Wheaton Crossroads Development Report

Wheaton Crossroads Diamondback Developers 2020 NAIOP Capital Challenge

Team

William Combs Awais Qazi Mohsen Teimouri

Advisor

Ron McDonald

EXECUTIVE SUMMARY INTRODUCTION Diamondback Developers ("Diamondback") is a real estate investment and development firm that has deep roots in Maryland. Headquartered in College Park, MD, we have been able to keep a finger on the pulse of the regional real estate markets and have delivered over 10 million Square Feet ("SF") of office, retail, and residential projects over the past decade. Diamondback values the collaborative spirit of the design process and has expertise in development, architecture, engineering, and project management.

Diamondback is seeking to be a development partner with Unibail-Rodamco-Westfield ("URW") to transform the sites between Ring Road and Veirs Mill Road into a mixed-use health-and-wellness community. Diamondback proposes a 924,540 SF, $273,600,000 vision for how Wheaton Crossroads can develop into Wheaton's premier destination for retail, exercise, food, and healthcare. Diamondback responded to URW's goals for financial performance with the key strategies of the project:

1. Reinvestment into Wheaton Mall: The primary goal of this venture is generating income to reinvest in the struggling Wheaton Mall and modernizing the property.

2. Low-Risk, Long-Term Holding: URW has held Wheaton Mall since the 60's and has a record for long holding. Long-term income is needed for continuing mall development.

3. Short-Term Revenue: URW needs immediate value to begin reinvesting in the Mall immediately while interest rates are low.

4. Place-making: URW wants the project to be more than just numbers; they are seeking a new identity for the development and the mall and a fun, marketable space that will be an icon of the company and community.

KEY STRATEGIES

1. Strategic Phasing: Development of Wheaton Crossroads is split into three phases and is designed to accentuate the mall at every stage. Phase I develops a bright and active gateway into the mall from the Metro station that is flanked by the popular food court and LA Fitness. Phase II capitalizes on growing families as Wheaton begins to offer first class amenities such as daycare facilities. Phase III completes the entryway to the mall and lays the groundwork for future development at a new Site 3.

2. Opportunity Zones and LIHTC: Wheaton Crossroads uses LIHTC and Opportunity Zone funding to leverage investment with low-risk, long-term debt and tax benefits.

3. Immediate Feasibility: Phase I of the project is under a LIHTC deal to provide low equity investment, high returns, and tax credits which generates immediate income.

4. Health and Wellness Community: Wheaton Crossroads combines its important anchors of LA Fitness, the multi-cultural Food Hall, CVS, Day Care, and Clinic to create a development where healthy living and community engagement is put first.

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FINAL SUMMARY NUMBERS The construction of all three phases is expected to be 100% complete in 5 years from start of design and entitlements.

• Phase I, the Dynamo, maxes out residential demand on Site 1 with 362 combined units of market rate and LIHTC housing with LA Fitness and multicultural Food Hall tenants. Phase I is funded by LIHTC and achieves IRR of 15.6% on an initial investment of $7,100,000.

• Phase II, the Momentum Residences, is the first of two planned buildings on Site 2 and includes 260 Senior Housing units with 25,000 SF Day Care. Phase II offers 15.7% IRR on a large equity investment to maximize the tax benefits of the Opportunity Zone Funding.

• Phase III, the Momentum Clinic, completes the mixed uses of the Wheaton Crossroads by partnering with Adventist or Holy Cross Hospital and providing a 80,000 SF outpatient facility and 15,000 SF pharmacy to serve both residents and the community. Opportunity Zone Funding, 17% IRR, and stabilized NOI on Phases 1 and 2 allow for Ring Road benefits.

FINANCIAL SUMMARY Project Buildout Market-Rate Multifamily (units) 60% AMI LIHTC Multifamily (units) LA Fitness (SF) Multicultural Food Hall (SF) Independent Senior Housing (units) Medical Office / Day Care (SF) Clinic (SF) CVS (SF) Structured Parking (spaces) Non-Income Generating Structure (SF) TOTAL

Phase I 260 142 45,000 20,000

Phase II

260 25,000

227 64,350 455,850

145 48,090 345,690

Phase III

80,000 15,000 43 10,000 123,000

TOTAL SF 108,900 172,600 45,000 20,000 220,600 25,000 80,000 15,000 115,000 122,440 924,540

Key Financial Metrics Total Development Cost Total Equity Total Debt Residual Land Value IRR Yield

Phase I $118,788,094 $7,145,216 $92,063,681 $36,933,567 15.6% 8.6%

Phase II $109,822,964 $27,444,491 $82,333,473 $6,923,306 15.7% 7.3%

Phase III $44,999,597 $11,249,899 $33,749,698 18.5% 10.5%

TOTAL $273,610,655.41 $45,839,606.35 $208,146,851.81 $43,856,873.00 17% 9%

USES OF FUNDS Construction Costs Fees Related To Construction Costs Aqcuisition Costs Total Syndication Related Costs Financing Fees and Charges Developer's Fees (6%) Guarantees and Reserves Ring Road Improvements TOTAL

Phase I $94,551,594 $2,914,196 $8,525,000 $142,092 $2,466,351 $7,861,749 $2,327,112 $118,788,094

Phase II $90,446,853 $2,665,506 $9,050,000 $50,000 $6,100,605 $1,350,000 $109,777,964

Phase III $29,408,780 $2,024,974 $3,990,878 $160,000 $3,339,966 $675,000 $5,350,000 $39,599,597

TOTAL $214,407,227 $7,604,676 $21,565,878 $192,092 $2,626,351 $17,302,320 $4,352,112 $5,350,000 $268,165,655

SOURCES OF FUNDS Senior Debt Sponsor Equity Low Income Housing Tax Credits Interim Income TOTAL

Phase I $92,857,414 $7,145,216 $17,975,465 $810,000 $118,788,095

Phase II $82,333,473 $22,025,431 $5,419,060 $109,777,964

Phase III $28,349,698 $11,249,899 $39,599,597

TOTAL $203,540,585 $40,420,546 $17,975,465 $6,229,060 $268,165,656

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MARKET TRENDS CURRENT MARKET TRENDS Montgomery County has developed into a powerhouse within the DC real estate market. Once a simple suburb for DC Commuters, cities such as Bethesda and Rockville have developed into employment hubs drawing commuters from surrounding counties and states. Diamondback sees Wheaton as the next big opportunity as it finds its identity, an identity shaped by three large-scale trends in today's market: FUTURE OF THE SHOPPING MALL Due to shifting consumer trends, malls across the country are closing. Wheaton Mall is relatively well situated due to strong anchors such as Costco and Target providing necessities to the community. However, the failure of other retailers like JCPenney and Macy's foretell of a fundamental change Wheaton Mall's organization in order to stay afloat. This means the parcelization of large properties such as malls into smaller, more agile blocks consisting of mixed-use buildings.

This property type also has a higher resale value. By adapting to these changes early on, URW can future proof themselves as long term holders of the property.

AMAZON HQ2 The most recent development in the ever changing fabric of the DC metro area comes from the tech giant, Amazon, deciding to locate one of their headquarters ("HQ2") in Arlington, Virginia.

HQ2 will open by 2023 and the surrounding markets have already begun to absorb the residential demand. At least 50,000 new jobs in the area are creating demand for 30,000 new residential units in Montgomery County alone.

