Quarters Cedar Falls

Quarters at Cedar Falls Investor Update Quarter 4 2020 Michael Sather, CFO Tailwind Group

Good News

 Students are back on campus. The clubhouse is seeing much more activity.  280% increase in inquiries in the week of February 8th.  Turned game room into study lounge and saw a big jump in use.  Signed 47 leases so far in February compared to 17 in December and January combined.

Challenges

•

Declining enrollment amid continued COVID-19 uncertainty. Spring semester dropped to 8,900 students from a high of 12,000 just 4 years ago.

•

Current Occupancy (94%); below 3 year historical average of 100%

•

Pre-leasing well behind prior year data. Adding sales support from Mankato teams. Expect clubhouse updates will be well received and boost leasing.

•

Students were off campus for 60 days due to Covid shutdown.

Property Updates

30%

Pre-Leasing Velocity 2021-2022 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

Pre-Lease

As of February 15th

1-Oct 15-Oct 1-Nov 15-Nov 1-Dec 15-Dec 1-Jan 15-Jan 1-Feb 15-Feb 1-Mar 15-Mar 1-Apr 15-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 15-Jul 1-Aug 15-Aug 31-Aug

 Pre-leasing trending well below last years pace

2016-2017

2017-2018

2018-2019

2019-2020

Current Lease-Up

 Decline in college enrollment

×

2020 enrollment dropped 10%

×

Per The Gazzette¹, spring enrollment decline of 9%

 Enrollment is forecasted to increase for the upcoming year, per Axiometrics  There are zero beds in the pipeline for development in Cedar Falls.

¹Gazette Link *Enrollment data from University of Northern Iowa website

Metrics & KPIs

Executive Summary Metrics & KPIs

Operating Cash Flow

Net Operating Income

Rental Income

Q4 2020: $136

Q4 2020: $321

Q4 2020: $628

Q3 2020: $85

Q1 2020: $364

Q3 2020: $623

Q2 2020: $143

2020 Avg: $340

Q2 2020: $613

Metrics and KPIs [ Oct - Dec ]

[ Jul - Sep ]

[ Apr - Jun ]

[ Jan - Mar ]

Q4

Q3

Q2

Q1

YTD Average

Prior Year Average

OOP

NOI

$

321 $

330 $

344 $

363 $

340 $

323 $

325

Cash Flow

$

136 $

85 $

143 $

142 $

127 $

107 $

152

53%

52%

56%

59%

55%

53%

47%

7.33%

7.55%

7.87%

8.30%

7.76%

7.39%

7.42%

Occupancy

94%

94%

100%

100%

n/a

100%

95%

Pre-Leasing

17%

1%

92%

81%

n/a

n/a

n/a

Profit Margin YOC*

Dollars in thousands *Annualized **Original Operating Plan for the 2020 Academic Year

Metrics and KPIs Recap Q4 Net Operating Income (NOI) compared to 2020 YTD average Q4 2020 NOI 6% below 2020 Average Positives:    Setbacks: ×

Controlling expenses and minimizing large, one-time expenses Effectively increased Market Rents by 1% Collecting on delinquent accounts (<1% bad debt in December) Current Occupancy at 94% for 2020-2021 term compared to 100% in 2019-2020

Full-Year 2020 5% growth from the Original Operating Plan (OOP) Positives:   

Gross Potential Market Rent in-line Vacancy/Concessions In-line (Note: 6% Occupancy reduction for current term compared to historical) Expenses 89% of Original Operating Plan  Maintenance & Repairs  Security  Payroll

Metrics and KPIs Recap cont.

Full-Year 2020 to Original Operating Plan (OOP) continued..

Setbacks: × × ×

Management Income projected ~$162k annually vs. current ~$87k annually Increase in Property Taxes – project ~72k quarterly vs. ~91 Did not budget for Cap Ex or One-time expenses in Original Operating Plan (~150k currently)

Q4 2020 Cash Flow compared to 2020 YTD average Positives: 

Setbacks: × × ×

Increase in Gross Potential Rent by 2%

Vacancy (currently 6% vs. 0% in Q1 & Q2) Cap Ex/Replacements One-Time Expenses

Balance Sheet Recap Current Assets $561,000

Current Ratio

• • •

Cash: $165,000 Accounts Receivable: $15,300 Allowance: ($14,000)

• •

Escrow: $354,000 Prepaids: $23,000

Current Liabilities $340,000 • • •

Accounts Payable: $36,400 Prepaid Rent: $71,000 Accrued Expenses: $167,000

Current Ratio is calculated by dividing Current Assets over Current Liabilities. Our goal is to create a liquidity position of 1X.

Investment Performance

Investor Summary

5.0% Preferred Return

Current Distribution Payout

•

Distributions were adjusted to a 5% payout rate effective January 10, 2021

•

Capital Balance: $7,065,000

•

Current Distribution: $30,000 (current)

Driving factor is Occupancy – Currently 94% vs. 100% 3 yr historical average

Bank Financing •

Lender: Commercial Mortgage Backed Securities (CMBS)

•

Loan Amount: $10,500,000

•

Monthly Principal and Interest Payment: $57,721.52

•

Maturity Date: December 1, 2023

•

Interest Rate: 5.21%

•

New rent special for Spring Semester Leasing - expect to see short-term impacts to pre-leasing

•

Navigate College Enrollment decline

•

Students Returning to Campus •

Whats Next

Leasing Specialist from Tailwind Mankato properties on-site to assist in leasing strategies and executing leases

Michael Sather, CFO Tailwind Group msather@thetailwindgroup.com investors@thetailwindgroup.com