Q4 Management Presentation

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Snell Properties

Q4 Management Presentation

D

^ECEMBER

8, 2020

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Agenda

Strategic Plan Process

Financial Status & Forecast Acquisitions

Operations

Development Update

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Charlie Hewlett

RCLCO - Director of Strategic Planning

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FINANCIAL UPDATE

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2020 Budget vs. Forecast

Covid-19 Effect - cash flow off by $4.6M or 27.8% from budget presented in February

2019 2020 2020 $

Actual Budget Forecast Change

Multifamily Cash Flow $24,660,000 $26,940,000 $25,670,000 ($1,270,000)

Office Building Cash Flow $2,210,000 $2,580,000 $2,870,000 $290,000

Hotel Cash Flow $1,830,000 $2,230,000 ($1,330,000) ($3,560,000)

All Other Cash Flow $2,790,000 $3,310,000 $2,530,000 ($780,000)

Debt Service ($12,070,000) ($12,160,000) ($10,820,000) $1,340,000

Total Property Cash Flow $19,420,000 $22,900,000 $18,920,000 ($3,980,000) Snell's Operating Expense ($4,390,000) ($4,920,000) ($5,650,000) ($730,000)

All Other Expenses ($690,000) ($1,300,000) ($1,220,000) $80,000

Total Expenses ($5,080,000) ($6,220,000) ($6,870,000) ($650,000)

Cash Flow Before Dividends/ Projects $14,340,000 $16,680,000 $12,050,000 ($4,630,000) Operating Cash Flow

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2021 Preliminary Budget vs. 2020 Forecast

2021 Preliminary Budget $1.45M or 12.0% greater than the 2020 Forecast

2019 2020 2021 $

Actual Forecast Budget Change

Multifamily Cash Flow $24,660,000 $25,670,000 $30,230,000 $4,560,000

Office Building Cash Flow $2,210,000 $2,870,000 $1,370,000 ($1,500,000)

Hotel Cash Flow $1,830,000 ($1,330,000) $50,000 $1,380,000

All Other Cash Flow $2,790,000 $2,530,000 $3,190,000 $660,000

Debt Service ($12,070,000) ($10,820,000) ($14,360,000) ($3,540,000)

Total Property Cash Flow $19,420,000 $18,920,000 $20,480,000 $1,560,000

Snell's Operating Expense ($4,390,000) ($5,650,000) ($5,690,000) ($40,000)

All Other Expenses ($690,000) ($1,220,000) ($1,290,000) ($70,000)

Total Expenses ($5,080,000) ($6,870,000) ($6,980,000) ($110,000)

Cash Flow Before Dividends/ Projects $14,340,000 $12,050,000 $13,500,000 $1,450,000 Operating Cash Flow

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Dividend Recap

• 4^th Qtr. dividend includes the $68.84 per share ($13.0M) special dividend approved by the Board upon the completion of our 1031 exchange with the purchase of the Lincoln at Wiehle Station.

• 2020 dividends maintains 7% growth of the estimated net disposable portion of the dividend.

• We will update the tax forecast at year end.

2018 2019 2020

Actual Actual Projected Actual Actual Actual Estimated

Full Year Full Year Full Year 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.

Estimated Tax Dividend (G2 rate) $ 5.38 $ 8.23 $ 12.42 $ 2.26 $ 2.26 $ 1.00 $ 6.90 Estimated Net Disposable $ 25.04 $ 26.79 $ 28.68 $ 7.17 $ 7.17 $ 7.17 $ 7.17 Additional Net Disposable (one time) $ 9.58 $ 8.98 $ 71.74 $ 2.57 $ 2.57 $ 3.83 $ 62.77 Total Gross Dividend $ 40.00 $ 44.00 $ 112.84 $ 12.00 $ 12.00 $ 12.00 $ 76.84 Calculation of Gross Dividend

BASED ON THE AVERAGE BLENDED G2 TAX RATE of 36.27%

2020

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Special Dividend

• We estimate the $13M special dividend to be approximately $9M non-taxable and approximately $4M taxable.

• The taxable amount is taxed at capital gain rates. For a Virginia shareholder the rate is 29.55%.

• Special dividend is a reduction of shareholder basis which might lead to future dividends taxed at capital gain rates.

Special Dividend Amount

Taxable Amount $ 5.90

Non-Taxable Amount $ 58.94

Total Special Dividend $ 64.84

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2019 Tax Carryovers to 2020

• Approximately $940K additional federal historic tax credits in 2020 with completion of the Dominion renovation.

