FREEMAN WEBB COMPANIESENERGY EFFICIENCY: THE MULTIFAMILY BUSINESS

STRATEGYJULY 30th, 2013

FREEMAN WEBB COMPANIES Founded in 1979 with one multifamily property and 1 employee Currently Freeman Webb has over 450 employees and

owns/manages a long-term portfolio of income producing properties comprised of 16,000 apartment units under ownership/management as well as 1,000,000 sf of office and retail space

Annual Rent Collections of $100 Million Properties owned are primarily in Tennessee, but previously the

company owned multifamily properties in Alabama, Indiana, Ohio, Missouri, Mississippi and Texas

Freeman Webb Companies is comprised of the following divisions: Acquisitions & Investments Property Management Construction Services Mortgage Services Residential Real Estate Brokerage

FREEMAN WEBB: Acquisitions & Investments

Focuses on the acquisition of multifamily properties for our investor clients

Historically have acquired 1970’s and 1980’s vintage assets

Perform large-scale rehabs, reposition and stabilize assets for long-term holds

Through asset management, Freeman Webb looks to maximize investor yields by many methods including reduction of individual property operations, namely reducing property operating expenses

Business strategy has helped the company to grow by 50% in the last three years

FREEMAN WEBB: Property Management

Management company provides property management services for Freeman Webb-owned multifamily and commercial properties

Also provides property management services for clients; has roughly 6,600 apartment units and over 500,000 sf of commercial space in our management portfolio

Named the 2010 National Property Management Company of the Year by the National Association of Home Builders

FREEMAN WEBB: Construction Services

Manages large-scale rehabs of new acquisitions and/or current assets that are looking to be repositioned

Typically has over $20,000,000 worth of rehab in process at any given time

Based on rehab scope and property needs, rehabs will include full interior and exterior renovations

FREEMAN WEBB: Construction Services

Whispering Oaks – Before Rehab

FREEMAN WEBB: Construction Services

Whispering Oaks – After Rehab

Whispering Oaks – Before & After

Whispering Oaks – Before & After

FREEMAN WEBB: Construction Services

Interior Unit rehabs include cabinet replacement, counter top replacement installation of new flooring, among other items

There are also a number of opportunities for installation of energy efficient appliances, windows and doors

Repositioning of properties through extensive interior & exterior rehabs provides more quality housing opportunities for individuals and families while also extending the useful life of the asset

DEMAND FOR MULTIFAMILY HOUSING

Multifamily properties (5+ units) make up approximately 20% of the nation’s housing supply but that percentage will increase

Apartment demand is at an all-time high for several reasons:I. DemographicsII. Shift in PsychologyIII. Declining Homeownership RatesIV. Difficulty in Getting a MortgageV. Pent-up Renter Demand

M U LT I FA M I LY D E M A N DI . DEMOGRAPHICS

Number of People Turning 30 Years Old vs. Homeownership Rate

M U LT I FA M I LY D E M A N D

I I . A SHIFT IN PSYCHOLOGY Young peoples’ attitudes towards homeownership

have changed

One reason is they are seeing people trapped by “underwater” mortgages and millions of foreclosures

They believe that a home is no longer the biggest investment of a person’s life, but rather that they can rent and still live how they want

They are free to pick up and move if they get a job opportunity in another city

Source: “Renter Nation”, Gene Epstein, Barron’s Magazine

M U LT I FA M I LY D E M A N D

I I I . DECLINING HOMEOWNERSHIP RATES

The homeownership rate has fallen to 65% from its peak of 69% in 2004

It is likely to fall below 64% by 2015, if not sooner

Conversely, it is anticipated that the national rental rate will rise to 36% by 2015

Every percentage point increase in the rental rate = 1.3 million households joining the renter pool

Average household size is greater than two people, so analysts estimate

10 million extra renters could be moving into the market over the next five years

Apartment supply being delivered is, in most estimates, less than half of what is necessary to meet the expected demand (Marcus & Millichap, 2012 Apartment Outlook)

Source: “Renter Nation”, Gene Epstein, Barron’s Magazine

M U LT I FA M I LY D E M A N D

I I I . DECLINING HOMEOWNERSHIP RATES (cont inued)

M U LT I FA M I LY D E M A N D

IV. LESS LIKELY TO PURCHASE A HOME

First-time home buyers (the bulk of which are under 35 years of age) now account for roughly 30% of home sales, down from as high as 50% in 2009

The question becomes “how many renters can actually qualify for a mortgage?”

Many in this generation have gone back to school for more education and have taken on large student debt obligations

Stricter mortgage underwriting standards, which were much needed, are also making it more difficult for many in the younger generation to qualify for a mortgage

M U LT I FA M I LY D E M A N D

V. A GENERATION LIVING AT HOME

%

%

%

%

Source: “The Boomerang Generation: Feeling OK about Living with Mom and Dad”, Pew Research Center Report (March 15, 2012

Put into Perspective: the highest the young adult rate has ever been was in the 1940’s when it was 27.7%. At its low point in the 1980’s, this rate was right at 11%.

MULTIFAMILY DEMAND LEADS TO DEMAND FOR ENERGY EFFICIENCY

Freeman Webb and firms like it are examples of multifamily investors who are looking to retrofit properties with energy efficient technologies

Multifamily investors are hoping for want to utilize and implement public and/or private programs that will provide assistance in that effort

Other programs, such as Low-Income Housing Tax Credit programs, can provide equity to incorporate energy efficiency in property rehabs

Demand for multifamily units is at record levels, so the need for these programs is greater than ever before

In the wake of the Great Recession, apartment renters are much more price-sensitive than ever and more mindful of their monthly expenses

Younger generations are more mindful of the environment in general and desire to see energy efficiency and eco-friendly properties

BUSINESS STRATEGY:Combating Implementation Challenges

Ignorance of available programs and how to access/implement them on the part of owners: educational events like today are essential

Some programs, like those that offer energy tax credits, are difficult to qualify for or are cost-prohibitive

Owner’s need convincing of the merit of spending money on energy efficient upgrades as opposed to other property upgrades or general maintenance

Problem of Renter Perspective: utility reductions are not yet realized by prospective renter

which makes it difficult to use as sales tool Prospective renter’s are largely drawn by property condition

(curb appeal), property amenities (pool, playground, etc.), and condition of unit

Owner’s reluctant to make upgrades where returns may not be realized for years to come

BUSINESS STRATEGY:Conclusion

Demand for multifamily units is at an all-time high Multifamily owners currently have opportunities to

incorporate energy efficiency into their properties for new development but also in property rehabs

Energy efficiency can reduce operating costs for properties which typically lead to higher property cash flows and higher investor yields

Data shows that the economic benefit for energy efficiency can be substantially and it can be attained with the help of existing programs

Energy efficiency can be an effective marketing tool with respect to the leasing of multifamily units

Energy efficiency, aside from being the right thing to do, is simply good business