COVID-19 Phase I of Wheaton Crossroads completes in January 2023 with lease-up starting as well. We expect the market to be strong at this time for rental units. Continued demand for medical office space will also be strong as medical facilities are currently over capacity and hospitals are resorting to using stadiums and parks for overflow patients.

CBRE Econometric Advisors expect the multifamily market to bottom out in Q3 and begin to recover in Q4. The pandemic will initially lead to increased multifamily vacancy and diminished rental rates over the next two months. Rental rates are projected to drop 6.7% from peak in Q3 of 2019 to trough in Q4 of 2020 but will fully recover in 2021.

Historical & Projected Rent Change and Vacancy, with COVID-19 impact in green

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MARKET ANALYSIS OFFICE Although spec office space in Montgomery County is not doing well, medical office space is in demand globally with hospitals needing out-patient facilities. Wheaton Crossroads will feature to-suite offices that offer affordable non-emergency health services to the community.

RESIDENTIAL The residential market share for Montgomery County continues to grow and Wheaton, as a Metro accessible extension of the Washington, DC metro area, will realize a share of this growth.

This increase in demand is not being met by development, and rents will increase significantly as the limited rental stock left is occupied.

Market Effective Rent Per Unit By Bedroom

$3,000

Forecast

$2,800 $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000

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Š 2020 CoStar Realty Information Inc.

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04/10/2020

RETAIL As big box retail continues to shrink and eventually go off-line within the retail market, everyone is looking the future of retail. Food halls as well established brands like CVS are still in demand as health focused shopping places for customers. There have been little deliveries of new retail space and the vacancy is dropping in Wheaton, leaving the project a niche for destination retail.

Net Absorption, Net Deliveries & Vacancy

35%

20K

30%

0

25%

-20K

20%

-40K

15%

-60K

10%

-80K

5%

-100K

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Vacancy Rate

Absorption & Deliveries In SF

40K

0% 20

04/10/2020

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DEMOGRAPHICS We are increasingly seeing a demand for residential units brought on by new developments in the Washington metro area. With the demand for cities with Metro access growing, Wheaton is emerging as an attractive city to work and live within. The existing makeup of Wheaton is extremely diverse in terms of age, income, and race. The fastest growing segments of the demographics are young adult renters and empty nesters or seniors who are looking for a walkable neighborhood and close-knit community. We believe class-A buildings that have built in amenities will draw people into Wheaton as the CBD continues to evolve. The following is a sample demographic of the Wheaton Crossroads's target audience:

Jessica, 24

David & Victoria, 61

The James Family

M-NCPPC Workers

Jessica recently graduated from university with her Master of Education Studies. She works in Washington, DC but lives in Wheaton because of its Metro accessibility and promotion of healthy living. She frequents the LA Fitness and the food hall and loves the local food choices. Jessica chose not to own a car and prefers to travel by foot so the new pedestrian and bike friendly streets and the Metro are perfect for her.

David and Victoria have lived in a house close to the Wheaton CBD for 30 years now. They remember when the Wheaton Mall was an open-air establishment in the 60s and are impressed by the changes. They decided to sell their home and move into a senior housing apartment where they can be close to the attached medical facilities. The on-site physical therapy facility and the CVS also provides them hassle free accessibility.

The James family lives in Wheaton and the parents work for a tech start-up close by. Wheaton is the perfect distance from HQ2 in Arlington for startups to get new talent but still be visible to Amazon, and the James family knows that the firm will likely be bought

by Amazon soon. They are looking forward to digitally commuting to work and spending time with the kids at Wheaton Town Square or taking a stroll along Ring Road.

The new employees at the M-NCPPC Headquarters enjoy the accessibility the Wheaton CBD offers. They can get their morning work out at the LA Fitness across the street, grab a healthy lunch at the food hall, and shop at the mall during their work week.

Many employees enjoy frequenting the open and inviting lobby space or shopping at the mall after work. Some have even purchased apartments in the new development!

Wheaton has a significantly higher portion of renters aged 60 or older than either Montgomery County or DC.

1- and 2- person households are the largest portions of the rental market, but Wheaton has higher rental rates for 3- and 4person households than the county.

The new M-NCPPC building added 1,000 jobs to Wheaton and started a chain of community investment that will only increase.

Teacher

30% of Wheaton Renters make more than $100,000 annually, and 25% make less than $35,000.

Retired Couple

Software Engineers

Office Workers

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ZONING

Current Uses in Wheaton

ZONING Wheaton Crossroads is a CR zone is a CR-6.0, R-5.5, C-5.5, H200 zone; a building that is 100% residential or commercial can achieve a 5.5 FAR, but a building combining both uses can achieve up to a 6.0 FAR with a 200 foot height limit. Site 1 can provide up to 510,000 SF of development with 6.0 FAR. Site 2 can provide up to 450,000 SF of development with 6.0 FAR. Total, The Wheaton Crossroads can cover 960,000 SF of development.

Most uses are permitted in a CR zone excluding agricultural production, broadcasting equipment, accessory dwelling units, warehousing and industrial uses, and shooting ranges and adult entertainment. Importantly, uses that are permitted include day care, residential care facilities, restaurants, clinics, retail, and office, including medical and research office.

To get the maximum density allowable, both sites incorporate a mix of residential and non-residential uses that do not require special exceptions. To limit the notoriously lengthy process of entitlements in Montgomery County, Diamondback is proposing uses expressly permitted in the Zoning and is developing by right.

Current Zoning in Wheaton

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SITE ANALYSIS Wheaton Crossroads is a collection of two sites located at 11010 Veirs Mill Road in Wheaton, MD. The properties are currently divided into two separate sites in which Site 1 currently hosts a car dealership while Site 2 hosts the LA Fitness. Both sites reside within the overall property of the Wheaton Regional Mall and therefore benefit from the amenities offered by the mall. Site 3, the current site of CVS, will be left vacant after Phase III and ripe for redevelopment. For this report, Diamondback does not propose a development scheme for this site and instead advises a plan.

CVS

LOCATION Located at the intersection of three major thoroughfares, the site benefits heavily from private car connections as well as public rail and bus transit.

With the master plan of Wheaton moving towards a more transit oriented development focus, Wheaton has begun to drive in development to the CBD. A prime example of this is the new Montgomery County Planning Department Building (M-NCPPC) being located across the street.

The M-NCPPC HQ is a 14-story 350,000 SF Class A office building and host several county agencies at delivery in 2020. Another strength of this project is that government agencies tend to be long term tenants of properties and bring with them a host of financial, residential, and commercial activity. With the influx of 1,000 of government employees, Wheaton will be revitalized as more people patronize local businesses and make greater use of the Metro train and bus system.

Furthermore, a Bus Rapid Transit (BRT) is proposed in the Veirs Mill master plan to connect Rockville to Wheaton. This dedicated bus line will connect the ends of the Metro Red Line and connect Wheaton to the more established entertainment center of Rockville. Just south of Wheaton is the proposed Purple Line connecting Silver Spring and Bethesda. Wheaton is underdeveloped compared to these established centers but enjoys just as much if not more public investment than all of them. It is ripe for development to make use of the incredible value of its proximity, transit, and mall.