• Actual carryover amounts will vary between shareholders based on number of shares owned and other income sources.

Passive Loss Historic Tax Credit

G2 Shareholder Average Carryover $ 747,054 $ 528,837

G3 Shareholder Average Carryover $ 182,095 $ 157,370

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ACQUISITIONS UPDATE

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Acquisitions Overview

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▪ 1031 Status, Lincoln Closing

▪ Property Budgeting / Performance

▪ 2021 projections

▪ Additional acquisitions

▪ Market Updates

▪ Notable transactions

▪ Dominion Plaza

▪ Monticello Partnership Acquisition

AGENDA

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1031 Status

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▪ Lincoln acquisition will be the final of 1031 transaction following the Southern Towers sale.

▪ In total we will have purchased $248.5M of assets since August

▪ Lincoln at Wiehle set to close December 23

^rd

▪ “Dry” closing occurred this week

▪ Only final funding remains

LINCOLN AT WIEHLE

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Budgeting / 2021

▪ Budgeting nearly complete for new assets

▪ NOI for the properties in line with underwriting

▪ In 2021, we will place debt on Retreat and Lincoln – this will fund $250M+ in additional acquisitions

▪ Focus will be RDU and Nashville, will continue to

monitor DC metro as well

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2021 Cashflow Projections

Southern Towers Theoretical ST

Cash Flow Replacement Properties Est. 2021 Exchange (3-assets)

Est. 2021

Mid-Year Acqs (5-6-assets)

Est. 2022

Full Year CF (5-6-assets)

Snell's Share of Cash Flow $ 7,205,000 Estimation of Cash Flow $ 7,370,255 $ 7,964,442 $ 10,220,919 Accl. Depreciation [1 yr] $ - Accl. Depreciation [1 yr] $ - $ 30,186,000 $ 30,186,000 Annual Depreciation [27.5 yrs] $ - Annual Depreciation [27.5 yrs] $ - $ 5,979,055 $ 5,979,055 Existing Depreciation $ 1,285,000 Existing Depreciation $ 1,285,000 $ 1,285,000 $ 1,285,000 Total Depreciation $ 1,285,000 Total Depreciation $ 1,285,000 $ 37,450,055 $ 37,450,055

Accl. Depreciation Tax Benefit $ - Accl. Depreciation Tax Benefit $ - $ 12,074,400 $ 12,074,400 Annual Depreciation Tax Ben. $ 514,000 Annual Depreciation Tax Ben. $ 514,000 $ 2,905,622 $ 2,905,622

AFTER 2

^nd

ROUND OF ACQUISITIONS, CASH FLOW WILL GROW BY 42% / +$3M ANNUALLY

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Notable transactions

▪ Broadstone Stockyards

▪ New Stick Product, 45% occupied

▪ Sold at $307k / unit (Blackstone; off-market)

▪ Tapestry at Brentwood

▪ 2015 stick product, stabilized

▪ U/C at $330k / unit (Institutional buyer, NY)

Retreat purchased at $307/unit, stabilized, new construction

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Notable Transactions

▪ Park and Market

▪ 2010 Product, stick over podium

▪ Sold at $267k / unit

▪ (Blackstone; off-market)

▪ Dillon

▪ 2018 construction, stick over podium

▪ $236m trade with office; Sold at $311k / unit (MetLife)

▪ Solis Brightleaf (Durham)

▪ 2019 stick product

▪ Sold at $300k / unit (Principal; off-market)

Metropolitan purchased at $270k/unit, new construction

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Dominion Plaza

▪ Discussed buying out Caruthers earlier this year – they declined

▪ Caruthers have agreed that we buy out there 1/3 interest in the property

▪ Last remaining partnership with Caruthers

▪ Opportunities to grow revenue

▪ Solid location; B product

▪ Attractive basis ($260 - $270k/unit)

▪ Plan to counter their initial offer

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MFC Partnership Acquisition

▪ Could make use of embedded equity in MFC

▪ Valuation ~$205M, debt $30M, LTV 15%

▪ Up to $90M of additional debt, 59% LTV

▪ Markets: Nashville & RDU

▪ Goal is quality asset with efficient size. 250-300 units.

