Table of Contents

INVESTMENT SUMMARY
Proposal Background Project Highlights Building Highlights Financial Highlights Market Highlights p. 3 p. 3 p. 3 p. 4 p. 4 p. 5

PROJECT DESCRIPTION
Project Summary Site Plan Floor Plans Elevations Unit Plan Renderings p. 6 p. 7 p. 8 - 10 p. 11 p. 12 p. 13

FINANCIAL ANALYSIS
Cost Analysis Stabilized Valuation Permanent Financing Project Cash Flow Returns & Key Metrics p. 14 - 16 p. 16 - 19 p. 19 - 20 p. 20 - 21 p. 22

MARKET OVERVIEW
U of U Demographics LDSBC Demographics Capture Rate Analysis Off-Campus Housing On-Campus Housing p. 25 - 26 p. 27 - 28 p. 30 p. 31 - 35 p. 35 - 36

SITE ANALYSIS
Property Information Existing & Surrounding Uses Connectivity Due Diligence Items p. 37 p. 38 p. 39 p. 40

CONCLUSION
Conclusion Appendix p. 41 p. 42 - 50

Westminster Demographics p. 29 - 30

University Station

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Investment Summary
Proposal
University Station Partners is pleased to express our interest in pursuing a joint venture partnership with the land owner of approximately 2.24 acres located at 400 South 900 East in Salt Lake City, Utah, for the purpose of developing a 464 bed student housing community. To this end, this development proposal outlines project highlights, architectural design, nancial returns, and market feasibility. We believe after studying this information the land owner will nd a joint venture partnership to develop student housing advantageous. With this new information, we sought out a credible development partner with considerable experience and a proven track record. One of the most prominent developers/owners in the state has shown considerable interest in the project, so much so that they joined with us in sending a Letter of Intent (LOI) to partner with, or purchase the land from, the land owner. The LOI has been sent, and we (University Station Partners and our development partner) are in active and ongoing dialogue with the land owner.

Background
The southwest corner of 400 South 900 East has been a highly desirable location for new development for many years. The land has been controlled by Smiths Food and Drug through a long-term ground lease whereon they operated a grocery store. Subsequently Smiths closed the store and relocated it to 500 East 500 South, but retained the ground lease to mitigate future grocery competition. Since then Smiths has subleased the building to Ofce Max. Smiths ground lease being sandwiched between the Ofce Max lease and the land owner has made this corner effectively undevelopable. Recent events have transpired that have changed the potential for development. Through discussions with Smiths, we learned that the land owner, a top tier real estate holding company out of New York City, bought out the Smiths ground lease earlier this year. This past November, Ofce Maxs corporate board approved a restructure program. Press releases reveal that the retailer plans to close stores and right-size existing stores (reduce the footprint). Conversations with Smiths and Ofce Max management revealed there is a high probability that Ofce Max is looking to right-size this particular store and is seeking a new location.

Project Highlights
University Station is a student housing development located at 400 South 900 East in Salt Lake City, Utah. Lack of student housing is well demonstrated by the consistent 97.1% occupancy and waiting list of the University of Utahs (the U) on-campus apartment style student housing. Site is zoned for Transit Oriented Development allowing for higher density and greater flexibility of uses. There are nearly 40,000 students enrolled in higher education institutions in the downtown area, the largest being the U, LDS Business College, Westminster College, and BYU Salt Lake Center. Anderson Strickler, a nationally renowned student housing consultant out of Washington DC, was hired in 2010 to perform market research for Honors Housing at Legacy Bridge at the U. The study said regarding Salt Lake City, The limited number of 3-bedroom and lack of 4-bedroom units indicates that there are no studentoriented complexes located off-campus. They understood that there is multi-family housing available, but none specically catering to students.

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Investment Summary
Building Highlights
Address: Building Uses: Materials: Site Size: Building Size: Capacity: Units: Zoning: 400 South 900 East, Salt Lake City Five story student housing development Modern mixture of brick, stucco, and metal paneling 2.24 Acres 177,000 Rentable SF 464 Students 140 Units Current Zoning = CC - Commercial Corridor Future Zoning = Transit Station Area or Form-based Zoning 272 Lower Level Stalls 117 Upper Level Stalls Grade level landscaping includes planter boxes along the street front; an elevated platform comprises grass and planters Private bedrooms furnished with a bed, desk and dresser; units also include a couch, coffee table, and stackable washer/dryer; internet; cable tv Barbecue pit; picnic tables; benches; hot tub; large pavilion; grass; open space Bus and TRAX stations immediately adjacent to the site (public transit is free to U students and subsidized for LDSBC students), bicycle storage, paid residential parking Stabilized NOI: Stabilized Value: Total Const. Cost: Total Land Cost: Disposition Value: CAP Rate:

Financial Highlights
$2,264,548 $34,839,200 $27,195,142 ($153.68/rentable SF) $2,536,934 ($26/SF or $18,000/door) $41,500,619 6.5%
6,041,421 11.16% 10.34% 17.45% 41,500,619 18,716,524 5,784,323 18,459,426 4.41x 1.53x

Total Project Cost: $29,732,077

Parking: Landscaping:

Amenities (Unit):

Return Summary/Key Metrics TE Total Equity Cash-on-Cash Unleveraged IRR Leveraged IRR Terminal Value @ 6.50% CAP NSP Net Sales Proceeds NCF Sum of Net Cash Flows Profit = NSP + NCF - TE Cash Multiple Debt Service Coverage Ratio

Equity Requirements Developer Equity (Deferred Dev. Fee) Land Value Contribution 629,076 2,536,934 2,875,411 10% 42% 48%

Amenities (Site): Transportation:

Investor Capital Total Equity Required

6,041,421 100%

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Investment Summary
Market Highlights
From a University of Utah, Facilities Planning document discussing Projects Under Construction in 2012 we nd the following:
Project Information: Over the past years, occupancy rates for the undergraduate halls have continued to increase resulting in excessive waitlists for students. The addition of new beds into the housing system will enable the university to meet the housing needs of more entering students whose enrollment far exceeds the availability of space.

Utah, said Curtis Ryan, Vice President of Finance and Administration. The U housing is over capacity with some units renting for $572 per bed. Their new housing will be as much as $669 per bed. Westminster College housing is over capacity with some existing units renting for $611 per bed. Their new housing will be as much as $807 per bed.

This is the perception of students. Old, run down housing is available close to the U. If you want nicer housing, you have to go further away. This is the primary reason the U has been labeled a commuter school and why it will continue to wear that label until new projects such as this one are built to specically accommodate students and not typical multi-family renters. The University of Utah has consistently had occupancy rates of approximately 97% in on-campus apartment style housing and slightly lower occupancy rates in the dormitory and house style housing. It is anticipated that University Station will attract students from many different institutions: University of Utah, LDSBC, BYU Salt Lake Center, Westminster College, Eagle Gate College, Salt Lake Community College, and other trade, vocational, and beauty schools. Further, it is anticipated that young adults not enrolled in any sort of schooling will nd the development attractive. ...theres certainly a demand for new housing. We know we dont have enough housing because we get more and more freshmen every year living on campus and weve been recruiting more students from outside the greater Salt Lake area and outside of

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University Station

Project Description
Project Summary
University Station Partners proposes to redevelop the site on the southwest corner of 400 South 900 East, Salt Lake City with a student housing facility. The sites close proximity to multiple schools, downtown amenities and public transportation make it the ideal location for this type of development. use, and removes some of the costs for frequently replaced items. Internet and cable tv are included. Some additional amenities included in the project are multiple common spaces and additional laundry facilities if necessary. A large elevated outdoor common space is provided which includes more The building will be ve stories of student housing, accommodating amenities such as green space, a hot tub, barbecue pit, and a large 464 students in 140 units. Each unit houses between two and four multi-use pavilion. students. Units range from 760 SF (2 Bd) to 1100 SF (4 Bd). Units Parking consists of two levels. Due to the slope of the site, the lower contain 2, 3 or 4 private bedrooms. 2 bedrooms share a bathroom, level will be accessed at grade from 400 South, and the upper level except in the 3-bedroom units (1 bedroom has its own private bath- will be accessed at grade from 900 East. The parking accommodates room). The bathrooms have the vanity separated from the bathtub just under 84% of the student capacity. Redstone Residential Propand toilet to provide additional privacy and efciency. Units are fully erty Management, which manages 13 student housing complexes in furnished with a couch and coffee table in the living room space, and Provo and Orem, disclosed typical and actual parking ratios for their with a bed, dresser and desk in each bedroom. A stackable washer- properties. Typical parking ratios are between .7 and .85 per bed, dryer is provided in each unit, as well as ample storage space. Kitch- whereas actual demand is between .75 and .8 per bed. To quote Grant ens are fully furnished and have a built in bar, including stools, for Collard of Redstone, The closer you are to campus, and the closer meals rather than a dining table. This opens up the space for better you are to public transportation, the more car-less students will rent there. Salt Lake City representatives have stated that the project could potentially be approved with a .5 parking ratio.

