The Cardinal Dispatch | Issue 04 | April - June 2021

ISSUE

04

APR-JUN

2021

GAME OF INCHES BY: ERIC FRANK CHIEF INVESTMENT OFFICER

As 2020 came to a close, we all breathed a sigh of relief

unpredictable start trending over 9% behind prior year, but

I preach to our investment team where the goal is to

optimistically peering into the year ahead anticipating

gaining ground quickly as we start to lap the most heavily

constantly make small moves to incrementally drive

menu including Geofencing 2.0, Spotify ads and

calmer waters and a return to normalcy following a year

impacted COVID months from 2020.

performance. The core of this idea is to (1) pay close

Connected TV/OTT ads. They are also launching

attention to what is happening to your properties and

their client portal in Q3 to enhance the onboarding experience and provide better service to customers.

of fear and chaos. As it turned out, that optimism was premature. Within the first week of 2021 protestors

Summary stats don’t capture the volatility in outcomes

markets, (2) react quickly, and (3) move incrementally. Small,

stormed the Capitol as Congress tallied the final election

experienced on the ground. It has been a game of winners

fast moves allow us to maintain momentum, avoid huge

results under a backdrop of civil unrest as protestors

and losers creating huge disparities between properties,

downswings and capture the upswings.

marched shedding light on widespread inequality and police

markets and locations.

violence. While political turmoil seems to be subsiding, the

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Agency Fifty3 is adding new products to their service

Turn has already signed 20 communities in its pursuit to expand to 30 communities in 2021 (15 in 2020). Turn is also working to build out its Facilities Services platform

Our historical reference points are meaningless, so instead

which fills the gap between projects that are too big for the maintenance team but too small for construction.

spread between winners and losers continues to widen

To fight COVID and combat its negative economic impact,

we move in inches with our eyes and ears capturing the

resulting in unpredictable impacts across our country,

Congress passed six bills totalling $5.3 trillion (yes trillion!)

data on the ground that won’t be published until it’s too

economy and industry.

in total stimulus and the Federal Reserve cut short term

late to respond. The combination of being well prepared

on numerous construction projects related to CGI’s

interest rates to 0% to stimulate investment. Included in the

and employing the Game of Inches approach has allowed

recent purchases and is bolstering its team to take on

Pandemic related shutdowns in Q2 2020 resulted in a 32.9%

numerous relief bills were also moratoriums on foreclosures

Cardinal to notch many significant wins to start the year.

the increased volume.

drop in quarterly GDP (a measure of the total output of the

and evictions. Stimulus of this size has never before been

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US economy), the worst quarterly decline in history. Then

seen (for comparison, total stimulus spending during the

of budget (grabbing all those inches) across its

infrastructure including the rollout of SimpleLegal

the following quarter saw a 33.4% quarterly gain in GDP, the

Great Financial Crisis was $939 billion), nor has there ever

owned portfolio, completed the acquisition of Arrow

in Q2 which will streamline contract management.

largest quarterly gain in history. This volatility was mirrored

been such a breadth of beneficiaries.

Townhomes and Flats in Bozeman, MT, has a portfolio

The systems team, in addition to continuing to refine

of four properties in Eugene, OR under control and has

Keystone and Salesforce, successfully launched Onesite

added significant depth and talent to its team.

for the Solidago platform in partnership with IT and

Cardinal Group Management has inked several

Operations. Google Currents has been rolled out as an

guideposts to follow as we emerge from the wreckage to

blockbuster deals adding 16 new properties and more

internal communications tool which many of you have

Across the student housing industry the landscape has

rebuild. With very little sense of what might happen next

than 10,000 beds with Saban and Harrison Street.

seen as the venue for MEME Madness voting.

been no less turbulent. Preleasing was off to its strongest

how are we to proceed?

