Quarters East Lansing

Q uarters at East L ansing C o ttag es Investo r Up d ate | Q 4 2020 Michael Sather, CFO Tailwind Group

Good News

•

Current Occupancy (98%)

•

Delinquency in good shape at 3%

•

Michigan State sent letter to students suggesting they will be all in person classes in fall. Not confirmed yet, but a good sign.

•

Steady enrollment projected for fall of 2021.

•

Distributions resumed October 2020

Challenges

•

COVID 19 environment has shut down amenities causing lower resident engagement and lower renewals.

•

Campus is currently shut down to visitors, only students with inperson classes are allowed on campus at this time so this has impacted our ability to get on campus to flyer and market to potential prospects.

•

Pre-Leasing below expectations for the 2021-2022 AY (academic year) Currently at 33% but gaining momentum.

15 leases signed in last 10 days.

•

High concessions for 2020-2021 AY

Pro p erty Up d ates

Market average 92%

Pre- Lease Velocity For the 2021- 2022 AY

33% Pre-Leased The Cottages are struggling to pre-lease for the 20212022 AY and are well behind last year's pace

Michig an State University Enrollm ent Despite the decline in enrollment for the 2020-2021 AY, enrollment is projected to grow annually .5%-1.5% over the next four years.

The pipeline is heavy with ~3,000 expected beds to come online; 1,332 are expected for 2021 MSU Fall 2020 Enrollment Report *Informatio n from Axio M etrics *F is fo r Forecast

Metrics and KPIs

Executive Sum m ary Q uarters at East Lansing Cottag es

Debt

COVID-19

Current Occupancy

Refinance completed in May 2020 $23k in savings per month

Corp and site teams continue to assess

Q4 2020: 98%

Collections for September were greater than 97%.

Q3 2020: 98%

Dollars in thousands Q4 2020 Q3 2020 Q2 2020 Q1 2020 YTD Avg 2019** OOP*** NOI

$ 123 $

Operating Cash Flow $ Profit Margin

71 $

72 $ 34 $

111 $ 109 $ 104 $ 104 $ 149 14 $

5 $

31 $

3 $

42

59%

40%

54%

52%

51%

51%

67%

6.40%

3.76%

5.75%

5.64%

5.39%

5.38%

7.73%

Occupancy

98%

98%

94%

94%

n/a

94%

95%

Pre-Leasing

25%

6%

57%

42%

n/a

n/a

n/a

YOC*

*Yield Over Cost Annualized **Quarterly Average ***Original Operating Plan for the 2020 Academic Year

Metrics and KPIs Recap Q4 Net Operating Income (NOI) 27% growth compared to 2020 YTD average Positives:  

August 1st, 2020 academic leasing year at 98% occupancy, prior was 94% Lower maintenance costs

Full Year 2020 NOI (30%) decline compared to Original Operating Plan Positives:  

Market rents are inline with the original plan Lower payroll and related costs

Negatives:   

Higher vacancy prior to August 1, 2020 Higher utility costs $70K higher property taxes and insurance (this represents 42% of the total variance).

Property taxes are currently being challenged

Metrics and KPIs Recap cont..

Operating Cash Flow is significantly higher than 2020 YTD average  Loan refinance took away principal payments of roughly $25K per quarter as well as lowered total interest expense  No capital expenditures in Q4 2020  Cash flow expected to continue to strengthen with new academic year occupancy and refinanced debt

Yield Over Cost (YOC)  Increase from 2019 due to stronger NOI mainly due to occupancy  Lower than the plan mainly due to higher property taxes

NOTE: Cost can be calculated in various ways. For the purpose of this calculatio n, Tailwind inputted 'Total Project Cost'

Balance Sheet Recap Current Assets: $332K

1.5X Current Ratio

• $187K cash • $88K escrow • $48K prepaids

Current Liabilities: $221K • $62K accounts payable • $14K accrued interest • $160K security deposits & prepaid rent

Current Ratio is comparable to 2019, no significant changes Current Ratio is calculated by dividing Current Assets over Current Liabilities. Our goal is to create a liquidity position of 1X. Not all current assets and liabilities listed, only significant categories are included above

Investm ent Perform ance

Investor D istributions

Distributions resumed effective October 2020 and will continued to be monitored by management as the property stabilizes.

Capital Balance: $3,100,000 Monthly Distribution: $21,000 Investor Distribution

Total Investment Distributions: $399,000

Bank

Principal Amount

Interest Rate

Principal Pmt

Interest Pmt

Previous

TCF Bank

$5,440,000

5.10%

$10,000

$25,000

Curren t

Merchants Bank of Indiana

$5,850,000

2.63%*

$0**

$13,000

Variance

$410,000

2.45%

$10,000

$12,000

Other Loan Information Refinance Completed with Merchants Bank of Indiana May 2020 Maturity Date: 12/10/2024 Amortization: Interest-Only through June 2022 (24-months)

*1-mo nth LIBOR +250 basis po ints **Interest-only fo r 24 months

What's Next

•

Maintain current occupancy

•

Focus on increasing pre-lease velocity

•

Reduce concessions for 2021

•

Continue efforts to contest high Real Estate Taxes

Michael Sather, CFO msather@thetailwindgro up.co m