with lease renewals, maturing debt, and concerns about fundamentals and valuations, especially in urban office and retail properties. The multifamily housing sector encounters its own set of challenges with new supply, shifting demand dynamics, and economic uncertainties. CAF Companies 2024 Multifamily Outlook & Strategy

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Could Unemployment Be the Next Risk? What prompted the Federal Reserve to change its stance? Previously, their rhetoric on inflation had been increasingly stringent. Are they anticipating a sustained decline in inflation, or do they foresee some imminent disruption? Historically, the Fed has been characterized by a deliberate pace in its responses. It’s possible they are anticipating a surge in unemployment, a speculation gaining traction. Typically, unemployment is a lagging indicator, taking time to manifest in the economy. Often, it becomes apparent that unemployment is on the rise only after the Fed has hit the pause button. The first quarter of 2024 will likely provide crucial insights into whether this trend is indeed unfolding. *1

How Economic Challenges are Impacting the Multifamily Sector The multifamily investment market experienced sluggish volumes in 2023. Post the conclusion of 2022, cap rates and property prices adjusted to the elevated interest rate environment, resulting in an upward shift in cap rates and a corresponding decline in valuations. These prevailing headwinds posed a significant challenge to the multifamily investment market, exerting a negative influence on transaction volume throughout 2023. Initial projections for the full year of 2023 indicate a notable decline, with the expected volume dwindling to approximately $370 billion for the year, reflecting a substantial 17% decrease from the levels observed in 2022. Occupancy levels have shown a consistent downward trend over the past six quarters, a decline attributed to the influx of new property deliveries into the market. This impact is particularly pronounced in the Class A space, where the increased supply has exerted significant pressure. The competitive landscape in the real estate sector, exacerbated by this surge in new developments, has led to a challenging environment for maintaining optimal occupancy rates. The occupancy trends have also caused an increase in the number of concessions being utilized.

*2 New construction activities have experienced a substantial decline of nearly 60% in the past six months. This notable decrease in construction endeavors is poised to have ripple effects on rent growth in the upcoming years, specifically in 2025 and 2026. The repercussions are anticipated as the supply entering the market during this period is gradually absorbed, influencing the dynamics of rental pricing and availability. CAF Companies 2024 Multifamily Outlook & Strategy

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The multifamily market has witnessed a sharp decline in sales volumes, plummeting by -61% compared to 2022, primarily attributed to the volatility in interest rates and the protracted standoff between buyers and sellers. This tumultuous environment has prompted a necessary adjustment in pricing to account for the impact of higher interest rates, further contributing to the subdued transaction activity in the multifamily sector.

*2 Multifamily capitalization rates have ascended in tandem with the increase in treasury yields. This correlation has led to a decline in transaction volumes, as buyers and sellers grapple with aligning their perspectives on pricing within the context of a volatile interest rate environment. The challenge of finding common ground amid these fluctuations in capitalization rates and treasury yields has introduced a level of uncertainty, impacting the fluidity of transactions in the multifamily real estate market. CAF Companies 2024 Multifamily Outlook & Strategy

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*2 Upon stabilization of interest rates and institutional investors begin wading back into the markets, there is a growing belief that the pool of sidelined capital seeking stabilized multifamily assets has substantially expanded, especially amid the retreat in office sentiment. As economic conditions and investor confidence find firmer ground, the multifamily sector stands poised to attract a heightened influx of capital from those seeking stable and resilient investment opportunities. By having this additional capital in the market, this could push down cap rates and increase values.

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Conclusion: In conclusion, the dynamics of the current economic landscape present both opportunities and challenges. The U.S. economy, driven by robust consumer spending, demonstrates resilience amid evolving global conditions. As the Federal Reserve concludes a hiking cycle, inflation and labor market dynamics warrant close watch. The housing market stabilizes, commercial real estate faces both uncertainties and opportunities, and regional banks grapple with lending outlooks. Amidst these, the multifamily housing sector stands at a crossroads, navigating a balance between supply surges, changing demand patterns, and potential economic headwinds. As we move forward, a cautious optimism prevails, acknowledging the multifamily market’s resilience in 2023, contingent upon the trajectory of the broader economic landscape.

