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Mr. Jim Waters Quest Development, Inc. July 24 2013 Apartment Occupancy & Absorption: Collectively, the surveyed apartment comparables showed a combined physical vacancy rate of just 2.2% in July 2013. The area includes few modern Class A apartment properties. The nearby Landings at Silver Lake Village is the area's largest Class A `luxury" apartment development, featuring high - quality apartment residences and a full array of amenities. This property, constructed by Dominium in 2005, had a vacancy rate of just 1.4% in July 2013. The most recent Class A apartment development in the area is The View at Long Lake, which was completed by Stuart Companies last year. The property features 128 units on a site just northwest of I -694 at 35W. The View reported a 4.7% vacancy rate in July 2013. The property opened in July 2012, with 25 units pre - leased, and reached a stabilized 95% occupancy level within seven months, reflecting an absorption rate of 14 units per month. Rental Rates: The View at Long Lake and The Landings at Silver Lake Village are the market leaders among the apartment comparables, with studio and 1BR rents generally in the range of $1.55 to $1.67 psf, while 2BR plans range widely from approximately $1.25 to more than $1.75 psf, with a 2BR average of about $1.35 psf between The View and The Landings. The other three properties are considerably older (1980's vintage), and although they maintain high occupancy levels, rents are considerably lower than what we would expect for new construction product. Rates at Parkshore, The Lexington and Autumn Woods are mostly in the $1.10 to $1.30 psf range. DEVELOPMENT PIPELINE According to our market information and interviews with city planning staff and other housing professionals familiar with this market, we identified a just one pending apartment development in the area at this time. Local developer Tycon Companies is proposing a development called Lakeview Terrace on a site near County E & Victoria in Shoreview. The development will include 104 units, including 47 1 B units (avg. 880 sf), 16 1BR +Den units (avg. 1,065 sf), 29 2BR units (avg. 1,310 sf) and 12 2BR +Den floorplans (avg. 1,375 sf). Planned amenities include a club room and fitness center. Rental rates for these units, which are generally at the high end of size range for each unit type, are expected to average approximately $1.40 psf. The development is expected to be completed in late 2014. We believe that the Tycon project will pose peripheral competition to the development planned by Quest Development. First, we believe that there is sufficient market demand to support both projects. Secondly, we note that the locations are distinct such that there would only be partial market overlap (i.e. the Tycon development in Shoreview would draw more so from the east as compared to the Quest projected in St. Antony). As well, the proposed unit mix, sizes and development concepts are also differentiated. Marquette Advisors Page 20