The launch of Solidago marks a landmark for CGM by

in the stock market which witnessed a 33.9% drop in just 32 days before bouncing back 67.9% and closing the year with

These enormous swings and extreme levels of market

an 18.4% overall annual gain.

intervention are without precedent, leaving us with no

pace in a decade before grinding to a halt ending with a

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Cardinal Group Investments is trending 7% ahead

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Cardinal Group Construction is focussed on executing

The Legal Department has been focused on building

pushing into the affordable housing space starting with

As 2021 grinds on we must all commit to grabbing all of

3.2% drop in year-over-year occupancy, but a much more

The answer is that nobody knows and we are left with a

nine communities and another seven in the pipeline,

the inches around us. It will be some time before we can

significant drop in effective rates after heavy use of rate cuts

simple yet elegant solution that has guided us for years.

totaling nearly 4,000 with plans to more than double in

leverage historical data and we must move forward quickly

and concessions. This year’s preleasing is off to another

I call it the “Game of Inches” and it is a core philosophy

the next 12-18 months.

and incrementally to emerge once again as winners.

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GROWING OUR INVESTMENT PORTFOLIO: WHY CARDINAL GROUP INVESTMENTS CONTINUES TO ACQUIRE DURING A PANDEMIC BY: MADISON MEIER V I C E P R E S I D E N T O F C A P I TA L M A R K E T S Cardinal Group Investments (“CGI” or “Cardinal Group”) was

institutions maintaining stable enrollment; public and

and demand fundamentals across student housing markets,

have pivoted their attention to the higher-performing asset

the third largest buyer of student housing in 20201, and 2021

private non-profit institutions experienced undergraduate

affording owners the ability to grow rents and maximize NOI.

classes – multifamily, healthcare, and industrial. The influx of

is shaping up to be another banner year for the acquisitions

enrollment declines but graduate enrollment increased

team. With uncertainty still looming and a slower economic

resulting in a net neutral impact on total enrollment 5.

recovery ahead, why is CGI focused on growing our

ATTRACTIVE FINANCING OPTIONS:

competition, compressing cap rates and decreasing investor

Debt will remain affordable for the foreseeable future which

yields, and ultimately demanding investors increase

investment portfolio during a global pandemic?

SUPPLY & DEMAND:

in turn boosts investors’ yields and drives higher returns.

their risk appetite to achieve their targeted returns. With

Although the pandemic has created day-to-day operational

Based on historical post-recession trends, it is anticipated

The Agencies (Fannie Mae and Freddie Mac) were the first

competition thinning the opportunity set, Cardinal Group

challenges, CGI believes this is the most attractive

that enrollment will spike in 2021 and 2022. Following

to start offering financing options to select sponsors after

believes investors will seek niche multifamily asset classes to

investment environment seen in the last decade and the

the last two recessions, 2002 experienced 3.7% growth

observing the sector’s resiliency in fall 2020, and now

diversify their portfolios. As the spread between multifamily

foundation of student housing investing has never been

and 2009 saw 4.4% growth, far exceeding the 2% annual

banks, life companies, and debt funds are also lending

and student housing continues to expand and student

stronger. A multitude of factors contribute to this opinion

average growth rate . Many graduating high school seniors

within student housing again which ultimately drives up

housing upholds its recession-proof reputation, capital will

but the following outlines the most prominent trends.

and undergraduates postponed their post-secondary

competition in the debt markets. A low treasury rate and

be drawn to the sector, repeating the same trend observed

education in 2020 largely due to pandemic uncertainty and

competing debt options will help maintain a low-rate

after the Great Recession. A surge of capital expands

PANDEMIC RESILIENCE:

economic challenges. The forecasted surge will be driven by

environment for investors over the next 12-24 months.

the buyer pool and exit optionality for existing owners,

Despite a spreading global pandemic, Cardinal Group

these students re-enrolling in college education, graduate

believes the student housing industry has upheld its

students remaining in school to delay entering the turbulent

LIMITED BUYER POOL:

reputation as a resilient asset class. Stabilized occupancy,

job market, and demographic trends that support larger

Although today’s interest rates reflect historical lows, the

strong monthly collections, and minimal enrollment impacts

graduating high school classes starting in 2021. Secular

most attractive rates and terms are limited to a select group

Assembling an attractive portfolio during a pandemic allows

bolstered the resiliency and reinforced investors’ confidence

economic trends have historically influenced more students

of highly regarded sponsors. Agencies are maintaining

Cardinal Group to capitalize on the improved supply and

in a quick rebound. Off-campus properties averaged 89.2%2

to pursue higher education to lower susceptibility to job loss

extremely high scrutiny of sponsors and markets and only

demand fundamentals, attractive debt, and the limited

occupancy in fall 2020, solidifying investors’ longstanding

during recessions.