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Project Description
Site Plan

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University Station

Project Description
Main Floor Plan
The main oor provides 25 units: sixteen 4-bedroom, two 3-bedroom, and seven 2-bedroom units. The leasing ofce is centrally located across from the elevators. There are 2 lobby areas, one of which could potentially become an exercise room or laundry facility. As mentioned earlier, there are two locations to enter the site as demonstrated below. There are 117 parking stalls on the upper level, and 272 stalls on the lower level. The majority of the parking is covered.

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Project Description
Second Floor Plan (Levels 3-5 Similar)
The second oor provides 28 units: sixteen 4-bedroom, four 3-bedroom, and eight 2-bedroom units. Levels 3 through 5 are laid out the same except they provide one additional 4-bedroom unit above the second oor common space. The location above the ofce on the main oor could have multiple uses, as either a common area, exercise room, or laundry facility. As shown, the elevated platform is accessible from the second level. It provides plenty of seating and green space, making it an excellent space for socializing.

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Project Description
Lower Level Parking Plan

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Project Description
Elevations

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University Station

Project Description
Typical 4 Bedroom Unit
Balcony

Bed 2

Living Room

Bed 3

Bed 1

Bed 4

W/D Storage Bath Mech Kitchen Bath

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Project Description
Renderings

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University Station

Financial Analysis
Cost Analysis
The nancial analysis explains the economic feasibility of the University Station project by analyzing the costs, income, expenses, valuation, and assumptions used. Costs Per Finished Square Foot: The table to the right shows the hard and soft costs used for acquisition and construction of the project. The important number to highlight is the Total Construction Costs Per Square Foot of $153.68. This comes to $168.02/SF if land cost is added in. Construction Budget / Sources & Uses: The table below sheds more light on these costs by breaking them out further. The following page will drill down further on parking and land costs.
Construction Budget / Sources & Uses Land Hard Costs Demolition of Existing Structures Site Improvements & Landscaping Parking (Surface and Structured) Vertical Costs FF&E Other Hard Costs: Signage Total Hard Costs Soft Costs Title & Closing Soils & Environmental Architect & Engineering Permits, Review, Connections Legal & Accounting Taxes & Insurance Contingency Developer Fee Const. Loan Points & Int. Reserve Total Soft Costs Total Project Costs 26.00 3.50 8.00 14,154 90.50 2,000 15,000 / SF / Existing SF / SF / Stall (wtd. avg.) / SF / Student lump sum Cost / Finished SqFt 14.34 0.55 2.49 31.11 90.50 5.24 0.08 129.99 Cost / Unit 18,121 698 3,149 39,329 114,390 6,629 107 164,301

Costs Per Finished Square Foot Total Demo, Site Improvement & Landscaping Parking (Surface and Structured) Vertical Costs FFE & Other Costs Soft Costs Total Construction Costs Land Cost Total Costs 538,517 5,506,000 16,014,609 943,000 4,193,017 27,195,142 # of SqFt Per SqFt / / / / / / 176,957 176,957 176,957 176,957 176,957 176,957 3.04 31.11 90.50 5.33 23.70 153.68 14.34 168.02

2,536,934 / 176,957 29,732,077 / 176,957

Uses Total % of Total 2,536,934 8.5% 97,650 440,867 5,506,000 16,014,609 928,000 15,000 23,002,126 0.3% 1.5% 18.5% 53.9% 3.1% 0.1% 77.4%

Sources Equity Debt 2,536,934 97,650 440,867 15,000 553,517 5,506,000 16,014,609 928,000 22,448,609

21,500 33,000 295,780 995,570 15,000 225,000 2.5% 2.5% 1,403,038

lump sum lump sum lump sum lump sum lump sum lump sum of hard costs of costs lump sum

0.12 0.19 1.67 5.63 0.08 1.27 3.25 3.55 7.93 23.70 168.02

154 236 2,113 7,111 107 1,607 4,108 4,493 10,022 29,950 212,372

21,500 33,000 295,780 995,570 15,000 225,000 575,053 629,076 1,403,038 4,193,017 29,732,077

0.1% 0.1% 1.0% 3.3% 0.1% 0.8% 1.9% 2.1% 4.7% 14.1% 100%

21,500 33,000 295,780 995,570 15,000 225,000 575,053 629,076 2,789,979 5,880,430

1,403,038 1,403,038 23,851,647

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Financial Analysis
Land Cost Measurements: There is $2,536,934 budgeted for land acquisition. This can be more meaningful to developers when shown as $26/SF or $18,121/ door. These costs are in line with market comparables and within industry guidelines.
Comparable Land Sales Location Undisclosed CBD 675 E 100 South North Temple & Redwood Total Cost Acres

Land Cost Measurements Total Land Costs $ 2,536,934 Number of Acres 2.24 Cost/Acre $ 1,132,560 Square Feet Cost/SF Number of Units Cost/Door $ 97,574 26 140 18,121

Square Feet Cost/Acre Cost/SF 33.00 25.51 17.50 25.34 14.00 10.42 14.95 16.47

------ Undisclosed -----1,700,000 1.53 66,647 1,111,111 6,517,000 8.55 372,438 762,222 Downtown Area Averages 936,667 609,840 453,692 651,221 717,617

1700 S Redwood Rd 2,195,424 3.60 156,816 17 East 6150 South 294,900 0.65 28,314 10400 S Bangerter 429,806 0.66 28,750 Downtown and Salt Lake Area Averages

Comparable Land Sales: Market Comparables from disclosed asking/purchase prices are seen in the Comparable Land Sales table. You may notice that there is Undisclosed CBD as a comparison. In discussions with one of the signicant Utah players in the multifamily arena, they stated that land in the CBD and the periphery demand prices between $23/SF and $35/SF. This information was shared from actual deals that they or their partners had intimate, rsthand knowledge of. As this property is nearly out of the periphery of downtown, this developers estimation of land value was $25/SF. Looking at other comparables in the area, this appears to be in line with market expectations, making our assumption of $26/SF a conservative number.

Parking Costs: The next item of signicance is the cost for parking. Parking seems to be the culprit of more dead development deals than any other single factor. In order to keep the numbers in check, two sources were consulted for approximate costs on a per stall basis. For an underground parking facility that goes down several levels, typical costs can be between $25,000 - $45,000 per stall (we even learned of a project that incurred close to $60,000 per stall). For structured above ground parking, costs are anywhere from $12,000 $18,000. Surface parking can be as little as $3,000 - $5,000 per stall. Underground parking costs start to climb when you have to deal with shoring up walls, ground water issues, and access ramps. Because of the slope of the site, only the east side will require full depth excavation of up to 12 feet. The west side will only require 2 to 3 feet of excavation. This essentially eliminates the need for ramps, because access to the lower level is at grade along 400 South, and access to the upper level is at grade along 900 East. This is a signicant point to bring up as the shoring required for this type of a project will be no more extensive than that of a typical basement that may be found in many buildings in Utah. Therefore, the estimated parking costs are $14,154/stall as a blended average. This project has 389 parking stalls, 272 on the lower level and 117 on the upper level. The lower level stalls will cost $12,500 per stall and the upper level stalls will cost $18,000 per stall.
Parking Costs Type # of stalls Cost/Stall Upper Level 117 stalls 18,000 272 stalls 12,500 Lower Level Total 389 stalls Weighted Average Cost Per Stall Totals 2,106,000 3,400,000 5,506,000 14,154