DEVELOPMENT OPPORTUNITIES AND CONSTRAINTS Opportunities

Constraints

• • •

•

• • • •

Metro bus and train accessibility LA Fitness on-site 42,220 cars utilize Veirs Mill Road daily Proximity to Wheaton CBD Shopping at Wheaton Mall Costco and Grocery Stores within walking distance Large parking lots perfect for brownfield redevelopment

• • • •

Parcelization has to account for Wendy's impractical location Veirs Mill is not pedestrian friendly Entitlement process in MoCo is long and arduous Water main needs to be relocated to maximize Site 2 utilization Ring Road lacks cohesive pedestrian friendly system and is also difficult to navigate by car

M-NCPPC HQ

Site 1

Wheaton Metro

WMATA Garage

Wendy’s Lot

Site 2

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SITE 3

SITE 1

Ave

d R

rgia

Geo

ill M

d oa R

rs i Ve

g in R

SITE 2

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MASTER PLAN CONFORMANCE COMMUNITY ENHANCEMENTS Our development aims to bring focus on Wheaton as one of the emerging hubs for commerce and residence with the infusion of apartments, senior residences, and medical office space that can offload the pressure from nearby hospitals. The new food hall aims to tie together the cultural fabric of the community by providing international cuisine for the locals and visitors. Diamondback aims to make Ring Road and Mall Ring Road into a complete street that will unify the entire mall property, allow easy pedestrian access around the CBD, and make Wheaton a more desirable neighborhood to live within.

DEVELOPMENT ALIGNMENT WITH WHEATON MASTER PLAN The Wheaton CBD and Vicinity Sector Plan was revised in 2012 to rejuvenate the existing master plan. The envisioned future of the CBD includes mixed-use projects, culturally diverse retail and entertainment, business and government services, and transit-oriented residential and office use. Another goal is to make Wheaton more green by promoting alternate means of transportation to vehicular transportation such as promoting Metro usage, increasing walkability, biking, and using other public transportation.

Wheaton Crossroads begins to adapt to these envisioned changes by creating mixed-use buildings, creating culturally diverse retail and dining, and promoting public transportation. Through the redevelopment of Ring Road, and eventually Mall Ring Road, Wheaton Crossroads will become a walkable destination and attraction point. This plays into the Wheaton revitalization strategy as street level retail activates sidewalks and promotes community interaction.

The Veirs Mill Corridor Master Plan emphasizes a pedestrian friendly environment.

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DEAL STRUCTURE AND FUNDING OPPORTUNITY FUNDS Montgomery County has 14 areas designated as Opportunity Zones ("OZ"), which allow investors to receive federal tax incentives by re-investing their capital gains into select communities.

Opportunity Funds can be used in conjunction with other state and local programs such as Maryland Arts & Entertainment Districts, Maryland Enterprise Zones, and Maryland RISE Zones.

Due to the infancy of the program and the current difficulty with combining LIHTC with OZ, however, our development proposal uses each program individually. Phase 1 is structured under a 4% LIHTC Tax-Exempt Bond structure as it is the most robust and established financing structure available to provide low-risk returns. Phases II and III are structured under Opportunity Funds ("OF") with conventional financing to reinvest the capital gains from Phase I. While the programs are difficult to combine now, Phases II and III are at least 3 years away.

Should a funding mechanism or discovery be made that can marry the tax benefits from LIHTC with the reinvestment structure of OZ Funds, the financial improvements would be formidable and can be applied to the later strategic phases. For the purposes of this proposal, Diamondback assumes that this funding structure is unavailable and presents this feasible proposal with the understanding that a future breakthrough would improve the finances considerably. Regular OZ provides the following benefits:

1. Temporary Deferral: Realized capital gains from nearly any asset class that are reinvested into an OF prior to December 31, 2026 can receive temporary tax deferral.

2. Tax Relief: Investors can exclude 10 of their original capital gains from taxation if the reinvested gains remain in an OF for 5 years. An additional 5% can be excluded if the reinvested gains remain in an OF for at least 2 more years (i.e., 15% excluded after at least 7 years).

3. Permanent Tax Exclusion: Gains accrued after investing in an OF are permanently excluded from taxation if the investment is held in an OF for at least 10 years.

DEVELOPMENT ENTITY Diamondback proposes forming Wheaton Crossroads LLC with URW. URW would be a member and provide 80% of the required equity in return for gains on that equity.

Diamondback would be the managing partner, providing 20% of the equity and would receive a development fee as well as a promote return if the project outperforms goals. Diamondback provides the experience needed to make such a complex project work, and URW provides the land and equity to make it happen.

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DEVELOPMENT APPROACH ALIGNMENT Diamondback proposes forming an LLC with URW. Of the total project equity required of $45,839,600, Diamondback will operate the LLC as manager and contribute $9,167,900. URW will be the primary sponsor and member, contributing the remaining $36,671,680 over the full course of the three phases. Diamondback brings to the table years of experience delivering successful affordable projects in Montgomery County and can navigate the intense scrutiny of the LIHTC application process. The majority of funding for the project in Phases I and Phase II will come from Tax-Exempt Bonds issued through the Montgomery County Housing Opportunities Commission ("HOC"). Tax-Exempt bonds offer lower returns for the investor and are insulated from volatile market swings, giving developers access to relatively cheap capital to finance affordable projects. Tax-Exempt Bonds need to be applied for, and the judging process is extremely strict in Montgomery County. This is where Diamondback's expertise is mobilized; • Priority Funding Areas ("PFA"): Separate from OZs, PFAs are cities or locations that the state is actively trying to increase investment in. PFAs are much more likely to receive state-issued bonds or tax-exempt bonds than projects elsewhere. Wheaton, MD is a PFA that is already seeing increased investment with the recent M-NCPPC building and Veirs Mill Master Plan, and Wheaton Crossroads is poised as the only large project in the pipeline to capitalize on this advantageous funding opportunity.

• Lowest-Income Units: Projects incorporating units that serve people who make less than 20% of the Area Median Income ("AMI") will be considered more valuable than those that just provide the standard 60% AMI units. Wheaton, MD is poised to capture increasingly wealthy young families as well as increasingly wealthy aging baby boomers, but there is still a significant portion of the current population that makes 20% or less of the AMI. New LIHTC allows for up to 80% AMI units as long as the average unit amount is still 60% AMI, allowing Wheaton Crossroads to capture valuable sectors of the market untouched by other developments.

• Experienced Development Team: Projects with proven developers will always be considered more highly than those with new developers, but the design team expertise needs to extend beyond just the GP. Finding experienced asset and property managers, reliable contractors, and trustworthy bankers and investors are all essential to ensure that these complicated deals go smoothly.

• Public Services and Sustainable Design: Projects that actively serve the community they reside in are highly valued in Montgomery County. Setbacks for public parks, gathering spaces, or a focus on sustainability by providing bike lanes, pedestrian improvements, improved greenery, and other green building techniques mean a great deal to the judiciary committee.

After achieving the 4% LIHTC and Tax-Exempt Bonds approval, the $17,975,000 of tax credits will be disbursed over a ten-year time frame and can be used to directly offset the substantial tax obligations facing URW. These credits are tied to the Corporate Tax Rate and fall in value when taxes are low, but in the event of a new administration in the White House it is very likely that the corporate tax rate will increase significantly. Since these credits are disbursed over time, their value will only grow with uncertainty in the market and increased taxes from less than $0.90 per credit today to over $1.20 per credit with high taxes.