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Steering through Uncertainties: CAF’s Operations and Risk Strategy

Property Operations: Capex Spend, Occupancy, Collections, Trade-Outs, and Social Impact “In 2023, prioritizing occupancy has been at the forefront of our efforts. We’ve guided our teams with innovative strategies to consistently attract and retain highquality residents. Concurrently, we’re vigilantly managing spending levels across our properties, aiming for long-term success while addressing resident needs and maintaining performance standards. Our commitment extends to continuous reevaluation of vendor relationships to optimize turn and repair costs.” Brooke Hendry, EVP CAF Management

Capital Expenditures & Property Operations Throughout the portfolio, there has been an increase in the costs of debt service, elevated property taxes, and a rise in insurance costs. Additional inflationary impacts are evident in areas such as wage growth, maintenance, and turnover expenses. Consequently, properties are operating on tight budgets. While safety and high-priority capital expenditures receive approval, any non-essential enhancements are being deprioritized. The properties are adhering to a stringent budget, emphasizing essential needs and closely monitoring annual expenditures to maximize utility and financial efficiency. At CAF, our long-standing commitment to maintaining properties at a high standard, offering excellent leasing experiences, and promptly addressing maintenance issues remains steadfast. Recognizing the evolving landscape and cash flow challenges, we are adapting our approach to be more conservative with capital expenditure spending. This strategic shift reflects our dedication to prudent financial management while upholding the quality and CAF Companies 2024 Multifamily Outlook & Strategy

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service standards our properties are known for. Properties subject to intensified scrutiny from the CAF team are undergoing a stringent cost-control regimen akin to a “ramen-water” diet. This focused approach ensures a thorough examination of expenses, aligning with our commitment to optimal financial efficiency and strategic decision-making. Occupancy: The CAF Management team actively tracks ATR (Available Units to Rent), calculated as vacant units plus notices to vacate divided by the total number of units. This metric serves as a pivotal gauge for forecasted occupancy, providing a leading indicator for a property’s actual occupancy and vacancy rates. The team shares this insightful data weekly across the organization, fostering a competitive environment among property and district managers, underlining the importance of occupancy. Recognizing the heightened importance of maintaining occupancy during uncertain times, the team has implemented strategic initiatives to prioritize and drive occupancy levels. Properties facing lower occupancy levels during challenging phases are more susceptible to increased collection loss, making proactive measures crucial. As of the conclusion of Q3, our portfolio achieved an ending physical occupancy of 90.1%. Collections: Managing delinquency is a focal point at the property level, with the CAF Asset Management team consistently monitoring the portfolio to identify trends and proactively address potential issues. Throughout the year, there has been a gradual increase in delinquency, prompting the CAF team to initiate a project aimed at assessing the adequacy of our current screening technology and identifying additional measures for improvement. The team remains actively engaged in this effort to ensure that our processes are up-to-date and effective. As part of our forward-looking approach, we recognize that the potential for an increase in unemployment, driven by the Federal Reserve’s rate adjustments and general economic conditions, could contribute to a rise in collection loss. Anticipating this possibility, the CAF team is diligently working to fortify our strategies and tools to mitigate the impact of external economic factors. Lease Tradeouts (LTO): Lease Tradeouts refer to the variance in rent between a new lease and a departing lease that has chosen not to renew. Between 2021 and 2022, apartment owners witnessed unprecedented lease tradeouts, indicative of strong demand in various regions. During this period, many CAF properties encountered lease trade-outs ranging from 20% to 30%. In 2023, with a much different landscape, CAF strategically aimed for a balance between maintaining occupancy levels and optimizing the market through Lease Trade Outs (LTO). While adopting a less aggressive approach to prioritize acceptable occupancy rates. Below you’ll find some quarterly metrics across the portfolio.

CAF Portfolio Lease Trade-Outs (Owned/Managed):

CAF Portfolio Retention (Owned/ Managed):

• • • •

Q1: 6.48% Q2: 5.46% Q3: 4.32% YTD (Through Nov): 5.22%

Q1: 59.8% Q2: 59.7% Q3: 57.6% YTD (Through Nov): 57.8%

When comparing the average lease trade-out rate of 5.22% to the higher figure of 9.94% observed in 2022, a decrease is evident. However, all things considered, the performance remains favorable. Similarly, CAF’s retention percentage (the amount of leases renewed divided by the total possible that could be renewed) across the portfolio CAF Companies 2024 Multifamily Outlook & Strategy