lending to investors with strong portfolio performance

competition, resulting in a high-yielding portfolio that will

and deep-rooted student housing experience. This has

attract the inflow of new capital entrants who will be seeking

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thesis that attending college and living with friends is a

ultimately intensifying buyer competition and compressing cap rates.

tradition-driven experience that does not dissolve with

In addition to enrollment increases driving more demand

drastically thinned the buyer pool, allowing for a very limited

immediate scale and exposure to the recession-proof

online education. Guarantor backed leases supported

for off-campus housing, new development supply is

group of sponsors to capitalize on buying opportunities and

student housing asset class.

consistent rent collections, resulting in the industry

expected to be at the lowest level since the Great Recession.

continue consolidation of the industry.

achieving 95.4% average collections from April – July 2020 .

Construction financing options are extremely limited, so

Collections climbed to pre-COVID levels as students returned

developers are expected to deliver less than 40,000 new

RESURGENCE OF CAPITAL:

for fall 2021, pushing the industry average to 96.7% 4. This

beds annually through 2023, a 25%-30% decrease from

Hospitality, retail, and office sectors continue to grapple

strong performance was largely driven by the four-year

recent years7. This development slowdown will boost supply

with the impacts of the pandemic, so real estate investors

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capital into the multifamily sector has drastically increased

Based on transaction dollar volume reported by Real Capital Analytics and Co-Star as of February 1, 2021.

1 2

CBRE

3

CBRE

CBRE data and Cardinal Group Companies’ average monthly collections for third-party managed and owned student housing properties 4

5

National Student Clearinghouse Research Center

U.S. Department of Education, National Center for Education Statistics, 2019 Digest of Educational Statistics, Table 303.25 6

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CBRE

PORTFOLIO PERFORMANCE OVERVIEW BY: J E N N C A S S I DY S V P, S T U D E N T H O U S I N G O P E R AT I O N S

Throughout 2020, confidence fluctuated around

Renewal Efforts- Our on-site teams found ways to connect

the performance and resilience of the student

with their residents from hosting digital events to doing virtual calls, renewal generation was at the forefront.

housing space. In the Spring of last year, there was no way to predict the impact a global

Great customer ser vice throughout the year has led to

pandemic would have on the industr y. As we progressed through 2020, steady collections and continued (albeit late) leasing lead to newfound confidence in the industr y overall.

improved OR A performance and satisfied residents looking As we entered 2021, our student housing portfolio was preleased at 26.6% compared to a 28% market average.

to stay with us for another year!

National Average for OR A: 65.85 (conventional and student) Cardinal Group Average: 72.85 (conventional and student) Cardinal Group Student: 71.25

Pre-leasing has increased 21% in the 1st Quarter of 2021 For the Fall of 2020, the student housing industr y

and we are now tracking alongside the market.

reached 89.2% occupancy (a 3.2% decline YOY )

How? A combination of efforts drove solid leasing velocity

but a strong performance considering the

in the 1st Quarter.

uncertainty of University closures across the

Digital Marketing Campaigns - From AF53 ser vices like PPC

countr y. While the pandemic had an impact, it

campaigns, SEO, and Social Media Management to onsite

was limited which amplified the resiliency of the

social campaigns, digital advertising was generating traffic

industr y overall.

to our communities.

Follow Up- Our teams worked diligently to follow up on inbound traffic and convert traffic to leases resulting in consistent leasing performance each week and an average of 2.5% movement each week in 2021.

Preleasing kicked off strong in Q4 2020 for the 21/22 leasing season and as we entered 2021, we were well-positioned for a strong year.

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WHILE THE PANDEMIC HAD AN IMPACT, IT WAS LIMITED WHICH AMPLIFIED THE RESILIENCY OF THE INDUSTRY OVERALL.

Open Positions- Time to Fill

UNIVERSITY ANNOUNCEMENTS

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In the month of March, many Universities and colleges across the countr y announced plans to fully

In the last quarter, the average time to fill positions for all open positions was under 30 days.

reopen for Fall 2021. In conjunction, we saw a spike in leasing in key areas where Universities were closed the prior year. (Arizona, California) Additionally, as we’ve entered the COVID period from 2020, we are beginning to see current year leasing eclipse PY pace as expected.