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MARKETINGS STRATEGY "Wheaton Crossroads is a unique health and wellness community celebrating healthy lifestyles that connect the mall to the city with inviting, empathetic, forward-thinking design."

KEY STRATEGIES As URW owns the entire mall property, one of our key strategies for marketing prior to and during the lease-up period will be to advertise through the mall. We would also look to bring in residents that will begin working at the M-NCPPC building advertising short pedestrian commutes to work, access to amenities such as the on-site LA Fitness, pharmacy, restaurants, and AMC Theatres. Finally, another key marketing strategy will be to partner with the Holy Cross or Adventist Hospital for occupancy of the outpatient facility on Site 2 and market healthy living to their patients.

LEASE-UP PERIOD LIHTC funding stipulates a holding period of at least 15 years. Diamondback modeled the proforma with a 15 year holding period and sell-off at the end of year 15. This long-term component synergizes well with Diamondback’s community-oriented development approach and URW's goals for a long-term investment. In times of low taxes, conventional financing is often the easier and cheaper way to fund a project. However, the benefit of LIHTC and tax credits is that it insulates the investor from the sways of market-rate units since affordable units are always in demand, making them the perfect choice for a long-term developer looking for a steady tax offset and cash flow to reinvest in their mall.

TENANTS Wheaton Crossroads and its tenants aim to redevelop the urban fabric into a destination that can compliment the future transformation of the mall. The food hall compliments the mall by adding healthy, multi-cultural options to attract customers. Local mom-and-pop shops from Wheaton can benefit from decreased overhead costs and increased visibility. The hours of operation of the food hall will be from 7 am to 10 pm on Weekdays and from 7 am to 12 am on Fridays and Weekends. Some of the featured tenants are:

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DEVELOPMENT TIMELINE PROJECT OVERVIEW The project proposes three main phases of development to offer competitive returns and flexibility to adapt to market shifts. The strategic plan also offers opportunities for continued development after Phase III; however, those options remain open as Diamondback has not yet conducted financial analysis of development after Phase III of Wheaton Crossroads.

• Phase I is the construction of the Dynamo on Site 1 and offers a low Equity Investment of $7,145,216 to facilitate easy start to development. The returns are significant, achieving a 6.36 equity multiple and IRR of 15.6%, providing immediate returns for URW to reinvest in the Mall or in Phases II and III. Phase I begins with the parcelization of Sites 1 and 2 into the project areas defined in our site analysis. Construction begins with the demolition of the existing Ford dealership and construction of the retail pad for the 45,000 SF LA Fitness and 24,000 SF Healthy Food Hall. Construction finishes with the 362 market and affordable units.

• Phase II is the construction of the senior housing Momentum Residences on Site 2 and offers a higher Equity Investment of $22,025,431 and steady IRR of 9.1%. Phase II is financed with traditional debt to allow flexibility and relaxed restrictions on the units. Phase II begins with the demolition of the old LA Fitness building and construction of 260 age-restricted units, 10,000 SF medical office space, and 15,000 SF of Day Care Space.

• Phase III is the construction of the Momentum Clinic on Site 2 and the revitalization of Ring Road, offering an Equity Investment of $11,249,899 and steady returns of 9% IRR. Phase III is meant to coincide with the Wheaton Master Plan development of Veirs Mill Road with opportunities for transportation and infrastructure grants offered in later years. Construction starts with the moving of a water main under Site 2 and continues with 80,000 SF Medical Office Space sitting on top of a 15,000 SF Retail pad. Phase III concludes with the completion of Ring Road as a complete street, connecting Site 1 withTimeline Site 2. As CVS moves into Wheaton Crossing Development Site 2, it leaves Site 3 open for a new development along Ring Road.

PHASING DEVELOPMENT TIMELINE

April 2020

January 2021

January 2023

June 2024

June 2025

Pre-Construction

Phase I

Phase II

Planning, budgeting, permitting, and resource procurement

Phase I construction begins

Phase I construction finishes

Phase II construction finishes

Phase II lease up finishes

Phase I lease up begins

Phase I lease up finishes

Phase III construction begins

Phase II construction starts

Phase II lease up begins

Future

Phase III

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Capital Gain, Profit Margin @ 4.8% Cap Rate

Amount

PHASE II

Selling Price Total Project Cost (TPC) Total Selling Cost Depreciation for 15 Years Capital Gain Before Tax Tax Due Total Capital Gain Equity Invested Residual Land Value (RLV) in 2020 Dollars Equity Multiple Profit Margin IRR Yeild Capital Gain, Profit Margin @ 4.8% Cap Rate Selling Price Total Project Cost (TPC) Total Selling Cost Depreciation for 15 Years Capital Gain Before Tax Tax Due Total Capital Gain Equity Invested Residual Land Value (RLV) in 2020 Dollars Equity Multiple Profit Margin IRR Yeild

PHASE III

PHASE I

PROJECT PERFORMANCE

Capital Gain, Profit Margin @ 4.8% Cap Rate Selling Price Total Project Cost (TPC) Total Selling Cost Depreciation for 15 Years Capital Gain Before Tax Tax Due Total Capital Gain Equity Invested Equity Multiple Profit Margin IRR Yeild

$ $

$ $

$

$181,513,316 $118,788,094 $9,075,666 $8,181,818 $45,467,738 $10,821,322 $34,646,416 7,145,216 3,183,277 6.36 17.0% 15.6% 8.6% Amount $201,925,854 $109,822,964 $10,096,293 $8,181,818 $73,824,779 $17,570,297 $56,254,482 22,025,431 6,923,306.00 1.49 29.8% 9.1% 7.3%

Amount $98,119,172 $44,999,597 $4,905,959 $409,091 $47,804,525 $11,377,477 $36,427,048 11,249,899 4.25 24% 9% 18%

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FINANCIAL SUMMARY AND OPEX FINANCIAL SUMMARY The total project will cover almost 960,000 SF of development, maxing out the area available from the FAR and CR-6.0 Zone. Most of the value from the project comes from the rental residential component, generating cash flow as well as providing increased demand for the other retail uses in the area. Lower returns are prioritized for Phases II and III in order to reinvest in the placemaking and healthcare opportunities in the Crossroads as the development grows and matures into a stable, long-term investment.

OPERATING EXPENSES Phase I has the highest operating expenses at $1,596,758 per year. It has the most moving parts of any phase and the most residential units, both necessary to generate the immediate cash flow necessary for URW's reinvestment into Wheaton Mall. Due to its large lobby space, Phase I needs increased administrative expenses but benefits from the NNN lease of LA Fitness and the Food Hall Tenants. Phase III has the lowest operating expenses, as it is an office and retail space leased out with NNN lease to reliable and large tenants.