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has experienced a marginal decline when compared to 2022, moving from 65% down to 57.8%. Social Impact: Last, but certainly not least is the CAF social impact platform. CAF has successfully implemented a workforce housing investment strategy that overlays social impact programming on traditional institutional multifamily investment business plans. This strategy has provided CAF an advantage in the acquisition and operation of workforce housing properties. By providing an on-site social good to residents at little to no cost, the properties have been positioned competitively in their respective sub-markets and better insulated from socioeconomic headwinds they face. CAF developed the social impact investment platform to help compliment and augment market returns with resident desired on-site social programming to advance their well-being. By being a market leader in this strategy, CAF: 1. Creates immediate differentiation in a commoditized space 2. Increases retention rates, occupancy, leasing velocity 3. Reduces operating expenses: turn costs, make ready, and marketing 4. Activates a sense of community In one of our larger communities, CAF repurposed a clubhouse and placed a highly acclaimed childcare and tutoring center, Kids-U, onsite at no cost to residents. After the first 7 months of a Kids-U operations on-site, 100% of residents that were enrolled in the program renewed their lease. As a result of these efforts, CAF has been formally recognized by Freddie Mac with an Impact Sponsor designation, and was a finalist for many award nominations including: Company of the Year finalist for AAGD (Apartment Association of Greater Dallas), Community Impact Award (D Magazine), Transaction of the Year Finalist (D Magazine), and Executive of the Year Finalist (D Magazine). In 2023, we made more significant strides in expanding our social impact platform. • A notable achievement was the construction and launch of the Parks at Treepoint (Obsidian Portfolio) Kids U-Center, reinforcing our commitment to community development and youth education. • Actively building a partnership with Dallas Housing and Economic Development officials to explore incentives that enhance the impact of our programs. • Actively showcasing two properties to the Dallas City Council, fostering collaboration and partnership. • Exploring partnership opportunities with Workforce Dallas, aligning with our commitment to positive change in employment and community development. Kids-U Offers: • After School Tutoring + Dinners (3-6pm) • After School Social Emotional Support • Summer Enrichment Camps • Family Services Programs • Community Outreach Programs

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Triple Threat

The CAF team diligently monitors and analyzes what we term the ‘Triple Threat’ for each of our properties. This internal mantra signifies the top three areas of focus within asset management, which will be elaborated upon in subsequent discussions. The Triple Threat encompasses the following elements: • • •

Interest Rates Insurance Property Taxes

These factors exert significant influence on cash flow and demand careful analysis, understanding, and proactive preparation. In the current economic environment, we have encountered challenges in all three critical areas. Strategic cash flow management and prudent capital preservation are essential for investors to thrive in the present economic landscape. Adopting a conservative approach, we assess the distributions for each asset individually, considering factors such as interest rates, rate caps, taxes, and overall cash flow, not just for the current year but with a foresight into 2025. While pausing payouts may pose short-term inconveniences, it serves as a crucial measure for optimizing long-term returns. It’s important to recognize that a significant portion of an investment’s Internal Rate of Return (IRR) is often realized during the disposition phase. Therefore, actively positioning assets for the best possible exit is paramount. Our monthly reviews of each property’s cash position enable us to strategically navigate challenges, ensuring a maximized outcome for our investors.

“In 2023, CAF’s Asset Management and Reporting teams have expanded significantly, bolstered by investments in business intelligence tools and talent. Solutions like Entrata Pricing, DOMO, and LoanBoss have enhanced our capabilities and efficiency. We’ve also

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added two team members, further growing our resources. These strategic investments empower our teams to execute short-term plans while proactively developing scenario strategies to safeguard and optimize the portfolio. Our growth lays a strong foundation to actively steward our assets during any market conditions. By proactively leveling up our talent, technology, and analytics, we’ve strengthened an already solid foundation. We’re leveraging these resources to drive performance and better position the portfolio now and in the future.” Jeremy Thomason, EVP of Asset Management & Investor Relations