▪ $70M - $100M

▪ Acquisition LTV – 60% - 65%, max IO

▪ New MFC debt at ~4%, Acquisition debt at 3%

▪ Partners eager to proceed

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Acquisitions 2021 + Beyond

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▪ At least 2-3 more new assets to be purchased in 2021

▪ More diversification, exposure to high growth markets

▪ Drive Cash Flow growth

▪ Projecting additional $3M of Cash Flow once acquisitions are complete

▪ Opportunities for additional investments

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OPERATIONS UPDATE

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2020

Operations

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▪

Average occupancy of 94.7% - consistent with budget (94.2%).

▪

Collections/Evictions: 97.7% for November, 97.8% since start of COVID. NMHC for the same time period (96.4%).

▪

Total Revenue: 3.0% below budget, driven by flat to reduced net effective rents and weakness in the retail sectors.

▪

Expenses were within 1.2% of budget.

▪

Net Operating Income lags budget by 5.5% due to lower net effective rents (3.1%), increased collection loss and lower retail income.

▪

Relief Programs stabilized the market in the middle of the year, with increased weakness emerging in the fall.

▪

Urban markets felt the impact of COVID more acutely.

DOMINION PLAZA DOMINION

MONTICELLO FALLS CHURCH SHIRLINGTON HOUSE

THE JAMES ELYSIUM 14

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2020 Capital

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Dominion Plaza

▪

V2: Pace slowed due to COVID. 85 remain.

▪

Common Areas. Roof deck completed in the fall, Pool deck renovations underway with 1Q21 completion.

Dominion

▪

Day Care: Completed 11/2020. Opening Est. 1/2021.

▪

Ruthie’s All Day: Opened October 5, 2020. Strong opening performance to date.

Monticello Falls Church

▪

Potential Renovations including addition of Washers/Dryer are under review.

▪

Adding Building Access Control.

▪

Parking Lot repaving, Shirlington House

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V2: Pace slowed due to COVID. 40 completed in 2020.

▪

Parking Lot repaired/repaved, The James

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SMART Locks and Thermostats installed as part of the Alexa Residential program,

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Smart lighting added to common areas, Elysium 14

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Spin Room completed, DOMINION PLAZA

DOMINION

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2021

Operations

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▪

Average occupancy of 94.3% - consistent with 2020.

▪

Collections/Evictions: Increased collection loss in the 1Q/2Q due to expiration of relief programs.

▪

Total Revenue: 1.9% increase.

▪

Net Effective Rent Growth of 1.8%.

▪

Retail Income: $500,000 increase.

▪

Expenses: 4.9% increase primarily from real estate taxes and insurance.

▪

Net Operating Income consistent with 2020 levels.

▪

Concern re: expiration of relief programs and impact on

collections early in 2020 combined with eviction moratoriums.

▪

Expect continued stress on the markets in the first half of the year, with strong and steady growth in the second half of the year.

DOMINION PLAZA DOMINION

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2021 Capital

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Dominion Plaza

▪

V2: Complete 41 additional renovations at turn.

▪

Common Areas. Pool deck renovations underway with 1Q21

completion. Hallway carpet replacement, elevator cab refurbishment and elevator lobby cosmetic upgrades scheduled for 1Q21.

Dominion - none

Monticello Falls Church

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Package Lockers and Bike Storage.

▪

Potential Renovations, including addition of Washers/Dryer are under review.

Shirlington House

▪

V2: Complete 40 additional renovations at turn.

▪

Replace the fire pump (original).

▪

Clubroom and Dog Spa.

The James

▪

Expand and Program the Roof Deck.

Elysium 14 - none DOMINION PLAZA

DOMINION

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2021 New Assets

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Metropolitan - purchased August 2020

▪

Projected 2021 NOI is 2.02% ahead of Year 1 underwriting (UW)

▪

Average occupancy of 92.6% in line with Year 1 UW

▪

Capital Projects: Work Pods, Dog Park and Signage Retreat at Iron Horse – purchased September 2020

▪

Projected 2021 NOI is 7.0% ahead of UW

▪

Average occupancy of 93.5% is slightly ahead of Year 1 UW (92.5%)

▪

Capital Projects: New Fire Pit, Add EV Chargers Lincoln at Wiehle – closing 12/23/2020

▪

Projected 2021 NOI is in line with Year 1 UW

▪

Asset in initial lease-up with current occupancy at 87%; stabilization projected March 2021

▪

Capital Projects: Common Area Renovation (upgraded leasing

experience, work from home pods, more function club room – overall a more cohesive offering)

METROPOLITAN

RETREAT AT IRON HORSE LINCOLN @ WIEHLE

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Hotel and Office

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Holiday Inn

▪ Average RevPAR is 77.3% below 2019 performance, consistent with the Comp Set (74.7%).