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Financial Analysis
Construction Budget / Sources & Uses: Vertical costs, as shown on the budget on page 14 are $90.50 per rentable square foot. This gure comes from a review of numerous as-built construction budgets from other multi-family projects in Utah. It needs to be remembered that this is student housing and the main goal is to build a durable product. This doesnt mean the nest nishes, but those that will hold up the best against the student tenant. Often, this translates into savings in areas like countertops, tub surrounds, lights, etc. Occasionally this requires higher priced items such as cabinets, carpet, and unit furnishings. We believe the $90.50 per rentable square foot is a conservative number. FF&E stands for Furniture, Fixtures, and Equipment. This number is all inclusive of the common area and apartment FF&E as this is a fully furnished apartment complex. We have budgeted $2,000 per student or $8,000 per 4-bedroom unit.
Stabilized Operations and Valuation Income Type 2br-1ba 3br-2ba 4br-2ba Sum Parking Income Gross Rental Income Security Deposits Security Deposit Return of Deposits Net Security Deposits Semester Dues Other Income Less: Vacancy School Year Occupancy Summer Occupancy Weighted Average Effective Gross Income Expenses Operating Expenses Payroll & Administrative Management Fee Advertising Turnover Cost Repairs & Maintenance Utilities Taxes Landscaping Insurance Total Capital Expenditure Reserves Total Expenses Net Operating Income Going-In Cap Rate Direct Income Approach Value 3.0% # of Units 39 18 83 140 389 # of Beds 78 54 332 464 stalls Monthly Rental Inc/Student 615 605 595 Gross Income 575,640 392,040 2,370,480 3,338,160 70,020 3,408,180

15

464 students

150 75%

69,600 (52,200) 17,400 48,720 11,600

464 students 464 students

35 25 Weighted Avg. Vacancy 12.5%

95% 65% 87.5%

(434,288) 3,051,613 Total 105,000 91,548 21,000 80,500 28,000 126,000 231,000 17,500 56,000 756,548 30,516 787,065 2,264,548 6.50% 34,839,200

Per Unit 750 654 150 575 200 900 1,650 125 400 5,404 218 5,622

Stabilized Operations and Valuation

The Stabilized Operations and Valuation table shows revenue, expenses, and direct income approach valuation. Off-Campus Multi-Family Rent Survey: The driver for this entire table is the rent. Anticipating signicant scrutiny of this number, a fair amount of market research has been done. The Off Campus Multi-Family Rent Survey table on page 17 shows the rents charged for 1-bedroom apartments in the area.

1%

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Financial Analysis
Off-Campus Multi-Family Rent Survey Complex Address Brigham Apts Cambridge Cove Canterbury Apts Citifront Apts City Park Apts Covey Apts Emerald Court Foothill Place Apts Hawthorne Court Irving Heights Apts Irving Schoolhouse Jefferson School Apts Northgate at Gateway Palladio Park Capitol Raintree Regency Riverbend Apts Sky Harbor Apts Sun River Apts Sunset Tower Apts Terrace Apts 201 E South Temple 1754 West 1300 North 1841 West Morton Drive 631 W North Temple 780 N 900 West 239 E South Temple 4000 S Redwood Drive 2260 Foothill Drive 727 E 600 South 1963 S 1200 East 1155 E 2100 South 1099 S West Temple 135 S 500 West 360 S 200 West 215 N Main Street 870 N 900 West 2255 S 200 East 845 W 3900 South 1876 W North Temple 1080 W 3300 South 40 S 900 East 1810 S Main St City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City Salt Lake City One Bedroom Units Low High 875 1,060 n/a n/a n/a n/a 660 699 435 435 705 705 680 680 659 759 770 770 575 730 885 1,130 739 785 888 888 929 929 789 789 550 690 614 614 549 649 532 532 550 565 680 680 640 640 High Low Median Average 1,130 435 695 711

From the Off-Campus Rent Survey, we can see that the median rent being asked for 1-bedroom units in the SLC area is $695/month, average rent is $711/ month, with a range of $435-$1,130/ month.

rents. This is signicant since this project will be considerably newer than any of these other mentioned projects. Newer housing, in the right location, at comparable or better rental rates is sure to capture residents.
University of Utah On-Campus Housing (Non-Married) Bedrooms Residence Downtown Commons Shoreline Ridge Chapel Glen Shoreline Ridge Benchmark Plaza Gateway Heights Honors Housing (2012) Honors Housing (2012) Sage Point Sage Point Shoreline Ridge Shoreline Ridge Shoreline Ridge Downtown Commons Downtown Commons University Station (2015) University Station (2015) University Station (2015) Honors Housing (2012) Honors Housing (2012) Type Apartments Apartments Dormitory Apartments Apartments Dormitory Apartments Apartments Dormitory Dormitory Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Per Unit 4 4 1 3 2 1 8 4 1 1 4 3 2 6 3 4 3 2 8 4 Private or Shared Rooms Shared Shared Shared Shared Shared Shared Shared Shared Private Private Private Private Private Private Private Private Private Private Private Private Students Per Unit 8 8 2 6 4 2 8 4 1 1 4 3 2 6 3 4 3 2 8 4 High Low Median Average
Westminster College On-Campus Housing Bedrooms Residence Hogle Carleson Century Floorplan Villa Darvi Floorplan 5-Bedroom Apartments 6-Bedroom Apartments Westminster on The Draw (2012) Type Dormitory Dormitory Apartments Apartments Apartments Apartments Apartments Per Unit 1 1 1 1 5 6 4 Private or Shared Rooms Shared Shared Shared Shared Private Private Private Students Per Unit 2 2 2 2 5 6 4 High Low Median Average Per Student Per Month 505 505 576 576 611 611 807 807 505 576 599

Per Student Per Month 286 349 359 365 386 388 583 607 425 455 465 486 514 572 572 595 605 615 643 669 669 425 572 551

University of Utah and Westminster College On-Campus Housing: Rent surveys were done for On-Campus Housing at the U and Westminster College (see tables to the right). The U housing is over capacity with some units renting for $572 per bed. Their new housing will be as much as $669 per bed. Westminster College housing is over capacity with some existing units renting for $611 per bed. Their new housing will be as much as $807 per bed.

As shown on the previous page, rents for University Station are priced similarly to Westminster housing rents, $23 more than the median U campus housing rents, and $100 less than the median off-campus

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Financial Analysis
Parking Revenue: Considering parking, other housing studies performed in SLC have revealed that residents are willing to pay for on-site parking, but no more than $25/month. Parking rents have been set to $15/month. This is especially attractive since nearly all parking will be covered. of revenue philosophy. Therefore, our expenses were estimated on a per unit basis. As in many other areas, we decided to be more conservative and increased certain expenses bringing the total per unit expenses to estimate more than $5,400/unit (25% higher than the high end of per unit estimates). The expenses lines that are particularly Lease Term: Rental contracts will be offered for both the school higher on this project than on other projects are Repairs and Mainteyear and summer. This will be a strong marketing tool in attract- nance, Turnover Costs, and Utilities. These higher amounts should ing students as only 5 of the above off-campus complexes offer 8-9 help cover additional costs that are associated with student housing. month contracts. While this is positive for marketing purposes, it Capital Expenditures: Capital Expenditures is anticipated to be also causes higher vacancies during the summer months. With this low for the rst many years as this is going to be new construction. in mind, it is anticipated that the project will be fully occupied at Therefore, we have 1% of revenue going towards capital improve95% during the school year, and drop to 65% occupancy during the ments each year. summer months. A weighted average shows 87.5% occupancy year Valuation: The last item on the Stabilized Operations and Valuaround. Given the location and current market occupancy rates, this is tion table on page 16 is the Valuation. Valuation is determined by conservative. In fact, many industry professionals believe that due to looking at the stabilized net operating income and capitalizing it with the projects proximity to downtown, the project will not see nearly a market cap rate. Across the country there has been considerable cap as much of an occupancy hit during the summer as students will like- rate compression in multi-family projects over the past several years. ly maintain employment in the area. Class-A multi-family in major metro areas has been highly coveted Expenses: Expenses are also worth discussing. We have surveyed a number of real estate developers and management companies to get a feeling for what realistic operating expenses should be. We learned quickly that there are two very different rules of thumb for estimating operating expenses. One camp follows the percentage of revenue philosophy where you take approximately 30-35% of your revenue as your expenses. The other camp looks at expenses on a per unit level, rather than as a percent of revenue, with expenses being between $3,500/unit to $4,300/unit. Overwhelmingly, those that were in this second camp (expenses per unit) were the multi-family specialists, where as real estate generalists seemed to follow the percent by institutional buyers causing price wars to drive cap rates into the low 5s (Manhattan even dropped into the 4s). It is anticipated that this environment will change in the future and we have decided to use a more conservative cap rate of 6.5%. Because of the size of the project (464 students) and the urban location (downtown Salt Lake City), this project will be a prime candidate for institutional buyers. It is expected this project will see a favorable cap rate upon disposition.