Interest Rates: Since mid-2022, every property in our portfolio has reached its interest rate cap limit due to the upward movement of rates, triggering reimbursements based on the rate differentials stipulated by the caps. While we must carefully manage cash flow during the 90-day period until reimbursements are processed, our proactive rate protection strategy involves the acquisition of individual interest rate caps, which has proven invaluable in securing favorable rates amidst volatile conditions. This strategic approach not only insulates our properties from further rate increases but also ensures stability and predictability for our investors. By capping rates, we maintain the advantage of lower variable rate loans originally secured. The comprehensive cap coverage across our portfolio effectively transforms variable risk into a fixed-rate security, although the need for replacing interest rate caps remains a persistent consideration. Why Was Floating Rate Chosen? Within CAF’s portfolio, a strategic blend of fixed and floating interest rates is employed, with each deal assessed on a case-by-case basis. The rationale behind opting for a floating rate is primarily rooted in gaining prepayment flexibility, often accompanied by the lender providing capital expenditure funding instead of relying on equity, thereby reducing the overall cost of capital through the loan. In contrast, fixed-rate debt offers a level of certainty in cash flows, albeit with the potential for increased pre-payment penalties. Fixed-rate might also necessitate a higher amount of equity for financing capital improvements as opposed to relying on funds from lenders. Both floating and fixed-rate debt come with their respective advantages and disadvantages, requiring careful consideration based on specific financial goals and risk tolerance. Interest Rate Caps: When opting for floating-rate debt, lenders typically require the acquisition of an interest rate cap. These caps are typically purchased for a 2–3-year timeframe, whereas the typical multifamily hold period spans between 3-5 years. The purpose of these interest rate caps is to hedge against high interest rates by limiting the amount of interest expense a borrower may incur. In many instances, CAF has chosen to purchase a “tighter” interest rate cap than what is required by the lender. For example, if a lender mandates a 2.5% interest rate cap on a variable rate index, CAF might purchase a 2% cap instead. This strategic decision has resulted in substantial cost savings, with an estimated annual reduction of $625,000 in monthly interest payments across the portfolio. Given the heightened market volatility, the expenses associated with interest rate caps have surged as traders CAF Companies 2024 Multifamily Outlook & Strategy

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incorporate additional premiums to mitigate potential financial setbacks. The prevailing high-interest rate environment significantly escalated the costs linked to obtaining future interest rate caps. During 2023, CAF replaced several interest rate caps across the portfolio. Each deal’s timing and situation was uniquely different. CAF explored and implemented many creative solutions when evaluating for each property’s unique circumstances. Insurance: The insurance industry has weathered significant tumult over the last couple of years, grappling with challenges stemming from high inflation affecting replacement costs and events causing substantial losses. Against this backdrop, carriers are now contending with reduced capacity and private capital exiting reinsurance markets. This situation allows carriers to be more selective in choosing policyholders amidst decreased competition. Furthermore, the occurrence of numerous catastrophic events globally in the past year has led to many carriers being unprofitable, adding to the industry’s complexities. Since its inception, CAF Companies has always maintained a disciplined cost management culture that permeates through the organization. CAF teams across every department routinely evaluate costs for goods/services ensuring that we are receiving the best value. Nowhere has this been more evident than with the insurance cost burden. Insurance is a large ticket item that often gets overlooked both from a property and health benefits perspective. The perception is that most operators will simply rely heavily on relationships and become complacent within those relationships, accepting every renewal as it comes in. CAF takes a more diligent approach by evaluating insurance options at length and selecting the most competitive option that presents the most value to the organization. Having ownership and management responsibilities for over 23,000 units this year, CAF proactively engaged in direct discussions with insurance carriers during our annual visit to London. Our objective is not only to secure optimal pricing but also to foster direct relationships that yield benefits at the property level. This approach aligns with CAF’s commitment to obtaining not only the most cost-effective insurance but also the best coverage to safeguard the interests of our investors. We’ve experienced significant increases in the disruption being faced in the insurance industry. Due to our team’s persistent diligence in this area of the business, we’ve been able to save more than others and the increases not quite as painful. Our proactive management approach extends to analyzing and addressing disruptions in the insurance industry, ensuring that our cost-effective strategies provide the best coverage and protect our investors’ interests. This commitment is emblematic of our overall dedication to maximizing value across all aspects of our operations.

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Property Taxes: Property taxes are extremely important to understand in the state of Texas where most of CAF’s properties are located. Unlike some other states, the property taxes in Texas for multi-family properties are not subject to a limit on annual value increases. As a result, the taxes a property pays can increase dramatically on a year over year basis. The remedy to limit one’s property tax liability is to protest the assessed values of the property, first through the Appraisal Review Board, and if needed, through litigation. Ultimately, the assessed value of the property is lowered based where like kind assets have been taxed, but the road to this final valuation is arduous. Due to the intricacies of navigating the property tax landscape, CAF works with the best-in-class property tax professionals and litigates on nearly every property to prevent excessive tax payments. Due to the timeline and sequencing of taxes, it’s important for operators to appropriately monitor and adjust accruals. Notices become available to property owners in May. Immediately upon receiving the team is in communication with our tax consultants to determine a strategy for appeal. The rulings typically come back in September, and accruals are adjusted accordingly to account for any change between the current escrow and tax due in December. The December payment is the full amount of tax owed and the property will not get the refund difference until Q1 or Q2 of the following year.