The total development comes out to $5,000 per unit of operating expenses, around the industry average,

OPERATING EXPENSES Total Budget

Phase I: The Dynamo

Per Unit

Per SF

EXPENSES TOTAL ADMINISTRATIVE SALARIES

$150,000

$414

$0.29

TOTAL AUDIT & MANAGEMENT FEE TOTAL UTILITIES TOTAL MAINTENANCE EXPENSE Security Contracts TOTAL GENERAL EXPENSES

$295,160 $308,698 $200,000 $120,000 $360,000

$815 $853 $552 $331 $994

$0.58 $0.61 $0.39 $0.24 $0.71

$162,900 $1,596,758

$450 $4,411

$0.32 $3.13

REPLACEMENT RESERVE TOTAL OPERATING EXPENSES

Total Budget

Phase II: Momentum Residences EXPENSES TOTAL ADMINISTRATIVE SALARIES TOTAL AUDIT & MANAGEMENT FEE TOTAL UTILITIES TOTAL MAINTENANCE EXPENSE TOTAL OTHER SERVICE FEES TOTAL GENERAL EXPENSES REPLACEMENT RESERVE TOTAL OPERATING EXPENSES

EXPENSES TOTAL ADMINISTRATIVE SALARIES TOTAL AUDIT & MANAGEMENT FEE REPLACEMENT RESERVE TOTAL OPERATING EXPENSES TOTAL CROSS-PHASE OPERATING COSTS

$

Per SF

$140,000 $300,000 $245,000 $310,250 $170,000 $148,000

$538.46 $1,153.85 $942.31 $1,193.27 $653.85 $569.23

$0.40 $0.86 $0.70 $0.89 $0.49 $0.42

$150,000 $1,313,250

$576.92 $5,050.96

$0.43 $3.75

Total Budget

Phase III: Momentum Clinic

Per Unit

Per Unit

Per SF

$140,000 $100,000

-

$1.40 $1.00

150,000 $240,000

-

$1.50 $2.40

$3,150,008

$5,064.32

$3.28

15

CONSTRUCTION BUDGET CONSTRUCTION BUDGET Phase III has a significant construction cost of $5,000,000 for the improvements to Ring Road alone. This large cost is spaced out in Phase III to maximize the time value of money and give Phases I and II time to stabilize and URW to reinvest in Mall infrastructure. By the time Phase III starts, the redevelopment of Veirs Mill Road should be occurring as well, making this the perfect time to reinvest in infrastructure. The total project will cost $270, slightly more than industry average. The increased cost to infrastructure, lobby space, and retail shells is necessary in order to provide the level of amenities and community support that attract interest to development and further into the mall. The costs are absorbed in the construction of the Wheaton Crossroads, but the benefits will easily be seen in the increased traffic and attention brought to the Wheaton Mall and CONSTRUCTION the community. BUDGET Phase 1: the Dynamo

Cost per Unit / Space $ 6,321 $ 60,972 $ 8,198 $ 4,902 $ 180,051 $ 199,473 $ $ $

2,465 24,933 235,797 3% Per year 4% Per year 4% Per year 261,192

Sitework Parking LA Fitness Shell Food Hall Shell Residential Subtotal - Hard Cost

$ $ $ $ $ $

Cost 2,288,360 3,231,520 2,967,800 1,774,600 65,178,360 75,440,640

Insurance General Conditions & Fee Construction Budget

$ $ $

892,246 9,025,718 85,358,604

Escalation Pricing Contingency Construction Contingency Construction Budget with contingencies

$ $ $ $

2,375,760 3,408,600 3,408,600 94,551,564

$

Sitework Parking Day Care Office Residential Subtotal - Hard Cost

$ $ $ $ $ $

Cost 3,618,300 4,321,800 567,000 2,544,150 61,058,550 72,109,800

Cost per Unit / Space $ 13,917 $ 37,581 $ 2,181 $ 9,785 $ 234,841 $ 277,345

Insurance General Conditions & Fee Construction Budget

$ $ $

721,204 8,640,450 81,471,454

$ $ $

2,774 33,232 313,352

Escalation Pricing Contingency Construction Contingency Construction Budget with contingencies

$ $ $ $

2,448,600 3,263,400 3,263,400 90,446,854

$

3% Per year 4% Per year 4% Per year 249,853

Sitework Ring Road Parking CVS Office Shell Subtotal - Hard Cost

$ $ $ $ $ $

Cost 500,000 5,000,000 2,699,850 220,170 13,826,430 22,246,450

Insurance General Conditions & Fee Construction Budget

$ $ $

273,631 3,464,115 25,984,196

Escalation Pricing Contingency Construction Contingency Construction Budget with contingencies

$ $ $ $

867,739 1,278,422 1,278,422 29,408,780

Phase 2: Momentum Residences

Phase 3: Momentum Clinic

Cost per Unit / Space

3% Per year 4% Per year 4% Per year

16

PHASE I PROPOSAL THE DYNAMO Site 1 currently hosts a Ford car dealership that occupies the top of the WMATA garage; those spaces will be adopted for the Dynamo, providing 174 spaces for the multifamily residents.

Situated at the southern edge of the building, LA Fitness would have frontage on Veirs Mill Road, Ring Road, and the gateway road into the Mall. The double height lobby space connects the LA Fitness to the Food Hall and Wheaton CBD to Wheaton Mall. The multi-cultural Food Hall will bring together staples of the famous Wheaton food scene under one roof, taking popular restaurants from declining strip malls and placing them front and center in front of the Metro and M-NCPPC building. The Food Hall will serve gym-goers, passers-by, office workers, commuters, and the shoppers of Wheaton Mall as the premier place for good food.

Site 1 Program LA Fitness, Hall, & Residential Site 1Food Program

With a total development costLA of Fitness, $118,788,000, excluding tax credits in the project Foodequity Hall, &shares Residential will remain under $7.2M. This small investment of 6.1% of TPC is possible with Tax-Exempt 1 2 Level 3 low-cost debt. Phase Level 4-10 bonds,Level minimizing the riskLevel of leveraging with reliable I will result in aPenthouse net Typical Floor Plan Amenity Space yield of 8.6% and an IRR of 15.6%.

Site 1 has a residual land value of $3,183,277.

Level 1 Level 2 Level 3 Level 4-10 Penthouse Amenity Space

Ring Road Facing Outdoor Terrace

SITE 1 PROGRAM, SECTION & SITE PLAN Parking

62’

17’

49’

Ring Road Facing Outdoor Terrace Parking

62’

17’

49’

Food Hall

Doube Height Lobby Space

Lobby

Lobby

65’ 330’

Lobby

Lobby

65’ 330’

LA Fitness

Typical Floor Plan 65’

Viers Mills Facing Outdoor Terrace

65’

65’

174’

65’

174’

65’

133’

Food Hall Doube Height Lobby Space

Viers Mills Facing Outdoor Terrace

65’ 133’

Interior Courtyard Punchout Interior Courtyard Punchout

Amenity Space

Interior Courtyard Punchout

Interior Courtyard Punchout

Interior Courtyard Punchout

Amenity Space

Interior Courtyard Punchout

LA Fitness

LA Fitness

LA Fitness

LA Fitness: 22,800 sqft Lobby: 11,500 sqft Parking: 23,000 sqft, 49 Spaces

LA Fitness: 22,800 sqft Lobby: 11,500 sqft Food Hall: 23,251 sqft

LA Fitness: 22,800 sqft Lobby: 11,500 sqft Parking: 23,000 sqft, 49 Spaces

LA Fitness: 22,800 sqft Lobby: 11,500 sqft Food Hall: 23,251 sqft

Residential Floor Plate: 42,800 sqft

Residential Floor Plate: 42,800 sqft Amenity Space: 7,130 sqft Residential Floor Plate: 42,800 sqft Amenity Space: 7,130 sqft

Residential Floor Plate: 42,800 sqft

Residential Floor Plate: 42,800 sqft Elevator Core: 400 sqft Residential Floor Plate: 42,800 sqft Elevator Core: 400 sqft