NEW UNITS/BEDS ADDED Q1 was a huge growth quarter for Cardinal. We welcomed 9 Communities with LDG totaling 1,950 units, with over 2,000 more in the pipeline; marking our first endeavor into affordable housing. The student portfolio grew by 6,700 beds at 9 communities, representing expansion with several existing clients and passing the 75,000 bed threshold. This growth allowed Cardinal to enter five additional Ser vice Request Completion •

The majority (>85%) of all work orders were completed On Time or Early leading to increased Resident Satisfaction.

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markets in which we were not previously operating.

DIVERSITY EQUITY AND INCLUSION B Y : C A R A AT H M A N N CHIEF TECHNOLOGY OFFICER DE&I COUNCIL CO-CHAIR

WHERE ARE WE NOW? We have the right culture and the right values to continue working towards our goal of being the best place to work in any industry for anyone. What does the data tell us right now about representation? The representation of diversity across the entire Cardinal team is in the range of US demographic statistics, however we have a drop off when we get to team members hired or promoted into leadership positions. Across the company, 57% of TMs are white, yet at the leadership level that number increases to 76%. Our male TMs represent roughly 50% of the organization, yet at the leadership level that number increases to 61%. We have made some initial strides over the last year, but still have some areas on which to focus.

What have you told us about DE&I? Leveraging the most recent Qualtrics survey results, we have a DE&I score of 83%. This is a great place to start, however, there are gaps between monitored groups that we’d like to eliminate.

We want all TMs to have the same awesome experience regardless of gender, age, and ethnicity.

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WHAT HAVE WE DONE THE LAST SEVERAL MONTHS?

negotiating. These are big, complicated projects, but the Council and

We launched the DE&I Council to add more voices to the table in

HR team are underway on building out the data and infrastructure

company decision making. Through the council’s work, we’ve:

to drive towards a system to support this important initiative.

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Added three new company holidays: Dr. Martin Luther King Jr., Juneteenth, and national election day.

Performance Management: This is a critical component for driving

Launched two new business resource groups, Cardinal Connects-

Equity.

Black (48 members and growing) and Cardinal Connects -

expectations, provide actionable coaching, and facilitate candid

Spectrum for LGBTQ+ & allies (29 members and growing)

feedback. We have begun evaluating systems and will continue to

Expanded an existing business resource group to include all

focus on selection and implementation over the next two quarters.

female managers and above: Cardinal Connects - Women in

Opportunity at Cardinal should always be based on performance

Leadership

and adherence to the Core Values - nothing else.

We want to leverage this tool and process to set clear

Celebrated Black History Month and Women’s History Month which included external speakers, highlights of Cardinal leaders,

Connection: We are beginning the planning process to launch

and recognition of historic inspirational leaders.

additional business resource groups to facilitate a place for our

The L&D team launched unconscious bias training and hosted a

team members to connect, learn, and provide feedback to the

fantastic Leadership Summit highlighting diverse speakers.

senior leadership team. Our goal is not just Diversity, it is Inclusion!

In 2020, for all Director and above positions we implemented a

First up in Q2, will be the launch of the Cardinal Connects - Asian

mandatory “Diverse Candidate Pool” requirement for all hiring

& Pacific Islanders BRGs.

managers. The results were clear - we increased representation

options for additional BRGs to launch later in the quarter.

The council will continue to evaluate

of leaders identifying as People of Color from 14% to 18% over the last year - a 30% increase during a time of rapid growth in

HOW DO WE KNOW IF WE’RE SUCCEEDING IN OUR MISSION?

the Director and above cohort. We experienced a 2% increase

Your voices: Qualtrics is a great way for us to understand what

in our female representation at the leadership level and at our

people are actually experiencing.

senior leadership level (VPs and above), we increased female

towards closing the gaps between groups by raising the scores

representation from 9% to 33% over the last year!

of those that aren’t currently having the same experiences. 74%

We want to continue to work

of you participated in the last engagement survey, thank you and keep sharing your thoughts!

WHEN WILL WE BE DONE? This is a journey, it will take time, and we’ll never actually be done.

