Case Study | Encore Highpointe Park

$40.8 MM Multi-Family Development – Denver, Co

• Land contracted for in April, 2010 prior to construction boom and run-up in land values; $9,000/unit vs. $22,000/unit in 2016
• Construction costs in 2012/2013 were well below current costs due to early stage of recovery from 2008-2010 recession; built to $100/SF vs. $167/SF in 2016
• High drive-by visibility just off I-25 drove qualified traffic
• First new units in North Denver suburb made Encore the only new product in the sub-market

Financial Highlights

Case Study | Multi-Family Portfolio Sale

$145 mm Sale of 1,392 Unit HUD Financed Portfolio – Southeastern United States

• In 2010, amid the market downturn, Encore Multi-Family recognized the attractiveness of HUD financing to fund and develop multi-family assets across the Southeastern United States
• Over the next few years, the Company developed seven Class A, HUD financed properties across Texas, Oklahoma, and Louisiana
• Encore’s in-house asset management team conducted successful lease-up of all assets and achieved between 94% to 96% physical occupancy across all properties by April 2014
• In the same year, Encore recapitalized the portfolio through an institutional hedge fund partner, Och-Ziff Real Estate, representing a state pension fund
• Existing investors exited the portfolio and benefitted from significant capital appreciation while Och-Ziff was able to rollover the HUD financing at an attractive, long-term fixed interest rate
• Encore retains a minority interest in the portfolio and continues to actively manage the assets

Note: Each of the properties in the portfolio were acquired at different points in time for an average hold period of 3.7 years, therefore Encore does not disclose a specific time period for IRR calculations when presenting portfolio case studies

(1) Loan-to-value calculated by dividing total debt by total capitalization

Financial Highlights

Case Study | Hotel Portfolio Sale

$393 mm Acquisition & Sale of 35 Hotel Portfolio  – 13 States

Transaction Overview

• Encore partnered with an institutional investor to purchase 35 hotels, focused on Marriott and Hilton brands
• The institutional investor committed $85 mm in a programmatic joint venture to further expand Encore’s hospitality portfolio
• Over a 24 month period from 2005 to 2007, Encore utilized $55 mm to re-capitalize and acquire a total of 35 hotels (3,840 guest rooms) in 13 states
• 33 hotels were affiliated with either Marriott or Hilton, two of the most desired industry brands
• After evaluating asset and capital market conditions in 2007, Encore decided to cease new purchases and package/sell the portfolio for a total of $393 mm
• A national Institutional buyer bought 29 of the hotels for $315 mm, while six hotels were sold separately to other buyers for $78 mm

<h3Investment Thesis

• Opportunity to expand the existing hotel portfolio into attractive markets
• Geographically diversified with desirably tiered select-service hotels that demonstrated strong and increasing cash flow, offering lower risk/higher yield prospects
• Homogenous collection of select-service and extended-stay assets with tiered brand stratification
• Tiered brand stratification allowed Encore the ability to take advantage of high profit margins and consistent demand associated with select-service properties

The Encore Edge

• Nine of the hotels received ~$5,000 per room of capital improvements in 2004, with five of those hotels receiving an additional $5,300 per room of renovations in 2005 and 2006
• The remaining hotels were renovated in 2006 at $4,800 per key

• Focus on refining operating standards, policy and procedure implementation, and regional management stewardship while integrating technological and operating systems

• NOI increased by over 35% in 2006 despite disruptions in renovation that occurred at 29 of the hotels throughout the year

• After evaluating asset and capital market conditions in 2007, Encore decided to sell the hotel portfolio immediately before the economic downturn resulting in $183 mm profit and a 3.6x equity multiple

Note: Each of the properties in the portfolio were acquired at different points in time for an average hold period of 3.7 years, therefore Encore does not disclose a specific time period for IRR calculations when presenting portfolio case studies

(1) Loan-to-value calculated by dividing total debt by total capitalization

Financial Highlights