Key

Key Residential

Lobby

Site 1 Stacking Diagram Food Hall Residential

N

Lobby Amenity Space

LA Fitness, Food Hall, ResidentialAmenityParking Food& Hall Space LA Fitness

N

Site 1 Site Plan

LA Fitness

Pa rk

in

g

Parking

Fit ne s LA

D Lo oub bb e y S He pa igh ce t

s

Gr an d

Lo bb y

33

0’

Residential

LA Fitness

Lobby

Food Hall Parking ~25’

N

N

17 Not to Scale

PHASE I PROFORMA

15 YEAR OPERATING PRO FORMA Trends - Rental Project (Market) Revenue Growth Rate - Market Revenue Growth Rate - Affordable Non-residential (Public Use Spaces) Vacancy Rate Concession (Market) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

Trends - Rental Project (Affordable) Revenue Growth Rate - Market Revenue Growth Rate - Affordable Vacancy Rate Concession (Aff) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

2.00% 2.00% 2.00% 4.50% 0.71% 0.29% 2.00% 3.00% Year 1

Year 2

Year 3

Other Inputs Revenue Growth Rate - Market Revenue Growth Rate - Affordable Vacancy Rate Concession (Aff) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

2.00% 2.00% 3.50% 0.21% 0.29% 2.00% 3.00%

RESIDENTIAL (MARKET) RENTAL INCOME Rental Income Other Income Less: Vacancy Loss/Bad Debt Less: Concessions Nonresidential Income (Retail Component)

Year 4

Year 5

Year 6

Year 7

Year 8

$5,016,960 $574,534 ($251,617) ($39,585) $2,425,500

$5,117,299 $586,025 ($256,650) ($40,377) $2,474,010

$5,219,645 $597,745 ($261,783) ($41,184) $2,523,490

$5,324,038 $609,700 ($267,018) ($42,008) $2,573,960

$5,430,519 $621,894 ($272,359) ($42,848) $2,625,439

$5,539,129 $634,332 ($277,806) ($43,705) $2,677,948

$5,649,912 $647,019 ($283,362) ($44,579) $2,731,507

$5,762,910 $659,959 ($289,029) ($45,471) $2,786,137

NET RENTAL INCOME

$7,725,792

$7,880,308

$8,037,914

$8,198,672

$8,362,646

$8,529,898

$8,700,496

$108,150

$111,395

$114,736

$118,178

$121,724

$125,375

Phase 1-Return Metrics-Exit Year 15 IRR 15.6% Yeild 8.6% Development Spread 3.8% Profit Margin 46.5% Equity Multiple 4.73 Sale Proceeds $181,513,316 Net Present Value $16,739,221

2.00% 2.00% 2.00% 0.21% 0.29% 2.00% 3.00%

Year 9

Year 10

Year 11

Year 12

Year 13

Year 14

Year 15

$5,878,168 $673,158 ($294,810) ($46,380) $2,841,860

$5,995,732 $686,622 ($300,706) ($47,308) $2,898,697

$6,115,646 $700,354 ($306,720) ($48,254) $2,956,671

$6,237,959 $714,361 ($312,854) ($49,219) $3,015,804

$6,362,718 $728,648 ($319,111) ($50,203) $3,076,120

$6,489,973 $743,221 ($325,494) ($51,208) $3,137,643

$6,619,772 $758,086 ($332,004) ($52,232) $3,200,396

$8,874,506

$9,051,997

$9,233,036

$9,417,697

$9,606,051

$9,798,172

$9,994,136

$10,194,018

$129,137

$133,011

$137,001

$141,111

$145,345

$149,705

$154,196

$158,822

TOTAL OPERATING EXPENSES Aministrative Expenses

$105,000

Utility Expenses

$315,000

$324,450

$334,184

$344,209

$354,535

$365,171

$376,126

$387,410

$399,033

$411,004

$423,334

$436,034

$449,115

$462,588

$476,466

Operating & Maintenance Expenses

$140,000

$144,200

$148,526

$152,982

$157,571

$162,298

$167,167

$172,182

$177,348

$182,668

$188,148

$193,793

$199,607

$205,595

$211,763

General Expense

$114,030

$117,451

$120,974

$124,604

$128,342

$132,192

$136,158

$140,243

$144,450

$148,783

$153,247

$157,844

$162,580

$167,457

$172,481

Taxes & Insurance

$559,149

$575,924

$593,202

$610,998

$629,328

$648,207

$667,654

$687,683

$708,314

$729,563

$751,450

$773,994

$797,213

$821,130

$845,764

Replacement Reserve

$162,900

$167,787

$172,821

$178,005

$183,345

$188,846

$194,511

$200,346

$206,357

$212,548

$218,924

$225,492

$232,256

$239,224

$246,401

Management Fee

$200,678

$206,698

$212,899

$219,286

$225,865

$232,641

$239,620

$246,809

$254,213

$261,839

$269,694

$277,785

$286,119

$294,702

$303,543

TOTAL EXPENSES

$1,596,757

$1,644,660

$1,694,000

$1,744,820

$1,797,165

$1,851,079

$1,906,612

$1,963,810

$2,022,725

$2,083,406

$2,145,908

$2,210,286

$2,276,594

$2,344,892

$2,415,239

NET OPERATING INCOME

$6,129,034

$6,235,648

$6,343,914

$6,453,852

$6,565,481

$6,678,819

$6,793,885

$6,910,696

$7,029,272

$7,149,630

$7,271,789

$7,395,765

$7,521,578

$7,649,243

$7,778,779

Debt Service Payments

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

$4,341,399

NET CASH FLOW

$1,787,635

$1,894,248

$2,002,515

$2,112,453

$2,224,082

$2,337,420

$2,452,485

$2,569,297

$2,687,873

$2,808,231

$2,930,389

$3,054,366

$3,180,178

$3,307,844

$3,437,380

DSCR RESIDENTIAL (AFFORDABLE) RENTAL INCOME Rental Income Other Income Less: Vacancy Loss/Bad Debt Less: Concessions NET RENTAL INCOME