Property Tax Timeline in Texas May 1st Initial Tax Value

Delivered to CAF from various County Assessors for our entire Texas portfolio.

June 15st Protest Filed

July-September Appraisal Review Board

October Reduction in Value or Settlement

Our third-party tax professional team works to lower values on our behalf.

If the proposed values have been lowered, CAF elects to either accept and finalize, or move to litigation

December 31st Tax Payment Due

Following Year Reimbursement

We pay the taxes based If there is reduction in on the value at the time. value beyond what was paid in December, a refund from the County Assessors is provided to CAF.

Property taxes in Texas have been a source of contention, particularly as interest rates rose and property values declined, yet taxes continued to rise. However, in 2023, the state of Texas initiated efforts to address this issue and provide relief. This endeavor culminated in the overwhelming approval of Proposition 4 by voters, leading to a substantial $18 billion property tax-cut package. The focus of this package is primarily on lowering school district property taxes, a key element of Texas landowners’ property tax bills. Proposition 4 allocates $7.1 billion to school districts to reduce tax rates, offering a significant step toward easing the burden on homeowners and businesses in the state. While the impacts and aggressiveness of county tax appraisal districts in 2024 are still to be determined, there is optimism that this initiative will provide substantial help in the future.

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CAF Acquisition Strategy

“In 2023, we’ve navigated an intriguing and challenging landscape on the new growth frontier. Transactional opportunities have faced limitations primarily due to capital market volatility and the discernible gap between buyers and sellers. Despite these challenges, our dedicated team remains vigilant, actively engaging in market dynamics, fostering relationships, and positioning ourselves to seize emerging opportunities in the months ahead. As we observe a decline in prices, we perceive this as a strategic window to acquire compelling assets in high-quality locations at favorable basis. We look forward to capitalizing on these market shifts and continuing to drive value for our investors in the evolving real estate landscape.” Jack Alexander, President of CAF Capital Partners

Opportunity Looming In 2024, the multifamily sector faces over $100 billion in loan maturities. Currently, many potential sellers are waiting to observe whether the Federal Reserve will cut rates in Q1 or Q2. We expect it is likely that a cautious market of 2023 will shift into a more assertive one in 2024 if and when an interest rate pivot happens. Major institutional players such as Goldman Sachs, Starwood, Blackstone, and Brookfield are strategically aligning their substantial resources to seize opportunities, gearing up to acquire assets at discounted prices.

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Best Historical Investments To identify crucial themes and establish a strategy for sustained value creation for our investors, the CAF acquisition team conducted an analysis of our historical deals. Through this evaluation, it was determined that our Class B Light Value Add strategy, focusing on vintages from 1990 to 2005, emerged as the most successful and top-performing segment in our portfolio.

Additionally, the analysis revealed other characteristics, indicating that our top-performing properties were typically located either directly on or near major freeway systems. These successful assets often possessed distinctive features or characteristics that set them apart and contributed to their memorability.

Identifying Top Markets The acquisitions team delved deeper into its analysis by evaluating fundamentals across datasets to identify target markets. Prioritizing states with landlord-friendly environments, the team assessed factors such as job growth, supply and demand trends, affordability, and population growth narratives. Based on our comprehensive analysis, our conclusion pointed to key target markets, including Dallas, Fort Worth, Austin, San Antonio, Atlanta, Nashville, Charlotte, Raleigh, Orlando, Phoenix, and Las Vegas.

Acquisition Strategies

Today’s market presents several key strategies, each with its own unique considerations. 1. Lease-Up: Acquiring and stabilizing assets undergoing lease-up might present opportunities, especially with potential cap rate expansion due to increased market supply. Builders seeking exits could make these deals attractive. 2. Core Plus/Light Value Add: This strategy aligns with CAF’s core competency, offering an appealing riskadjusted return. However, it’s crucial to note the heightened competition in this space, as many buyers recognize its attractiveness and perceive it as less risky than workforce housing.

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3. Workforce Housing: This segment may experience increased distress, potentially resulting in a more limited buyer pool. While presenting challenges, it could offer unique opportunities for those willing to navigate the complexities. Across all these strategies, fixed rate loan assumptions remains an appealing option, providing positive leverage and robust, stable cash flows.