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Financial Analysis
Pro Forma NOI and Value Pro Forma NOI Capitalization Rate Value (NOI/CAP) Loan Terms Interest Rate Amortization Period (years) Using Loan to Value Maximum LTV Maximum Loan Based on LTV
Stabilized Development Profit

2,264,548 6.50% $ 34,839,200 5.50% 30

68% $ 23,690,656

Stabilized Development Prot: NOI 2,264,548 6.50% If the property is sold immediately Cap Rate Capitalized Value 34,839,200 upon stabilization, with a NOI of Total Project Costs 29,732,077 Stabilized Development Profit 5,107,123 $2,264,548 and a 6.5% cap rate, the Simple Unleveraged Return 17.18% project will be valued at $34,839,200. 5,880,430 Subtracting total costs of $29,732,077, Invested Equity Invested Equity Simple Return on 86.85% a prot of $5,107,123 is achieved. See the Stabilized Development Prot chart for returns the project will attain should the project be sold immediately upon leasing it up.

Using Debt Coverage Monthly NOI Maximum DCR Maximum Monthly Payment Maximum Loan Based on DCR

188,712 1.25 $ 150,970 $ 26,589,079

Maximum Loan (Lesser of LTV, DCR, or LTC) Maximum Principle $ 23,690,656 Monthly Payments $ (135,837) Annual Debt Service $ (1,630,045)
Cash Required or Returned at Take-Out Loan Total Project Costs Equity for Construction Loan (-) Construction Loan Debt & Amount to Pay Off with Takeout Loan Take-Out Loan Max Additional Equity Required Potential Equity Refunded to Developer

Permanent Financing
To determine permanent nancing for the project, lenders give the lesser of Loan-to-Value (LTV) or Debt Service Coverage Ratio (DSC). To be conservative, the project was kept at a 68% LTV parameter and 1.25 DSC. The maximum loan in this scenario will be constrained by LTV as this is the smaller amount than using DSC. The table to the right shows how this was calculated. An additional $160,991 in equity would be required to get the loan as shown in the bottom right table.

29,732,077 5,880,430 23,851,647 23,690,656 160,991 -

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Financial Analysis
Project Cash Flow
Equity Requirements: This additional equity will bring the total equity invested to $6,041,421 as shown in the table below. The entire investor capital is desired up front, due to investor distaste of bringing additional equity to a project. Through a joint venture agreement the land owner will contribute 42% of the equity, essentially becoming a 42% stakeholder. The table shows the equity stack required for the project.
Equity Requirements Developer Equity (Deferred Dev. Fee) Land Value Contribution Investor Capital Total Equity Required 629,076 2,536,934 2,875,411 10% 42% 48%

All of the individual elements of the project have now been discussed, as well as key nancial numbers. The discounted cash ow shown on page 21 brings each of these elements together to give a complete picture of the project. The discounted cash ow (DCF) is a 10-year model, with one year to gain entitlements and approvals, 22 months from demolition to completion of construction, and a 7-year hold after completion. Due to space constraints, only major categories are shown rather than an itemized DCF. An itemized monthly DCF can be provided upon request. Revenues and expenses are grown 3% per year.

6,041,421 100%

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Financial Analysis
2012
Development Period Beginning Capital Account Balance Sources Investor Capital Developer Capital Construction Loan Total Sources Uses Total Land Acquisition Costs Total Design/Permitting Total Horizontal/Prep Work Total Construction & TI Total Other Hard Costs Total Other Soft Costs Total Const. Loan Costs Total Uses Ending Capital Account Balance Operation Period CAPITAL ACCOUNT Funding of Takeout Loan Additional Investor Capital (Capital Payback) Construction Loan Payoff Capital Account Balance INCOME Rental + Parking Income Total Potential Gross Revenue Vacancy Effective Gross Revenue EXPENSES Operating Expenses Management Fee Total Expenses Net Operating Income (NOI) Structural Reserves Debt Service Debt Service Coverage Ratio Net Cash Flow DISPOSITION Sale of Property Less Closing Costs and Commissions Less Loan Payoff Net Sale Proceeds Ending Capital Account Balance 23,690,656 160,991 (23,851,647) 629,076 26,572,064 26,572,064 (3,345,991) 23,226,073 (5,213,620) (696,782) (5,910,403) 17,315,670 (232,261) (11,299,087) 1.53x 5,784,323 41,500,619 (1,743,026) (21,041,069) 18,716,524 1,898,574 1,898,574 430,932 430,932 158,764 158,764 23,690,656 160,991 (23,851,647) 1,420,075 1,420,075 (71,004) 1,349,071 (302,671) (40,472) (343,143) 1,005,928 (13,491) (672,565) 1.5x 319,873 319,873 319,873 3,510,425 3,510,425 (438,803) 3,071,622 (688,913) (92,149) (781,061) 2,290,561 (30,716) (1,614,155) 1.42x 645,690 965,562 965,562 3,615,738 3,615,738 (451,967) 3,163,771 (709,798) (94,913) (804,712) 2,359,059 (31,638) (1,614,155) 1.46x 713,266 1,678,828 1,678,828 3,724,210 3,724,210 (465,526) 3,258,684 (731,324) (97,761) (829,085) 2,429,599 (32,587) (1,614,155) 1.51x 782,857 2,461,686 2,461,686 3,835,937 3,835,937 (479,492) 3,356,445 (753,510) (100,693) (854,203) 2,502,241 (33,564) (1,614,155) 1.55x 854,521 3,316,207 3,316,207 3,951,015 3,951,015 (493,877) 3,457,138 (776,376) (103,714) (880,090) 2,577,047 (34,571) (1,614,155) 1.6x 928,321 4,244,528 4,244,528 4,069,545 4,069,545 (508,693) 3,560,852 (799,944) (106,826) (906,770) 2,654,082 (35,609) (1,614,155) 1.64x 1,004,318 5,248,846 5,248,846 2,445,118 2,445,118 (436,628) 2,008,490 (451,083) (60,255) (511,338) 1,497,152 (20,085) (941,591) 1.59x 535,477 41,500,619 (1,743,026) (21,041,069) 18,716,524 24,500,847 24,500,847 24,500,847 5,251,355 629,076 23,851,647 29,732,077 (2,558,434) (1,324,350) (538,517) (16,942,609) (15,000) (1,444,129) (1,403,038) (29,732,077) Total 5,251,355 5,251,355 (2,558,434) (662,175) (132,171) (3,352,780) 1,898,574 1,898,574 3,904,106 3,904,106 (662,175) (538,517) (3,904,106) (2,609) (264,342) (5,371,748) 430,932 430,932 11,712,317 11,712,317 (11,712,317) (7,826) (264,342) (11,984,485) 158,764 158,764 629,076 8,235,223 8,864,299 (6,832,185) (4,565) (783,275) (1,403,038) (9,023,063) 319,873 319,873 965,562 965,562 1,678,828 1,678,828 2,461,686 2,461,686 3,316,207 3,316,207 4,244,528 4,244,528 5,248,846 5,248,846 24,500,847 24,500,847

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

p. 21

University Station

Financial Analysis
Returns & Key Metrics
Return Summary/Key Metrics TE Total Equity Cash-on-Cash Unleveraged IRR Leveraged IRR Terminal Value @ 6.50% CAP NSP Net Sales Proceeds NCF Sum of Net Cash Flows Profit = NSP + NCF - TE Cash Multiple Debt Service Coverage Ratio 6,041,421 11.16% 10.34% 17.45% 41,500,619 18,716,524 5,784,323 18,459,426 4.41x 1.53x

The cumulative free cash ows (NCF $5,784,323) plus net sales proceeds (NSP $18,716,524) equals free cash of $24,500,847. To derive our prot, we subtract equity contributed (TE $6,041,421) equaling a prot of $18,459,426. If we take the free cash of $24,500,847 divided by cash invested $5,412,345 ($6,041,421 less $629,076 of deferred developer fees), it equals a 4.41x cash multiple. IRR returns of 7% are attractive to many real estate investors in todays economy. New development demands a higher return for the risk associated. At 17.45% IRR, we believe the investor is compensated for the additional development risk.