▪ YTD GOP: -$261,797

▪ 2021: Strong sales for the Inauguration but otherwise slow growth through May 2021.

Ames

▪ Current Occupancy: 41%

▪ 2020 NOI is projected to exceed budget by $29k as tenants continued to pay rent but did not occupy the space resulting in lower expenses.

▪ 2021 NOI is expected to run at a slight deficit as tenants vacate in September due to near term renovation

Arlington Center

▪ Current Occupancy: 66%

▪ 2020 NOI is expected to exceed budget by $110k as tenants continued to pay rent but did not occupy the space resulting in lower expenses.

▪ 2021 NOI is decline by slightly, a combination of the inability to extend leases on a long-term basis and tenants closing physical office space

HOLIDAY INN

AMESARLINGTON CENTER

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ROSSLYN DEVELOPMENT UPDATE

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Ames Center Redevelopment

Church / Gas Station

Hyatt Centric Dittmar

490 Units, Hotel Under Construction

Ames

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Entitlements

•

County board set to approve the site plan in January 2021.

•

Major proffers include:

•

Delivery of the 18th Street pedestrian corridor improvements.

•

Removal of the existing pedestrian bridges over Nash Street and Fort Myer Drive.

•

Incorporation of the church and gas station into the redevelopment.

•

25 on-site affordable housing units (15 1-BR units and 10 2-BR units).

•

$5.0M cash contribution toward the removal of the Ft. Myer Drive tunnel.

Design

•

^Schedule:

•

September 2020: 100% Schematic Design completed

•

April 2021: 100% Design Development

•

August 2021: 50% Construction Drawings

•

December 2021: 95% Construction Drawings / GMP

•

Working on unit layouts, amenity/common area designs, value engineering, and construction details.

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Program

Unit Mix

North Tower South Tower Project Total

Residential Units 326 Units 404 Units 730 Units

Parking Spaces No above grade 229 above grade 586 total (357 below grade)

Retail / Commercial 8,000 GSF 11,000 GSF 19,000 GSF

Major Amenities

25m indoor lap pool Chef’s kitchen Expansive rooftop terrace

Fitness center

Rooftop pool Rooftop fitness center

Spa/yoga center BBQ terrace

North Tower South Tower Project Total

Unit Type # of Units Ave Unit Size # of Units Ave Unit Size

Studio 23 Units 486 RSF 71 Units 453 RSF 94 Units

1 Bedroom 175 Units 665 RSF 237 Units 693 RSF 412 Units

2 Bedroom 128 Units 1126 RSF 96 Units 1114 RSF 224 Units

Project Total 326 Units 833 RSF 404 Units 751 RSF 730 Units

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Church / Gas Station

•

Executed a contract that gives Ames the right to purchase the church's density.

•

Negotiating a redevelopment agreement with the gas station (three-party agreement).

•

Church shell design complete.

Hyatt Centric

•

Continuing to litigate over construction easements.

•

Awaiting a ruling on summary judgement (any day).

•

Made an offer to settle the case in exchange for an REA acceptable to Ames . Awaiting response.

Underwriting

•

Underwriting the project based on input from Clark, Bozzuto, Noell, CBRE, JLL, and others.

•

Latest all-in hard cost budget of about $365,000/unit. $277M total including church/gas station.

•

Updated revenue projections of approximately $4.05/SF in 2020 numbers.

•

Underwriting to an untrended (no rent escalation) return on cost of 5.3% to 5.5%

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Development Approach / Business Plan

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Working with JLL and others on the viability the capital stack in the current market.

•

Evaluating risk mitigation measures including phasing the project and partnering with a co-GP.

•

Due to the uncertainties in the market, developing potential alternate business plans including:

•

Putting the development on hold to ride out market conditions

•

Selling the entitled development and reinvesting in cash-flowing assets

•

Renewing the existing office building D

evelopment Schedule

•

January 2020: Site plan approval

•

Mid 2021: Close with debt and equity partners

•

Late 2021: Break ground

•

Late 2024: Deliver south tower w/ temp hotel (200 units), begin lease-up (203 units)

•

^{Mid 2025:} Deliver north tower, begin lease-up (337 units)

•

Early 2027: Multifamily stabilization

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ROCKETTS LANDING

DEVELOPMENT UPDATE

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Block 24 Future Parcel – Being Re-entitled Block 19 Waterfront Working with a Local

Office Developer Block 15 (Riverbank

Terraces) Closed July 10, 2019

Blocks 22 27 of 32 Units Taken Down

Block 17 Waterfront For Sale

Blocks 21 & 23 Stanley Martin - 37 of 61 Units Taken Down

Land Sales - Henrico County

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Henrico Land Sales

HH Hunt have taken down 27 out 32 lots. They plan on taking the last 5 down towards the end of the year or early next year. They total land price should be between $3.5 and $4 million based on final home prices. The first 13 units are closing between

Thanksgiving and the end of the Year. We get a true- up payment at closing.