Triangulating a Thesis & Conclusion As we stand at the intersection of opportunities in the multifamily landscape for 2024, CAF Capital is positioned for strategic navigation. The looming surge in loan maturities, coupled with potential interest rate fluctuations, paints a dynamic backdrop. Large-scale syndicators grapple with cash shortfalls, creating an environment where institutional players are gearing up for strategic acquisitions at discounted rates. The lessons from our historical investments, emphasizing the success of our Class B Light Value Add strategy and the significance of location in top-performing assets, guide our approach. In response to the multifaceted landscape, our focus on landlord-friendly target markets, including Dallas, Fort Worth, Austin, and others, reflects a deliberate approach to sustainability. As we delve into various acquisition strategies, from Lease-Up to Core Plus/Light Value Add and Workforce Housing, the overarching goal remains sustained value creation. With an unwavering commitment to investor relationships and a hands-on, no-stoneunturned ethos, CAF Capital stands poised to navigate complexities, turning challenges into opportunities in the ever-evolving multifamily sector.

Final Thoughts In conclusion, our commitment to safeguarding our portfolio and investor capital remains unwavering. At CAF, we are diligently implementing comprehensive initiatives across various fronts, from scrutinizing operating expenses and optimizing occupancy to addressing delinquency concerns. Through both strategic and proactive measures, we are focused on fortifying our positions, ensuring the stability and growth of our investments. As custodians of investor capital, our focus on thorough management and scrutiny of all aspects of our business underscores our commitment to protecting and enhancing the value of our portfolio. Please note the time of publication as January 2024. Things change at a rapid pace; we could wake up tomorrow and the world be completely different. CAF’s goal here was to share thoughts on the current economic landscape and how the company is adapting as it stands now. Real estate has been and will remain a valuable investment, especially during times of inflation. We strongly believe in the Multifamily asset class and the need for safe, affordable housing. During times of uncertainty, multifamily typically vaults into the forefront as one of the most desirable investments one can make. As a company, we are continuing to become more agile and increasingly intelligent in how we manage risk and opportunity going forward. With the leadership of an experienced and focused executive team, CAF will become stronger as we work towards our goal of 50,000 units under management. The CAF team remains hungry, confident, and as determined as ever to continue building a company we are proud of that places investors and residents first. The team is appreciative of the trust and confidence placed in CAF and look forward to continuing to partner together in the future.

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For questions, comments, or inquiries: CAF Investor Relations investors@cafcompanies.com CAF Companies, LLC 2601 Network Blvd, Suite 400 Frisco, TX 75034 www.cafcompanies.com

Sources: *1. JP Morgan 2024 Economic Outlook. https://www.jpmorgan.com/insights/outlook/economic-outlook/economic-trends *2: Avison Young U.S Multifamily Market Trends Q3 2023 *3: Fannie Mae. 2023 Multifamily Market Outlook *4: Freddie Mac. 2023 Multifamily Outlook Update

Legal Disclaimer: This document does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. The information contained in this presentation does not purport to be complete and is qualified in its entirety by other information that may subsequently be provided to you. This presentation does not take into account the investment objectives, financial situation and particular needs of a recipient, and each recipient is expected to conduct its own independent investigation and assessment of the contents of this presentation and make such additional inquiries as it deems necessary or appropriate. The information contained in this presentation is confidential. Except as required by law or regulatory requirements, by participating in or accepting this presentation, you agree to maintain the confidentiality of the information contained herein and agree that you will not reproduce or distribute such information to any other person or use such information for any purpose other than to evaluate your potential participation in a transaction described herein. Statements contained in this presentation that are not historical facts are based on current expectations, estimates, projections, opinions, and beliefs of CAF Capital Partners. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this presentation may contain “forward- -looking statements.” Actual events or results or the actual performance of the transaction may differ materially from those reflected or contemplated in such forward- -looking statements. Certain economic and market information contained herein has been obtained from published sources prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, CAF Capital does not assume any responsibility for the accuracy or completeness of such information. CAF Capital Partners does not make any representation or warranty as to the accuracy or completeness of the contents of this presentation and takes no responsibility for any loss or damage suffered as a result of any omission, inadequacy or inaccuracy herein. Recipients acknowledge that circumstances may change, and the contents of this document may become outdated as a result. CAF Companies 2024 Multifamily Outlook & Strategy

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