$196,836 $26,760 ($7,826) ($470) $215,301

1.41

1.44

1.46

1.49

1.51

1.54

1.56

1.59

1.62

1.65

1.67

1.70

1.73

1.76

1.79

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Year 12

Year 13

Year 14

Year 15

$2,822,847 $383,768 ($112,232) ($6,734) $3,087,650

$2,879,304 $391,443 ($114,476) ($6,869) $3,149,403

$2,936,890 $399,272 ($116,766) ($7,006) $3,212,391

$2,995,628 $407,258 ($119,101) ($7,146) $3,276,638

$3,055,540 $415,403 ($121,483) ($7,289) $3,342,171

$4,124,628 $423,711 ($159,192) ($9,552) $4,379,596

$2,362,032 $321,120 ($93,910) ($5,635) $2,583,607

TOTAL OPERATING EXPENSES Aministrative Expenses Utility Expenses

$2,409,273 $327,542 ($95,789) ($5,747) $2,635,279

$2,457,458 $334,093 ($97,704) ($5,862) $2,687,985

$2,506,607 $340,775 ($99,658) ($5,980) $2,741,744

$2,556,739 $347,591 ($101,652) ($6,099) $2,796,579

$2,607,874 $354,542 ($103,685) ($6,221) $2,852,511

$2,660,032 $361,633 ($105,758) ($6,345) $2,909,561

$2,713,232 $368,866 ($107,873) ($6,472) $2,967,752

$2,767,497 $376,243 ($110,031) ($6,602) $3,027,107

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

Operating & Maintenance Expenses

$0

$0

$0

$0

$0

$0

$0

$0

$0

$1

$1

$1

$1

$1

$1

General Expanses

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Taxes & Insurance

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Replacement Reserve

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Management Fee

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$1

$2

$2

$2

$3

$3

$3

$3

$3

$3

$3

$3

$3

$3

$3

$4

NET OPERATING INCOME

$2,583,605

$2,635,277

$2,687,982

$2,741,742

$2,796,577

$2,852,508

$2,909,558

$2,967,750

$3,027,105

$3,087,647

$3,149,399

$3,212,387

$3,276,635

$3,342,168

$4,379,592

Debt Service Payments

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$2,583,605

$628,783

$693,030

$758,563

$1,795,987

1.24

1.27

1.29

TOTAL EXPENSES

NET CASH FLOW DSCR

$0 1.00

$51,672 1.02

$104,378 1.04

$158,137 1.06

$212,972 1.08

$268,904

$325,954

$384,145

$443,500

$504,042

1.10

1.13

1.15

1.17

1.20

$565,795 1.22

1.70

18

PHASE II PROPOSAL PHASE II: MOMENTUM RESIDENCES The Momentum Residences will be built on top of the existing foundations of the old LA Fitness building. This phase will transform the southern half of the site into an 18-story building consisting mainly of senior living residential units. The 208 senior living units will take up 235,520 square feet sitting on top of 52,000 square feet of parking to accommodate for occupancy parking requirements. Within this building there will also be a small medical office as well as day care facilities.

The medical office space in this building is primarily for staff in assisted care units. The daycare will provide a commodity in the developing Wheaton CBD for the influx of employees that want care facilities for their kids within a walking distance of work. The day care in the M-NCPPC will be at capacity at this point and more child care services will be needed. This daycare will cater more to families shopping at the mall and catch overflow from the M-NCPPC daycare.

The Momentum Residences will be developed under a OZ structured deal that requires $22,025,431 of OZ funds in the form of equity. Through this financing structure there will be an IRR of 15.7% and yield on investment of 7.3%.

SITE 2 PROGRAM, SECTION & SITE PLAN

N

19

PHASE II PROFORMA 10 YEAR OPERATING PRO FORMA Trends - Rental Project (Market) Revenue Growth Rate - Market Revenue Growth Rate - Affordable Non-residential Vacancy Rate Concession (Market) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase) RESIDENTIAL (MARKET) RENTAL INCOME Rental Income Other Income Less: Vacancy Loss/Bad Debt Less: Concessions Nonresidential Income (Office & DayCare Less: Vacancy Loss/Bad Debt Less: Concessions NET RENTAL INCOME

Other Inputs Revenue Growth Rate - Market Revenue Growth Rate - Affordable Vacancy Rate Concession (Aff) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

2.00% 2.00% 2.00% 4.00% 0.61% 0.39% 2.00% 2.50%

Phase 2-Return Metrics -Exit Year 11 IRR 15.7% Yeild 7.3% Development Spread 1.5% Profit Margin 43.3% Equity Multiple 1.49 Sale Proceeds $ 140,696,894 Net Present Value $ 13,810,457

2.00% 2.00% 10% 0.61% 0.39% 2.00% 3.00%

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

$6,260,160 $458,640 $268,752 $40,847 $1,701,000 $170,100 $10,341 $8,110,201

$6,385,363 $467,813 $274,127 $41,664 $1,735,020 $173,502 $10,404 $8,272,405

$6,513,070 $477,169 $279,610 $42,497 $1,769,720 $176,972 $10,467 $8,437,853

$6,643,332 $486,712 $285,202 $43,347 $1,805,115 $180,511 $10,531 $8,606,610

$6,776,199 $496,447 $290,906 $44,214 $1,841,217 $184,122 $10,595 $8,778,742

$6,911,722 $506,376 $296,724 $45,098 $1,878,041 $187,804 $10,659 $8,954,317

$7,049,957 $516,503 $302,658 $46,000 $1,915,602 $191,560 $10,724 $9,133,403

$7,190,956 $526,833 $308,712 $46,920 $1,953,914 $195,391 $10,789 $9,316,072

$7,334,775 $537,370 $314,886 $47,859 $1,992,993 $199,299 $10,855 $9,502,393

$7,481,471 $548,117 $321,184 $48,816 $2,032,852 $203,285 $10,921 $9,692,441

Aministrative Expenses Utility Expenses Operating & Maintenance Expenses Taxes & Insurance Replacement Reserve Management Fee TOTAL EXPENSES

$140,000 $245,000 $250,000 $400,000 $150,000 $171,750 $1,356,750

$143,500 $251,125 $256,250 $410,000 $153,750 $176,044 $1,390,669

$147,088 $257,403 $262,656 $420,250 $157,594 $180,445 $1,425,435

$150,765 $263,838 $269,223 $430,756 $161,534 $184,956 $1,461,071

$154,534 $270,434 $275,953 $441,525 $165,572 $189,580 $1,497,598

$158,397 $277,195 $282,852 $452,563 $169,711 $194,319 $1,535,038

$162,357 $284,125 $289,923 $463,877 $173,954 $199,177 $1,573,414

$166,416 $291,228 $297,171 $475,474 $178,303 $204,157 $1,612,749

$170,576 $298,509 $304,601 $487,361 $182,760 $209,261 $1,653,068

$174,841 $305,971 $312,216 $499,545 $187,329 $214,492 $1,694,395

NET OPERATING INCOME

$6,753,451

$6,881,736

$7,012,418

$7,145,539

$7,281,144

$7,419,279

$7,559,989

$7,703,322

$7,849,325

$7,998,046

Debt Service Payments

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

$5,006,059

NET CASH FLOW

$1,747,392

$1,875,677

$2,006,358

$2,139,479

$2,275,085

$2,413,220

$2,553,930

$2,697,263

$2,843,265

$2,991,987

TOTAL OPERATING EXPENSES

DSCR Annual QOZI Cash Flow Effect Cash Flow Under QOZI DSCR Under QOZI

1.35

1.37

1.40

1.43

1.45

1.48

1.51

1.54

1.57

1.60

$33,107

$33,107

$33,107

$33,107

$33,107

$33,107

$33,107

$33,107

$33,107

$33,107

$1,780,499

$1,908,784

$2,039,465

$2,172,586

$2,308,192

$2,446,327

$2,587,037

$2,730,370

$2,876,372

$3,025,094

1.36

1.38

1.41

1.43

1.46

1.49

1.52

1.55

1.57

1.60

20

PHASE III PROPOSAL PHASE III: THE MOMENTUM CLINIC Phase III of the project would begin with the relocation of the water main under Site 2 allowing us to further develop and occupy the site. Once the water main is moved, the Momentum Clinic would begin construction and will consist of 80,000 SF medical office space, physical therapy space, and the relocation of the CVS from Site 3. This move will further strengthen the overall health focused theme of the development as well as provide a key anchor tenant. CVS, a tenant of the mall, can renew their lease at this highly visible corner and gateway to the mall, opening up its previous site for development.