University Station

p. 22

Market Overview
The Market Overview shows the reasons why the University Station Out of the undergraduates, the largproject will successfully attract and retain tenants. We rst look at est class is the Senior class with the University of Utah student prole to dene our target customer. 37%. This is a result of students being seniors for 1, 2 or even 3 years University of Utah Demographics as they complete their course-work or While this project is not limited to only University of Utah students, change majors part way through their it is anticipated that the majority of the residents for this project will schooling. The table to the right corbe from this body. Further, the project is specically targeting under- roborates that students typically dont graduate students that are sophomores or higher. Freshmen are the graduate in 4-years, but more comtarget for on-campus housing. This bodes well for the project as our monly in 5 or 6 years. Logically, this non-freshman target group is the largest group at the University. would make the senior class the largEnrollment at the U in 2011 was 31,660. Since 2007, enrollment has est. Junior class is the second largincreased on an annual compounding basis for undergraduate stu- est containing 22% of undergraduates dents at 3.2%, at 2.8% for graduate students, and 3.1% for the uni- with the sophomore and freshman classes taking about 17% each. versity overall as shown in the table below.
Enrollment by Headcount by Academic Level 2007-2011 2007 3,625 3,562 4,701 7,939 733 861 21,421 5,612 992 6,604 28,025 2008 3,724 3,399 4,583 7,999 770 1,051 21,526 5,699 986 6,685 28,211 2009 3,977 3,538 4,746 7,872 895 1,166 22,194 5,835 1,300 7,135 29,329 2010 4,139 3,918 5,045 8,182 976 1,111 23,371 6,120 1,328 7,448 30,819 2011 4,270 4,108 5,283 8,680 934 1,022 24,297 6,062 1,301 7,363 31,660 % 2008 % 2009 % 2010 % 2011 3% 7% 4% 3% -5% 4% 11% 5% -3% 4% 6% 5% 1% -2% 4% 6% 5% 16% 9% -4% 22% 11% -5% -8% 0% 3% 5% 4% 2% -1% 1% 1% 2% 32% 7% 4% 5% 2% 4% 5% -1% -2% -1% 3% Total Change Compounded 2007 - 2011 Annual Growth 18% 4.2% 15% 3.6% 12% 3.0% 9% 2.3% 27% 6.2% 19% 4.4% 13% 3.2% 8% 31% 11% 13% 1.9% 7.0% 2.8% 3.1%

60% 50% 40% 30% 20% 10% 0% Within 4 Years Within 5 Years Within 6 Years

Freshmen Sophomores Juniors Seniors Second Bachelor's Non-Matriculated Total Undergraduate Graduate - Research Graduate - Professional Total Graduate Total Enrollment

p. 23

University Station

Market Overview
Undergraduate vs Graduate Enrollment
6,604 24%

Of the 31,660 students, 76% (21,421) are undergraduate students, while the remaining 24% (6,604) are graduate students. Of the entire student body, 56% are male, while 44% are female.

Enrollment by Class
Undergraduate Graduate
21,421 76% Seniors 37% Juniors 22% Second Bachelor's 3% NonMatriculated 4% Freshmen 17% Sophomores 17%

Enrollment by Sex

17,602 56%

14,058 44%

Female Male

University Station

p. 24

Market Overview
The majority of students attending the U are considered in-state (77%). This leaves 23% as out-of-state students (or 8,378 students). Of those that are in-state, there are another 7,305 that originate from counties other than Salt Lake County. This totals 15,683 students that are enrolled in the U, but dont originate in Salt Lake County (see map to the right).

23%

77%

In-State

Out-of-State

(Ofce of Budget and Institutional Analysis)

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University Station

Market Overview
Where do students currently live? It is widely stated that the U is a commuter campus. Traditional commuter schools have more part-time students than full-time students as they try to t school in around work. In the fall of 2010, 64% of all students enrolled at the U were full-time students, a much larger percentage than traditional commuter schools. Students actually want to live near campus! The University Commuter Services department collects zip code data for the residences of every student and faculty member. Over 1/3 of all the full-time students live in the same eight zip codes, located on the east side of the Salt Lake Valley in the neighborhoods surrounding the campus (see map to the left). The following table shows what we consider to be potential tenants from the U. Out of 31,660 enrolled students, we remove 4,123 (15%) that live on campus; 11,081(35%) that are married; and another 6,332 (20%) that claim to live at home. This leaves 10,124 off-campus residents, of which approximately 41% live in Salt Lake City. This means that there are 4,150 students living in Salt Lake City, in offcampus housing, and not with parents or spouses. Over 1/3 (37%) of all full-time students live near campus, which means that the realistic captured market from the U is approximately 3,746 or 37% of all 10,124 off-campus-single-students-that-dont-live-at-home.
Potential Tenants from U of U Total enrollment Full-time Part-time Living on Campus 15% of full-time 3% of part-time Married (35%) Living at Home (20%) Off-campus candidates Living in Salt Lake City (41%) Living near campus (37% ) 31,660 26,441 5,219 (4,123) 3,966 157 (11,081) (6,332) 10,124 4,151 3,746

Map of Student Residences from University Commuter Services

University Station

p. 26

Market Overview
LDS Business College and BYU Salt Lake Center
The second largest body of tenants is anticipated to come from students attending LDS Business College or BYU Salt Lake Center. Both schools are housed at the Triad Center on 300 West between North and South Temple. The Triad Center is easily connected to University Station via TRAX since both locations have a TRAX stop at their doorstep. Since BYU Salt Lake Center infor4.5% California mation is limited, 11.4% 19.1% 3.0% Washington we only focused on Idaho the LDS Business Utah 30.3% College (LDSBC) 31.7% Other States student. ApproxiInternational mately 2,050 students are enrolled at Roughly 130 male students live at The Lodge. It was converted in LDSBC. Of these, nearly 1,400 come from out of the State of Utah 2006 from a Travel Lodge Motel to student housing by PRI. It is and nearly 400 from out of the country. 100% occupied by LDSBC students. Even though it was converted These out-of-state students all have to nd housing in the downtown in 2006, amenities are still dated and lacking. For example, each unit area. LDSBC has no ofcial housing. On ldsbc.edu the school states: has
Where LDSBC students come from:

The LDS Business College does not own, operate, or control any student housing facilities. As an informal service to its students, the LDS Business College provides a list of possible housing opportunities on its website. Students are free to make housing arrangements wherever they like and are under no obligation to choose from the facilities listed.

No kitchen No living room/gathering area No private roomsall shared Bunk beds only Single sink in the toilet/shower area Coin-op laundry

The two listed facilities are: The Lodge and The Plaza Hotel. These The entire facility has 2 kitchens (one per oor or one per 65 resiare only listed because they are owned by PRI (the commercial real dents). There is a single TV/gathering room for all 130 residents. estate arm of the Church of Jesus Christ of Latter-day Saints, who SIGN ME UP!!! also owns LDSBC).

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University Station

Market Overview
The Plaza Hotel is located on South Temple and is still an operating hotel. Their ofcial website makes no mention of the student housing options. Currently, 70-female students take residence in the hotel. The room amenities are typical to those found in a hotel, rather than in a permanent housing facility. There is one kitchen shared per two oors and a single TV/gathering room. Again, there is a single sink shared between two women and coin-op laundry. On the housing webpage (ldsbc.edu), the school strongly encourages students to take advantage of the fact they are located at a TRAX stop.
students will find that the city bus lines (UTA) and light rail (TRAX) serve the campus well. City transit passes, subsidized by the College for its students, are available for a modest amount and include all bus and TRAX routes except ski busses, paratransit and special services. There is a light rail (TRAX) terminal adjacent to the campus, and the FrontRunner commuter rail stop is also within walking distance.

The following table shows what we consider the potential tenants from LDSBC. As mentioned above, there are at least 1,400 students LDSBC does not have to approve of student housing as is customary from out of the state that need a place to stay. In addition, a portion of the 650 students from Utah will be looking for a place to stay that is for students attending BYU in Provo, Idaho, or Hawaii. close to school. However, to remain conservative, the Utah residents LDS Business Colleges approved housing program differs from the are not taken into consideration, nor are the few thousand BYU Salt housing program offered by other schools affiliated with The Church of Lake Center students that attend school at the Triad Center taken into Jesus Christ of Latter-day Saints LDS Business College does not (a) consideration. oversee landlords enforcement or compliance with the Housing Policy
and Residential Living Standards, (b) inspect or monitor the condition or cleanliness of units, (c) review or approve lease terms, or (d) mediate or become involved in disputes between landlords and students.
Potential Tenants from LDS Business College Total enrollment Students From Utah Students in The Lodge Students at The Plaza Hotel Target students 2,050 (650) (130) (70) 1,200

Housing choices are left solely to the discretion of the students. Considering the alternatives, The Lodge or Plaza Hotel, it is not hard to imagine a large number of students looking elsewhere for housing options.