We’re committed to the journey and are so grateful to the team members that are investing their time to be on the council, a part of the business resource groups, and for all of you for sharing your thoughts on how we can work together to achieve our mission.

WHAT ARE WE CURRENTLY WORKING ON? Pay equity: We want pay to be based on market, experience, performance, and value creation, not on how good you are at

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THIS IS A JOURNEY, IT WILL TAKE TIME, AND WE’LL NEVER ACTUALLY BE DONE.

Representation: across the company, at HQ and in leadership positions. We know that if we nail things like recruiting, inclusion, performance management, and unconscious bias, we will continue to organically grow diverse representation across all levels of the organization. The data clearly shows us that we have improved representation at the leadership level, but that we still have major opportunities to increase representation for people of color, especially women of color.

QUALTRICS RESULTS B Y : P E T E R LY N C H CHIEF PEOPLE OFFICER

ENGAGED TEAM MEMBERS ARE THE FOUNDATION OF SUCCESSFUL COMPANIES.

Engaged team members are the foundation of successful companies. In fact, according

There are several reasons we believe the overall

making sure our managers have the tools they need

to Gallup, a majority of the workforce is not engaged, with half (51%) being ‘not engaged,’

scores dropped but the main one is experienced

to lead effectively and effective communication.

and another 17% being ‘actively disengaged. At Cardinal, we are dedicated to increasing

by many companies as they launch surveys. Over

We are continuing to impact manager effectiveness

the engagement of all our team members.

time, team members feel more comfortable about

through the launch of the Ascend site and our plan

the confidentiality of the survey tool and they get

to launch formal performance management later

more honest. This often leads to scores dropping

this year.

initially. We see this as a net positive because we can only get better when team members feel

One of our biggest opportunities is our need to

comfortable sharing the whole truth.

improve communication across the organization.

We are actively building out a more consistent

KEY WINS

and coordinated communications strategy. Alex

Our focus on Diversity, Equity and Inclusion

O’Brien recently shared with me that he heard a

has shown positive momentum as we saw a 1%

team member say “everyone likes to know what is

increase in our score related to the question;

going on and feel like an insider”. We are taking

“All employees in this company are treated as

active steps to ensure everyone feels like an

individuals, regardless of their job, age, race,

insider. More to come on this.

In February we launched our second engagement survey and the results are in. The

gender, physical capabilities, etc.” We were also

good news is that we have seen positive results in key areas like the engagement of our

6% above the global average on this score.

We have a lot of work left to do, but remain committed to putting action behind the information

women teammates as well as how our team members feel included. We did see a drop in our overall scores of 2% from our survey in October, but still remain above the Global

KEY OPPORTUNITIES

from the survey as we strive to become the best

Benchmark. See below for the 3 key areas of Engagement, Manager Effectiveness and

We have identified several areas of opportunity

place to work in any industry, for anyone! Thanks

Equip Factors.

from the survey. These opportunities include

for your time and input to help us achieve that goal!

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NOTABLE HIRES

PROMOTIONS CHRISTINA TARUMOTO

TRACY SLAPPEY

PROMOTION TO VP OF CLIENT SERVICES

VP OF OPERATIONS, AFFORDABLE HOUSING

As part of our commitment to increase focus on our clients, we needed a

Tracy joins Cardinal as VP of Operations for Group 5. She will lead

Vice President to manage and lead a company of our size and complexity

the Solidago team, our white-label af fordable housing portfolio with

to our growing list of clientele. Luckily, the leader we needed in this

LDG, as we venture into the af fordable housing space. Tracy most

position is a long-time Cardinal team member, Christina Tarumoto. In

recently ser ved as a Regional Vice vPresident at Pinnacle, where she

her experience as Director of Business Development, she has been

spent the last 10 years of her career. Tracy is based in Austin, T X.

an integral part of Cardinal’s success. She has built an unbelievable reputation as a detail-oriented, thorough, thoughtful professional that has built deep relationships with clients across the industry.