Stanley Martin (Orange Box) has 61 condominium units in block 21 & 23. There are two parcels. The first block closed in October. There second block is scheduled for closing next year. When the units are complete and close with the homeowner, we get a true-up payment. These blocks will generate approximately $7 million of revenue.

Block 24 is currently in a re-entitlement process to reduce the project’s commercial requirement. This would allow us to develop more lots for HH Hunt towards the end of next year.

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HHHunt and Stanley Martin

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Rocketts Block 8

Closing is scheduled by the end of the year.

There are 198 units in the

building and the total purchase price is

$3,960,000.

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East 51- Block 17

113 of the 127 units have certificate of

occupancy. The last 14 units are scheduled for inspection the week of December 15^th.

The project is 37% leased. The next month is typically a slow time for leasing, but we expect to get the project fully leased by summer.

The project is on budget. In our financial model, we carried 4.6% as the permanent interest rate.

Current rates are significantly better.

Snell is a 22.4% owner of the building

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Project Outlook

Once Stanley Martin (Blocks 21 & 23) and HH Hunt (Blocks 20 and hopefully 24) are complete (middle to end 2022), there were still be additional blocks to sell, but the land development will essentially be complete.

In order to wind down the project, we additionally need to accomplish the following:

– Turn over the Homeowners Association to the residents.

– Establish a long-term plan for the Architectural Review Committee.

– Complete the acceptance of maintenance of the roads by Henrico County.

– Potentially sell off commercial properties and marina slips.

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BALLSTON JOINT VENTURE

& OTHER NEW DEVELOPMENT

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Ballston JV

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▪ Alternative business plans studied and considered:

▪ PIP hotel, renovate Arlington Center, convert Arlington Center to apartments

▪ Discussion about focus on maintaining control of Ballston versus Ames

▪ Co-GP structure the right path forward - ran process with 5 varied but qualified potential partners

▪ Two of the groups significantly stronger on financial terms. Management liked Hoffman and

Associates for: potential halo effect related to Ames and other entitlements, easier to entitle plan, potential for future deals

▪ In September, board approved moving forward with Hoffman, assuming Hoffman would fund all predevelopment work, be flexible on Snell involvement, and complete diligence on Hoffman’s financial wherewithal

RECAP

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Ballston JV

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▪ Progress made on all terms discussed with the board

▪ Solving Snell’s exposure if land sale does not close.

▪ New closing timeline: negotiate 6-month termination rights upon renewals at Arlington Center; extend leases where possible through end of 2023 (or beyond); Hoffman will give 7 month notice to close with no extensions (after funding 100% of predevelopment and putting up a $2.5M nonrefundable deposit.

▪ Outside closing date: December 31, 2023 – schedule should allow for earlier close.

▪ Current plan is still to 1031 land proceeds into a new stabilized multifamily property.

CURRENT STATUS

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Ballston JV

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▪ Target Program:

▪ 480 multifamily rental units

▪ 29 townhouse lots

▪ Re-evaluate grocery store concept prior to moving forward

▪ Next Steps:

▪ Sign term sheet this week

▪ 60 days due diligence

▪ Enter into PSA and JV agreement within 45 days after DD TARGET PROGRAM

NEXT STEPS

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Shirlington House

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▪ Shirlington House included in Arlington Housing Conservation District

▪ Uncapped bonus density in exchange for provision of community benefits

▪ Estimated county value/cost of bonus density - $65/FAR foot

▪ Likely in-kind contributions such as street front improvements or dedication of affordable units in existing building

▪ Partial release of collateral pre-negotiated with Fannie

▪ Potential program:

▪ (10) 2-over-2’s

▪ (52) “skinny” units

BACKGROUND

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Shirlington House

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CONCEPT

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Shirlington House

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SITE PLAN

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Shirlington House

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SKINNY UNIT

TYPOLOGY

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Dominion New Development

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SITE PLAN

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Dominion New Development

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