University Station

p. 28

Market Overview
Westminster College
Westminster College, located at 1300 East 1700 South (2.4 miles from the project), has a total enrollment of approximately 3,200 students. 55% of their latest in-coming classes are from out-of-state, and their student housing is over capacity. This has led to a quasi-partnership with the school and Woodbury Corp to build student housing near the campus (Sugarhouse). Reports are conicted about the total number of beds that will be provided. Westminsters website states that 132 beds will be provided, while more recent news articles state that there will be 168 new beds. The following are some excerpts from one of these news articles entitled, Westminster on The Draw, published August 29, 2011 by Justina M. Mccanless.
Theyre calling it Westminster on The Draw at 2150 S. 13th East the six story building will include student housing, retail, ofces, and a dynamic classroom and activities space. Construction began on the project this summer and its projected to be nished by Fall 2012. Westminster will be the major tenant of the building This unit is going to have 168 beds theres certainly a demand for new housing. We know we dont have enough housing because we get more and more freshmen every year living on campus and weve been recruiting more students from outside the greater Salt Lake area and outside of Utah, said Curtis Ryan, Vice President of Finance and Administration. Ryan said...these rooms will be a little more expensive than core campus housing. Although if students live in the new building they will not be required to be on a campus meal plan, so when thats factored in, these rooms will cost less. Over fty percent of Westminsters incoming students this year are from out of state according to Annalisa Holcombe, Director of Alumni, Community, & Board Relations. What do you tell their parents, right? So they move here from another state and then we say, great, but we can only put them up for a year and then theyre going to have to nd another place to go after that. She said its important we create additional space, and the new building is kind of like an in between space because its not right on the core campus, but its easy to get to.

These units will be nearly identical to University Station in their layout 4-bedrooms, full kitchen, family room, washer/dryer, and a balcony. While the units are similar, there are going to be some very signicant differences. Cost: Mr. Ryan stated in the article that the units would be more expensive than their other on-campus units. These new units at Westminster on The Draw will cost approximately $807 per student per month ($3,630 per semester) while the next most expensive units cost approximately $611 per student per month ($2,748 per semester). Commute: Administration at Westminster hopes to see students bike or walk to campus, however they admit there are issues with this during the winter months. University Station enjoys TRAX and many bus routes while Westminster on 1300 East is only serviced by two bus routes (Route 220 & Route 213). Common Space: Westminster hypes up the open space at Sugar House Park across the street, while University Station has private on-site open space.

p. 29

University Station

Market Overview
To determine the number of potential tenants from Westminster, we start with total enrollment of 3200 and remove the 25% that live oncampus, leaving 2400 students. If we assume 50% of those 2400 are from Utah and will not seek housing, we remove 1200 more. Then we remove 168 for Westminster on The Draw, and if their student body make up is anything like the U, we can assume that of these remaining students, 35% are married, and 23% are graduate students, leaving 336 students looking for off-campus student housing.
Westminster College On-Campus Housing Bedrooms Residence Hogle Carleson Century Floorplan Villa Darvi Floorplan 5-Bedroom Apartments 6-Bedroom Apartments Westminster on The Draw (2012) Type Dormitory Dormitory Apartments Apartments Apartments Apartments Apartments Per Unit 1 1 1 1 5 6 4 Private or Shared Rooms Shared Shared Shared Shared Private Private Private Students Per Unit 2 2 2 2 5 6 4 High Low Median Average Per Student Per Month 505 505 576 576 611 611 807 807 505 576 599

Potential Tenants from Westminster Total enrollment On-campus (25%) Total Off Campus Off-campus from Utah (50%) Westminster "On The Draw" (Woodbury Dev) Married (35%) Graduate Students (23%) Off-campus candidates 3,200 (800) 2,400 (1,200) (168) (420) (276) 336

Capture Rate Analysis It is anticipated that University Station will attract students from many different institutions: University of Utah, LDSBC, BYU Salt Lake Center, Westminster College, Eagle Gate College, Salt Lake Community College, and other trade, vocational, and beauty schools. Further, it is anticipated young adults not enrolled in any sort of schooling will nd the development attractive. To arrive at a capture rate for this project, rather than look at all of these potential sources of tenants, we will only look to the University of Utah, LDSBC, and Westminster College. The chart below shows what capture rates would need to be attained in 2015 and beyond in order to achieve full occupancy (89% weighted average) in the rst year, and 89% occupancy every year thereafter.

Capture Rate Analysis Annual Enrollment Growth University of Utah LDS BC Westminster Totals 3.2% 3.0% 5.0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 Target Target Target Target Capture Target Capture Target Capture Target Capture Target Capture Target Capture Students Students Students Students Rate Tenants Student Rate Tenants Student Rate Tenants Student Rate Tenants Student Rate Tenants Student Rate Tenants 3,746 1,200 336 5,282 3,866 1,236 353 5,455 3,990 1,273 370 5,633 4,117 1,311 389 5,817 7.10% 7.10% 7.10% 7.10% 292 93 28 413 4,249 1,351 408 6,008 6.87% 6.87% 6.87% 6.87% 292 93 28 413 4,385 1,391 429 6,205 6.66% 6.66% 6.66% 6.66% 292 93 29 413 4,525 1,433 450 6,408 6.44% 6.44% 6.44% 6.44% 292 92 29 413 4,670 1,476 473 6,619 6.24% 6.24% 6.24% 6.24% 291 92 29 413 4,820 1,520 496 6,836 6.04% 6.04% 6.04% 6.04% 291 92 30 413

University Station

p. 30

Market Overview
Why do we think we will be able to capture enough tenants? The answer to this question lies in comparing and contrasting what University Station will offer students and what the market has been offering students. To make the answer more meaningful, it may be worth noting that student housing complexes and typical apartment complexes are different. Some of these differences are small and deal with the way management communicates with the tenants, and other differences are very signicant physical differences in the structures themselves. Students want to live with friends and other people, but also want some privacy. Todays student-focused housing is built with 4-8 bedrooms per unit with one student per room as the norm, whereas typical apartments are 1-2 bedrooms with an occasional third. This one feature is a MAJOR difference in a typical apartment building and a student-focused one. Lease term is another big difference. Student-focused housing offers leases that are school year length (8-9 months), rather than your typical 12-month lease. Typical apartments will assign the liability for the entire units rent to the occupants, whereas a student-focused complex will only require the students to guarantee their portion of the rent due rather than the rent due for the entire unit. Student housing is typically fully furnished, whereas normal apartments are not. Community gathering areas are more important in student housing where residents want to be social, whereas typical apartment complexes dont need to have as much community gathering space.

p. 31

University Station

Market Overview
Other differences are in the lease up and turnover rates. Student housing can literally ll up with all new tenants every year and then at the end of the year have nearly every single tenant move out with another all new group moving inand this all happens within about a week or two. This requires special maintenance and management practices in order to clean carpets, change blinds, paint, and make other necessary repairs to over 150-units in compressed time. In normal apartment buildings, some tenants will live there for literally decades. It can often take weeks and even many months to rent the space again and turnover is slower and more constant over the entire year. ment complexes they track wherein a number of students reside (see map on next page for locations of these complexes). A few statistics about the 22 apartment complexes the U tracks: Only 2 were built in the past decade (2004 and 2003) Only 5 are within 3 miles of campus Only 1 had occupancy below 90% Only 5 had 8-9 month (school year) leases available Only 1 is furnished Only 5 included a Washer and Dryer in the unit Only 1 includes free internet Only 1 includes free cable Only 4 offer 3-bedroom units Zero offer 4-bedroom units

On page 34 are pictures of nearly all the complexes from the Us list that are on the east side of the Valley. Also included are a few complexes from the west side. As the pictures show, there has not been a new complex built in the area for some time. University Station characteristics include: New construction 1 mile from the U campus 9 month leases available Fully furnished Washer/dryer included in each unit Free cable Free internet Primarily 4-bedroom units The U does not regulate off-campus housing, but they do keep a pulse Student oriented programming on where students live and what conditions are like at these larger complexes. The off-campus housing department has a list of 22 apart- Clearly University Station is better positioned to capture the student. Now that we understand some key differences between student housing and regular multi-family apartments, we will compare University Station to what the market has to offer. We have already looked at the encouraged options available to LDSBC students and we feel we are on solid ground in assuming we will be able to capture a portion of these students. We will now turn our attention to University of Utah student and their off-campus housing options.