Once the water main has begun to be relocated, Ring Road will transform into a complete street in accordance with the Veirs Mill master plan. Pedestrians and bikers from Wheaton can walk and shop in peace, protected from the rush and traffic of Veirs Mill Road. Ring Road provides a strong place-making component to connect the eastern edge of the Wheaton Mall property to the mall as well as the Wheaton CBD. Phase III will require a qualified Opportunity Zone investment of $11,249,899. The remaining debt will be fulfilled by the equity investor. Phase III in total will deliver an IRR of 18.5% and an 10.5% yield.

BEYOND PHASE III After the Momentum is completed and Ring Road revitalized, the previous location of the CVS, Site 3, can be properly redeveloped and complete the buffer between Wheaton Mall and Wheaton City. Development will likely spread out along the mall's edge as more pieces of land get parcelized and developed, transforming Wheaton Mall into a mixed-use urban center.

A site of particular note would be the current location of Wendy's. Located at a major entrance to the site, the restaurant is likely not that property's highest and best use. After the main phases are completed, it is likely that the developers will want to reclaim that parcel for place-making purposes such as providing a public park or area for food trucks. Economics may change, diseases will rise and fall, but the development of Wheaton as a holistic, healthy, self-sustaining community can continue thanks to the momentum from the original Wheaton Crossroads.

Momentum Clinic

Ring Road as a Complete Street

21

PHASE III PROFORMA 10 YEAR OPERATING PRO FORMA Trends - Rental Project (Market) Revenue Growth Rate - Market Revenue Growth Rate - Affordable Non-residential Vacancy Rate Concession (Market) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

Other Inputs Revenue Growth Rate - Market Revenue Growth Rate - Affordable Vacancy Rate Concession (Aff) Bad Debt Other Income (Annual Increase) Operating Expenses (Annual Increase)

2.00% 2.00% 2.00% 4.00% 0.61% 0.39% 2.00% 2.50%

Phase 3-Return Metrics -Exit Year 10 IRR 18.5% Yeild on Gain 10.5% Development Spread 5.7% Profit Margin 42.2% Equity Multiple 3.8 Sale Proceeds $ 82,623,438 Net Present Value $ 13,595,438

2.00% 2.00% 10% 0.61% 0.39% 2.00% 3.00%

RESIDENTIAL (MARKET) RENTAL INCOME Nonresidential Income (Office & CVS) Less: Vacancy Loss/Bad Debt Less: Concessions

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

$4,522,500 $452,250 $27,495

$4,612,950 $461,295 $27,662

$4,705,209 $470,521 $27,830

$4,799,313 $479,931 $27,999

$4,895,299 $489,530 $28,169

$4,993,205 $499,321 $28,341

$5,093,070 $509,307 $28,513

$5,194,931 $519,493 $28,686

$5,298,830 $529,883 $28,861

$5,404,806 $540,481 $29,036

NET RENTAL INCOME

$4,522,500

$4,612,950

$4,705,209

$4,799,313

$4,895,299

$4,993,205

$5,093,070

$5,194,931

$5,298,830

$5,404,806

$140,000 $316,575 $100,000 $556,575

$143,500 $324,489 $102,500 $570,489

$147,088 $332,602 $105,063 $584,752

$150,765 $340,917 $107,689 $599,370

$154,534 $349,440 $110,381 $614,355

$158,397 $358,176 $113,141 $629,714

$162,357 $367,130 $115,969 $645,456

$166,416 $376,308 $118,869 $661,593

$170,576 $385,716 $121,840 $678,133

$174,841 $395,359 $124,886 $695,086

NET OPERATING INCOME

$3,965,925

$4,042,461

$4,120,457

$4,199,943

$4,280,945

$4,363,492

$4,447,613

$4,533,338

$4,620,697

$4,709,720

Debt Service Payments

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

$2,052,057

NET CASH FLOW

$1,913,868

$1,990,403

$2,068,400

$2,147,886

$2,228,888

$2,311,435

$2,395,556

$2,481,281

$2,568,640

$2,657,663

TOTAL OPERATING EXPENSES Aministrative Expenses Taxes & Insurance Management Fee TOTAL EXPENSES

DSCR

1.93

1.97

2.01

2.05

2.09

2.13

2.17

2.21

2.25

2.30

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CONCLUSION Wheaton Crossroads will change the face of Wheaton Mall, connecting an isolated area to the hip and growing future of urban Maryland. The base financials stand up for themselves, offering competitive and all but guaranteed returns for URW. Wheaton Crossroads uses LIHTC deals as well as beneficial financial opportunities from the novel OZs to get the most value of URW's investment. In total, there is a total equity investment of 45,283,606 with significant immediate financial performance of 15.6% IRR in Phase I and long-term benefits with IRRs of 15.5% and 18.5% in Phases II and III, respectively. Though the project is expensive, the returns from the project coupled with the valuable location vastly outweigh the costs with consistent yields of at least 7.3%. The value of the development can be seen in the company finances as well as more customers are drawn to this regional staple by the food hall, clinic, and LA Fitness.

The opening of Amazon HQ2 will further drive up the demand for housing. Medical office facilities will also be in high demand as a result of the current virus pandemic as it has shown that there is a need for medical infrastructure. New businesses such as the trendy local staples in the food hall will attract customers from the Wheaton CBD and Washington, DC metro area. Easy Metro bus and train accessibility is and will continue to be the key to connectivity in Wheaton Crossroads.

Wheaton Crossroads leverages tax-free debt to increase the value of URW’s capital as well as providing valuable tax offsets. LIHTC projects offer very low failure rates with the nationwide default rate on LIHTC transactions being roughly 1%. Wheaton Crossroads is both socially responsible and financially successful, acheiving competitive rents while still being affordable to a community that needs it. OZ funding is used for Phases II and III to reinvest the capital generated in Phase I and to avoid tax liability, allowing equity to be invested back into the mall and in future phases. Combining OZ with LIHTC would provide a win-win investment boosting the returns exceptionally; the mechanisms are not compatible at this time but may become compatible in the future. The Wheaton Crossroad's strategic phasing is flexible, allowing opportunity to capitalize on market trends.

If URW wants to reinvest in Wheaton Mall, first it must invest in Wheaton Crossroads to cement its place at the intersection of reliable profit, community service, and unparalleled place-making anywhere else in the county. Improving the infrastructure of Ring Road connects the mall once again to the city, and the development itself acts as a gateway from the fastest growing Metro station and city in Montgomery County to one of its most valuable retail assets.

The Future of Wheaton Mall

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PROPOSAL TEAM UNIVERSITY OF MARYLAND William Combs is a full time student at the University of Maryland, College Park pursuing a Master of Real Estate Development and Master of Architecture.

Awais Qazi is a full time student at the University of Maryland, College Park pursuing a Master of Real Estate Development and Master of Architecture.

Mohsen Teimouri is a full time student at the University of Maryland, College Park pursuing a Master of Real Estate Development.

Ron McDonald is the Managing Principal of RMC Development, LLC. and the faculty advisor for the Colvin Institute of Real Estate Development at the University of Maryland’s NAIOP team.

Maria Day-Marshall is the Program Director for the Colvin Institute of Real Estate Development at the University of Maryland.

CONSULTANTS

Navid Tehrani Meredith Megin Zach Wolk Michael Nicolaus

Tom Olin Van Anderson

Thomas Lenar Victor Licata

Brian Downie

Joseph Whartenby

Thomas Brown

Additional Sources CoStar US Bureau of Labor Statistics US Census

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