OFFERING SUMMARY

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website or advertising expense. The rent growth in the ... premium rents that could help generate extremely outsized ret
KE Y WEST • FLORIDA

OF F E R ING SUMMA RY 1

Introduction HFF is pleased to offer an epic repositioning and value creation opportunity to acquire one of only three multi-housing communities in Key West, Florida – arguably the highest barrier to entry market in the United States. Ocean Walk Apartments (the “Property” or “Ocean Walk”) is a 297-unit multi-housing community nestled among lush natural vegetation on the island of Key West. The Property is ideally situated on the quiet Atlantic side of the island and is just minutes away from everything that Key West has to offer. The Key West apartment market is vastly under-supplied. With 646 professionally managed multi-housing units on the entire island, Ocean Walk represents 46% of the apartment stock. The submarket consistently posts explosive rental rate growth, with market rents at Ocean Walk having grown 12.4% over the past 12 months. Ocean Walk offers investors a unique opportunity to acquire an asset with strong in-place cash flow and a wide range of viable execution alternatives including a value add apartment strategy or condominium conversion.

PROPERTY OVERVIEW

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Location:

3900 South Roosevelt Boulevard, Key West, FL 33040

Total Units:

297 Units

Number of Stories:

3&5

Number of Residential Buildings:

2

Year Built:

1989

Total Rentable Square Feet:

237,424 SF

Average Unit Size (Under A/C):

799 SF

Construction:

Concrete construction

Percent Occupied (As of April 2014):

96%

UNIT MIX Unit Description

Unit Count

% of Type

Average SF

Total SF

1 Bedroom/1 Bath (1A)

72

24%

549

39,504

2 Bedroom/1 Bath (2A)

105

35%

768

80,640

2 Bedroom/2 Bath (2C)

47

16%

840

39,480

3 Bedroom/2 Bath (3A)

73

25%

1,066

77,800

297

100%

799

237,424

Total/Average

PROPERTY & UNIT AMENITIES Property Amenities

Unit Amenities

Carports

Scenic views

Proximity to employment, schools, and entertainment

Mini-blinds

Elevators

Fully-equipped kitchen

Swimming pool

Private patios and balconies

Storage units

Walk-in closets and wall-to-wall carpeting

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Offering Highlights One of the Highest Barrier-to-Entry Markets in the Country – New Development is Virtually Impossible The Florida Keys is one of the highest barriers to entry markets in the Country because it is surrounded by water on all sides, there are no remaining development sites, and the Keys is subject to the Rate of Growth Ordinance “ROGO” — an extremely restrictive set of rules that make new development virtually impossible. Explosive Rent Growth in the Tightest Apartment Market in the United States Given the extreme barriers to entry and dearth of supply, the Key West apartment market is one of the tightest in the United States. West Isle Club, a key competitor, boasts a 100% occupancy rate with a 3-4 month waiting list for new apartments. Another comparable, Peary Court, has raised its asking occupancy cost by 19% in the last 12 months with no

website or advertising expense. The rent growth in thePEARY marketCOURT is astounding! ASKING OCCUPANCY COST INCREASES OVER PAST Y $2,600 PEARY COURT ASKING OCCUPANCY COST INCREASES OVER PAST YEAR $2,500 $2,600

$2,400

$2,500

$2,300

$2,400

$2,200

$2,300

$2,250 $2,100

$2,200

$2,500 $2,250

$2,500

$2,550 $2,300

$2,150 $2,300

$2,000

$2,150

$2,100

$1,900 Original Rents - 1 Year Ago ($2,150)

$2,000

Increase Rents (+$100)

Pass-Through Water/Sewer (+$50)

Pass-Through Electricity (+$200)

Premium for End Units (+$50)

$1,900 Original Rents - 1 Year Ago ($2,150)

Increase Rents (+$100)

Pass-Through Water/Sewer (+$50)

Control 46% of the Apartment Stock in Key West –

Pass-Through Electricity (+$200)

KEY WEST MULTI-HOUSING UNITS BY PROPERTY

Unprecedented Pricing Power With only two other apartment communities on the island KEY WEST MULTI-HOUSING UNITS BY PROPERTY (Peary Court and West Isle Club), Ocean Walk represents 46% of the island’s entire apartment stock. This amazing market share allows an investor to command unprecedented

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by the Property’s rent growth over time. 192 297

Ocean Walk 297

pricing power with regards to driving rents, as evidenced Ocean Walk 157 Peary Court

Peary Court West Isle Club

West Isle Club 157

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Opportunity to Acquire a Rare Stabilized Multi-Housing Asset in Key West, Florida Ocean Walk affords buyers the opportunity to acquire one of only three multi-housing communities on the island of Key West, Florida. The Property generates significant in-place cash flow with room to increase rents. By combining the opportunity to increase rents to the level of its competitors with astounding rent growth (as shown in the graph below), Ocean Walk is uniquely poised to potentially outperform the loftiest of return expectations.