University Station

p. 32

Market Overview
22 Apartment Complexes tracked by the University of Utah

p. 33

University Station

Market Overview

University Station

p. 34

Market Overview
It is not difcult to nd student feedback on off-campus housing conditions, there are a great number of reviews from students posted on college review websites. Below are a few reviews pulled off a popular college review website called CollegeProwler.com. (no editing was done, including grammatical corrections, to the following statements)
There is Greek row that is right next to campus and a few sets of apartment but I personally lived 15 min from the school. I would have liked to live closer but most of what I saw was to rundown. Jul 09, 2011 ctaysom Architecture 10 There are many apartments to be found in SLC. All the good ones are on Craigslist or KSL -- by good ones, I mean cheap, but old. Dont expect dishwashers or washer/dryers or elevators. If you want a nicer apartment in a complex with those amenities and a pool, expect to pay at least $800 or more a month for a studio or one bedroom. Feb 24, 2012 miloandtiger English 12 If you are looking for quality housing its pretty hard to nd especially if you want somethings thats close to the school. Jan 30, 2012 Key0323 Business Mgmt 15 Most off-campus housing in Salt Lake City are old homes that have been turned into student housing. Feb 7, 2012 ach11 Architecture 17 The university is in Salt Lake city so housing is going to be expensive but housing right near the campus is expensive and not well kept. Not very safe either. Jul 29, 2010 sarakaechilds Music 08

a commuter school and why it will continue to wear the label until new projects such as University Station are built to accommodate students and not typical multi-family renters. The only student focused housing in the area is the Us on-campus housing. Traditionally, on-campus housing is utilized almost exclusively by freshmen. This helps them acclimate to college life in a campus regulated environment with help from Resident Assistants as this is their rst time living on their own. After this rst year, generally speaking, these students move off-campus. On-campus housing consists of the following residences: Honors Housing at Legacy Bridge (Opening 2012) Benchmark Plaza Shoreline Ridge Downtown Commons Chapel Glen Gateway Heights Sage Point Ofcers Circle

The University of Utah consistently has occupancy rates of approximately 97% in the apartment style housing and slightly lower occupancy rates in the dormitory and house style housing. Because of this consistently high occupancy number, the U is currently building a new on-campus housing facility that will accommodate 309 new students.

This is the perception of students. Old, run down, unsafe housing is available close to the U. If you want nicer housing, you have to go further away. This is the primary reason the U has been labeled

p. 35

University Station

Market Overview
From a University of Utah, Facilities Planning document discussing Projects Under Construction in 2012 we nd the following:
Project Information: Over the past years, occupancy rates for the undergraduate halls have continued to increase resulting in excessive waitlists for students. The addition of new beds into the housing system will enable the university to meet the housing needs of more entering students whose enrollment far exceeds the availability of space.
University of Utah On-Campus Housing (Non-Married) Bedrooms Residence Downtown Commons Shoreline Ridge Chapel Glen Shoreline Ridge Benchmark Plaza Gateway Heights Honors Housing (2012) Honors Housing (2012) Sage Point Sage Point Shoreline Ridge Shoreline Ridge Shoreline Ridge Downtown Commons Downtown Commons University Station (2015) University Station (2015) University Station (2015) Honors Housing (2012) Honors Housing (2012) Type Apartments Apartments Dormitory Apartments Apartments Dormitory Apartments Apartments Dormitory Dormitory Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Apartments Per Unit 4 4 1 3 2 1 8 4 1 1 4 3 2 6 3 4 3 2 8 4 Private or Shared Rooms Shared Shared Shared Shared Shared Shared Shared Shared Private Private Private Private Private Private Private Private Private Private Private Private Students Per Unit 8 8 2 6 4 2 8 4 1 1 4 3 2 6 3 4 3 2 8 4 High Low Median Average Per Student Per Month 286 349 359 365 386 388 583 607 425 455 465 486 514 572 572 595 605 615 643 669 669 425 572 551 Per Unit Per Month 2,181 2,790 719 2,187 1,542 777 4,664 2,428 425 455 1,860 1,458 1,028 3,203 1,716 2,380 1,815 1,230 5,144 2,676

The project is called Honors Housing at Legacy Bridge and only Honor students at the University are permitted to live in this new project. As such, we dont see this being a big threat to the proposed University Station project. The last time new housing was built at the University of Utah was in preparation for the 2002 Winter Olympics. Dormitories were built to house Olympic athletes and were then rented to students.

University Station

p. 36

Site Analysis
Property Information
The property consists of 2.24-acres in the Commercial Corridor District zoning (CC). Multi-Family developments are permitted within this zone. City planners have indicated that the zoning will be changed to Transit Station Area Zoning (TSA) or Form-based Zoning in the near future. Both of these zones recommend a minimum of two stories and a minimum of 30 dwelling units per acre with no maximum. Both zones will also allow for buildings exceeding 45 feet in height. The current use of the property is far from its highest and best. It currently hosts a single tenant retail box that has been home to many different businesses, and is currently occupied by Ofce Max. More often than not, the parking lot is used as a park and ride for the TRAX station rather than for customers of the retail space, so much so that the parking lot has designated stalls for TRAX, even though no ofcial agreement has been made with UTA. The property is currently encumbered by a 36 storm drain line that is part of the Jordan Salt Lake City Canal system. City Engineers have expressed interest in re-routing the 36 pipe to the perimeter of the site. Salt Lake County is currently in the planning process of a high density multi-family project to the South of the site along 900 East. The storm drain line continues under this property as well. The synergistic timing of the two projects may allow relocation of the pipe at the most opportune time. The excavation required for the proposed parking will facilitate this work. Surrounding land uses include retail and restaurants along 400 South to the East and West. M Lynn Bennion Elementary School and Cakewalk Baking Company border the project to the South.

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University Station

Site Analysis
Existing & Surrounding Uses

Ofce Max

Medical Center

Strip Center

Jiffy Lube

TRAX Stop

Bus Stop

Ofce Building

Rec Center

Village Inn

M Lynn Bennion Elementary

Nearby Residences

University Station

p. 38

Site Analysis
Site Connectivity

p. 39

University Station

Site Analysis
Due Diligence Items
Soil Issues: Ground Water: Sewer: Culinary Water: Power: Natural Gas: Cable: Curb Cuts: Drainage: Storm Water: Liquefaction: Flood Plain: Wetlands: Brownelds or Contaminants: Zoning: Permitted / Conditional Uses: Unknown. Unknown. Sewer lines are located in 900 East. 6-inch culinary water lines are currently located in 400 South and 900 East. Power is to the site and hookups are available. Gas is to the site and hookups are available. Cable and internet are available in the intersection of 400 South and 900 East and is available for connection. 2 curb cuts currently exist along 400 South, and 2 curb cuts exist along 900 East. The site currently slopes from North to South and from East to West, providing sufficient drainage. The site currently drains all surface water into the storm drainage system. The proposed development will not change the amount of storm water runoff, in fact the added green space will reduce runoff. The Utah Geological Surveys Liquefaction Potential Map shows this site in the lowest category (Very Low) for liquefaction potential. F.E.M.A. map number 4901050031A lists the property in Flood Plain C No Hazard. The site does not contain any wetlands. An Alta / ACSM Land Title Survey prepared by Bush & Gudgell found that the site is not affected by any Hazardous Wastes. Commercial Corridor District Zoning (CC). Changing to Transit Station Area (TSA) or Form-base Zoning. Retail, Office, Residential, Entertainment.

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Conclusion
Through a detailed market analysis, University Station Partners has identied a substantial need for student-oriented housing within the Salt Lake City market. This overwhelming demand has been proven by the 97.1% occupancy rates and consistent waiting lists for both the U and Westminster College. Student preferences regarding unit styles and amenities have largely been ignored. Students are being forced to settle for inferior housing options, or have larger commutes for better housing options, perpetuating the perception that the U is a commuter campus. The site located at the southwest corner of 400 South and 900 East has been chosen due to its ability to accommodate the many preferences of local students including: proximity to amenities, public transit, and higher learning campuses. University Station meets the needs and wants of students, incorporating an aesthetically pleasing and functional design, private rooms, and large common and green spaces. Costs have been conrmed, rents veried and expenses vetted resulting in strong rates of return for investors. One of the most prominent developers/owners in the local market has shown their interest and condence in the project by uniting with University Station Partners to send a Letter of Intent to partner with, or purchase the land from, the land owner. The facts have been presented and it is the hope of University Station Partners that this proposal has created sufcient interest for the land owner to work together with us and our development partner to create a student housing community resulting in a sense of place for students and superior returns for all development parties.