BRIAN HAWTHORNE VP OF OPERATIONS, CONVENTIONAL HOUSING Brian joins Cardinal Group with over 15 years of experience in the multifamily industry. His extensive background encompasses a variety of asset classes with a specialization in new construction lease-up communities and asset repositioning. Brian spent the majority of his career at Alliance Residential where he served as Vice President of Operations and led high-performing teams overseeing new construction owned assets in multiple markets. Brian is based in Austin, TX. CAREY MCDONALD REVENUE MANAGEMENT DIRECTOR Carey joins the Cardinal team as the first Director of Revenue Management. Prior to joining Cardinal, Carey ser ved 9 years in multi-family operations and revenue management. Carey will focus on building out Cardinal’s revenue management platform and maximizing economic occupancy performance for CGI. Carey is based in Austin, T X.

SEAN DEVINE

SLY BRANDON

TRACY SLAPPEY

PROMOTION TO VP OF

PROMOTION TO VP OF

PROMOTION TO VP OF

STUDENT HOUSING

STUDENT HOUSING

AFFORDABLE HOUSING

2020 brought many unexpected changes but Cardinal has shown strength, resilience, and a continued grow th across our entire platform. With our grow th

NOTABLE Q1 ANNIVERSARIES Corinne Walker - Januar y 5, 2016 (5 years)

Samantha Stallings - March 3, 2015 (6 years)

Kayla Meyer - Januar y 9, 2016 (5 years)

Danielle Winn - March 5, 2015 (6 years)

Sam Winn - March 8, 2016 (5 years)

Mat Windsor - March 10, 2015 (6 years)

Courtney Richardson - March 3, 2015 (6 years)

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internally and externally, the Director title did not correlate with industr y standards. Af ter much consideration, Cardinal believes that the change to the Vice President title not only aligns with industr y standards but more importantly, recognizes the leadership, influence, and responsibilit y required of this position at Cardinal Group. These 3 individuals are incredibly deser ving of this promotion.

Q2 COMPANY ROADMAP & KEY INITIATIVES B Y : W I L L C O N R O Y, V P , M A N A G E M E N T S E R V I C E S & V E R S I E WA L L A C E , D I R E C T O R , L E A R N I N G A N D D E V E L O P M E N T

Q1 IN REVIEW Following a chaotic 2020, the primary focus of Q1 2021 was solidifying the foundation of our operating platform while welcoming lots of new Cardinal communities and Cardinal team members through the

Q2 LOOKAHEAD

acquisition of new assignments from new and existing clients. We worked to reduce complexity and

Many of the themes in Q2 will look similar to Q1, as we look to improve our platform

simplify some of our processes with a greater focus on L&D. Here are some of the achievements of Q1:

through reducing complexity. While our team will continue to work on the projects started in Q1, we will also begin work on the following projects:

The Launch of Solidago! - On March 15th, Cardinal Group officially became an operator of affordable housing with the launch of Solidago, our partnership with our client LDG. Cardinal started operating 12 communities in Q1 with more on the way in Q2! The launch of Solidago also included Cardinal’s first use of the RealPage operating system.

Build Series and Ascend - The Learning and Development team created

Lease Document Review - At most communities, Cardinal uses a proprietary lease document that needs to be manually updated each year and as laws change. As Cardinal grows into new markets, we will explore using some other lease document options to stay compliant with state and local regulations more easily.

two new features of the L&D platform in Q1. The Build Series is a monthly content series that gives our CMs digestible content they can share with their teams. Ascend is a primary L&D resource hub, where we will aggregate available learning material for all on-site team members.

CWOL - Relationship Building focused training, which produced an increase

Inspection Module - Long identified as an opportunity to improve, in Q2 Cardinal will begin the selection process for an inspection tool for our operators in the field to use for site visits, community inspections and other audit-related projects.

in Validate scores in Q1.

Maintenance Team members attended HD Supply training and were also granted new access to maintenance specific safety training in Cardinal U.

TURN! - Our student housing communities will be gearing up in Q2 for Turn at the end of the summer. We will be deploying new and improved resources to our teams in the field and will be hosting training sessions on a variety of topics through the summer.

Entrata Specials Module - We started testing Entrata’s specials module in Q1 and we continue to explore it as a possible option for our Entrata teams in the future to help capture incentive data and drive efficiencies in the

L&D - Our continued focus on upskilling TMs in Operational skills, customer service, MTL interviewing skills and Leadership development.

leasing process.

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THANK YOU

M A N AG E M E N T

www.CardinalGroup.com @CardinalGroup