MARKET RENTS PSF AT OCEAN WALK JANUARY 2012 – JANUARY 2014 $2.15 $2.10

18% Market Rent Growth Over the Past 2 Years

Market Rent PSF

$2.05 $2.00 $1.95 $1.90 $1.85 $1.80

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Epic Value Creation Opportunity — With More than $4.2M of In-Place NOI Ocean Walk represents arguably the top value-add investment opportunity in the Country. The property is a blank canvas with the possibility of becoming Key West’s most sought after residential address. From simply upgrading the interiors to high-quality amenities such as granite countertops and stainless steel appliances to the creation of brand new amenities such as a fitness center, resident/rooftop lounge, water features, laundry valet, and outdoor recreation areas, Ocean Walk is ready to be transformed into the highest-quality rental community on the island and achieve similar rents to competitors like Peary Court as well as condominium rentals.

RENT COMPS - MONTHLY RENT & MONTHLY RENT PSF

$5,000

$4.50

$4.27

$4.00

$4,000

$3.57

$3.00

$3,000

$2.27

$2.15

$2.50

$2.33

$2.00

$2.17

$2,000

$1.50 $1.00

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Monthly Rent Monthly Rent PSF

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Condominium Conversion Potential The island of Key West is home to one of the strongest condominium markets in the United States. Ocean Walk serves as a solid frame to renovate interiors, exteriors, and actually redevelop parts of the community to bring it to a comparable level to the other luxury communities on the island. One potential value creation opportunity would be to combine the units to be left with approximately 148 condominium-quality units of 1,603 SF in size. Not only would these larger units be more appealing to condominium purchasers, but the 149 resultant ROGO units could be sold on the open market at attractive prices.

RECENT COMPARABLE SALES Property

Date Closed

Unit Size

Sales Price

Sales Price PSF

Las Salinas

February 2014

1,073 SF

$320,000

$298

Salt Ponds

January 2014

772 SF

$262,500

$340

1800 Atlantic

January 2014

1,357 SF

$518,000

$382

June 2013

3,074 SF

$1,680,000

$547

Key West Beach Club

January 2014

1,500 SF

$890,000

$593

Harbour Place

January 2014

1,350 SF

$1,230,000

$911

Steamplant

Furnished Seasonal Rentals Another opportunity could be to convert the entire Property or at least several of the units to furnished short term rentals, which are very popular on the island. Furnished rentals at condominium quality properties on Key West command premium rents that could help generate extremely outsized returns. Zoning Allows for Additional Density Current zoning at the property allows for a density of up to 22 residential units per acre. The Property is currently only developed to a density of 17.3 units per acre and as such, zoning allows for development of an additional 80 units (if requisite ROGO’s can be obtained). Key West – Recession Resistant During market downturns such as 2008-10, Key West becomes an attractive lower-cost substitute to resorts in the Caribbean, Bahamas, and Central America. The Keys hotel market saw virtually no loss of occupancy while the rest of the country was in turmoil. With travel and tourism as the main source of income on the island, this is the reason that Key West is poised to perform well even when many other markets are in down years.

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Offering Format

The Property is offered on an “as-is, where-is” basis only to select investors registered through a Conditions of Sale and Confidentiality Agreement. Preference will be given to those investment offers that reflect the most comprehensive underwriting and the fewest due diligence requirements or other conditions to close. Investors should be prepared to disclose their sources of funds and any approval process necessary to close the transaction.

Due Diligence

An online archival bank of information such as income statements, rent rolls, survey, property tax bills, third party reports and other property information will be available through HFF upon request and approval by Owner. The purpose of this information is to facilitate pre-due diligence and depth of underwriting.

Offering Timeline

We will soon issue an investment update notifying you of the offer date for this transaction. Tours of the Property must be conducted with a member of the HFF team. Please reach out to any member of the HFF execution team to schedule property tours.

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INVESTMENT SALES www.hfflp.com Miami Office 1450 Brickell Avenue Suite 2950 Miami, FL 33131 T: (305) 448-1333 F: (305) 448-6767

DEBT FINANCING

Manuel de Zarraga

Jaret Turkell

Elliott Throne

Executive Managing Director

Managing Director

Director

(305) 448-1333

(305) 448-1333 ext. 152

(305) 448-1333 ext. 156

[email protected]

[email protected]

[email protected]

Maurice Habif

Tracey Goo

Todd Adams

Associate Director

Analyst

Associate Director - Debt

(305) 448-1333 ext. 147

(305) 448-1333 ext. 148

(305) 448-1333 ext. 118

[email protected]

[email protected]

[email protected]

Scott Wadler

Dan Bowen

Senior Analyst

Analyst

(305) 448-1333 ext. 119

(305) 448-1333 ext. 167

[email protected]

[email protected]

Copyright 2014 HFF (Holliday Fenoglio Fowler, L.P.) and HFFS (HFF Securities L.P.) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 22 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales, and commercial loan servicing. www.hfflp.com.