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Appendix
Utah Demographic Analysis
The State of Utahs April 1, 2010 population was 2,763,885, an increase of 23.8% from 2000. The states population grew more than twice as fast as the U.S. (9.7% growth rate) over the decade ranking Utah as the state with the third fastest growth rate (23.8%) in population from 2000 to 2010. This translates into 530,000+ new people living in Utah. To put this in perspective, Utah Countys entire population is 516,000+ people. The State of Utah is adding more people every ten years than the entire population of Utah County. Growth by County: 2000-2010

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Appendix
While Utah enjoyed exceptional growth over the past decade, not every county in the state enjoyed the same growth rates. In fact, nearly all the growth in the state was concentrated in two areas; Greater Saint George and the Wasatch Front/Back. A few counties in particular that stand out are Wasatch County (54.7%), Washington County (52.9%), Tooele County (42.9%), Utah County (40.2%), and Iron County (34.7%). Utah also continues to have a distinctive demographic prole. The states population is younger, women tend to have more children, people on average live in larger households, and people tend to survive to older ages in comparison to other states. Utah has both the highest fertility rate and household size in the nation. Utahs population is the youngest in the nation with a 2010 median age of 29.2, compared to the national median of 37.2. Utahs educational attainment ranks 7th in the nation with 90.6% of the population 25 years and older having a high school degree. Take the lowest median age in the nation, and one of the highest educational attainment levels in the country and you get a strong work force. This helps explain why Utahs unemployment level is also one of the lowest in the country. As of September 2011, the US unemployment rate was above 9% while Utahs was 7.4%. Historically, Utah typically losses jobs later and brings people back to work sooner than the rest of the country and as a result, Utahs unemployment is nearly always lower than the US rate as can be seen in the chart below.

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Appendix
The outlook calls for Utah to come out of the recession more quickly than the nation as a whole. Employment in Utah will grow 2.7%, as compared to 0.6% for the U.S. during 2012. The level of employment will increase to 1.24 million, over 30,000 more jobs than in 2011. Total wages will grow 6.0%, to $51.0 billion, while personal income grows 5.0%, to $100.3 billion. Average wages will grow 3.2%, to $41,071, which combined with ination of 1.3% will boost real pay 1.9%. stant 2011 dollars all three major construction sectors improved in 2011. Residential value is up 4%, nonresidential value up 19%, and additions, alterations and repairs are up 4%. Its likely the value of permit authorized construction hit bottom in 2010, and 2011 is the beginning of a modest recovery. In terms of residential units, the numbers continue to drift lower. The estimate for residential unit construction in 2011 is 8,700 units, 6% below 2010. This year will mark six consecutive years of decline in residential units. Utahs Industry FocusProfessional and business services, education and longest previous residential contraction was ve years (1978-1982). health services, and government were the only industries to have job During the peak year of 2005 permits were issued for 28,825 units growth during 2010. Construction experienced the largest decline compared to 8,700 six years later, a decline of 69% for total residential units, which includes apartment, condominiums and single-famiof 7.5%. ly homes. The decline has been more severe for single-family homes, which have dropped from 20,912 in 2005 to a estimated 4,800 units in 2011, a decline of 77%.

Construction The value of permit authorized construction in Utah in 2011 is predicted to be $3.5 billion, slightly higher than the $3.3 billion in 2010. In ination-adjusted dollars, the value of authorized construction last year was at the lowest level since 1992. The 6% increase in 2011 reverses four consecutive years of decline. In con-

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Appendix
TourismUtahs travel and tourism sector was not immune to the economic recession, but international, regional, and in-state travel helped to increase overall visitation to the state. Total spending by travelers and tourists is estimated to have increased 4.7% to $6.52 billion. Total direct state and local taxes generated by traveler spending is estimated to have increased to $842 million. Taxable room rents increased to $968 million, and hotel/motel occupancy rates were up 4.7%. ExportsWorsening economic conditions in Utah, the nation, and around the globe were reected in Utahs production and export levels through 2008 and 2009, but the rising price of gold has helped buoy the value of Utahs exports from 2009 to 2010. Utahs total exports rose from $10.34 billion in 2009 to an estimated $13.81 billion in 2010, an increase of 33.6%. Exports have been above $4.0 billion since 2002 and above $6.0 billion since 2005. EnergyIn 2010, Utah continued to experience signicant annual increases in crude oil production stemming from healthy crude oil prices spurring exploration and development in the Uinta Basin. In contrast, a weaker natural gas price has lead to a retreat from the record-high production recorded in 2009. Moreover, 2010 coal production dipped to a 20-year low based on a combination of lower demand and temporary mine closures. MineralsThe gross production value of all energy and mineral commodities produced in Utah in 2010 totaled $8.44 billion. On an ination adjusted basis, the 2010 value was about $1.12 billion (15%) more than in 2009 and second only to the record high of $9.58 billion reached in 2008. The increased 2010 total value can be attributed to a substantial increase in the value of crude oil combined with moderately higher values for natural gas, nonfuel minerals, and uranium, which were able to offset the nearly 6% decrease in coal values. The overall increase in nonfuel mineral values is primarily due to signicant increases in base metal values that compensated for the continuing decline in the value of industrial minerals. AgricultureUtah agriculture had total sales of $1.38 billion in 2010, which is 1.2% of Utah GDP. Utahs major markets in agriculture include cattle (22% of all agriculture sales), dairy production (21%), hogs (14%), and hay (10.6%). The downturn of the economy certainly has affected the prots and sales in these areas, but recent price increases starting in 2010 have brought better prot margins and earnings for farmers. EducationIn 2010, there were an estimated 576,335 students in Utahs public education system, a 2.3% (13,062 students) increase over 2009. Utah System of Higher Education enrollment for 2010 was 173,016, an increase of 8,156 (4.9%) from 2009. Overview of the Economy Utah typically grows more rapidly than the nation after recessions, and this pattern is taking hold in the current recovery. For the U.S., employment grew 0.9% in 2011, compared to 2.3% for Utah. While employment increased during 2011, Utahs unemployment rate remained at 8.0%, where it was in 2010. Though housing stabilized, with building permits at 8,700 in 2011, homebuilding is not leading the economy as it does during a typical recovery. Outlook 2012Economic growth in Utah is expected to accelerate during 2012. Employment is forecast to increase 2.7% for the year as a whole, with larger increases as the year progresses. Housing permits are forecast to move up slightly from historic lows. As the overall unemployment rate declines to 7.3%, the improving labor market will support increased consumer spending and a strengthening recovery.

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Appendix
and differences in demographics for the trade area compared to the City, County, and State. The following table shows numerous demographic categories. We will focus on only a few of these as they are some of the key drivers.

As economic headwinds diminish in 2012, economic growth should accelerate, though the European debt situation clouds the outlook. Assuming policy-makers use the tools at hand to preserve nancial stability, economic activity will improve. Growth in the U.S. will be slow but accelerating. Excess debt both at home and abroad will continue to dampen the recovery. Utah will come out of the recession more rapidly than the U.S., as has been the case with every downturn over the past 60 years. Assuming the nation continues a moderate but strengthening recovery, Utahs economy will expand at a stronger rate than experienced since the expansion began in summer 2009. Salt Lake County, Salt Lake City, and the Trade Area As we drill down closer to the actual site, we can see the similarities

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Appendix

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Appendix
The following demographics we will pay special attention. Those metrics that are highlighted in green are considered to be the most favorable value of the three areas (Trade Area, Salt Lake City, Salt Lake County).
Demographic Comparison Selected Demographics Current Estimated Population Current Estimated Households Projected Annual Growth 2011 to 2016 Persons per Household Median Age Average Household Income Percent with Associates or Higher Renter Occupied Percentage Homes Built Before 1940 Homes Built Between 1990 and 2000 Percent White Percent African American Percent Hispanic Trade Area 19,491 9,927 0.19% 1.90 34.30 50,020 47.51% 67.53% 43.01% 6.24% 75.49% 2.25% 11.22% Salt Lake City 180,834 70,042 0.50% 2.51 33.60 68,096 39.74% 44.47% 31.40% 7.83% 65.48% 2.47% 22.53% Salt Lake County 1,019,706 327,612 1.95% 3.07 31.60 78,489 34.73% 29.24% 10.42% 20.34% 74.52% 1.38% 16.77%

The first highlighted characteristic is the Projected Population Growth from 2011 to 2016. Typically, developers want to find those areas that are experiencing the most growth, but in this instance, we are looking for the opposite low growth. To clarify, if the area were losing population, the project would not be as appealing. Rather, since there is still positive growth, and since this is a heavily urban, in-fill location, the growth is exactly as expected. High growth typically means greenfields and greenfields mean lots of room for new competition. In this sort of an in-fill project, there is no readily developable raw ground, only redevelopment opportunities which provide certain barriers to entry. Also, as will be seen in the moment in the discussion of Renter Occupied Housing, the supply of housing is relatively fixed with new supply only coming online every few years.

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Appendix
As we look at educational attainment levels, it is noteworthy that the closer you get to the University, the more education the populous has. The following maps show the educational attainment concentration of the population.

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Appendix
As mentioned earlier, the trade area is more accustomed to multifamily and renting housing than the typical cross-section of the County or of the State. As can be seen in the following maps, this projects trade area is one of the strongest rental markets in the County and in turn the entire state. This is perhaps one of the strongest traits of the project area.

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