Carroll Co-Invest Fund I, LP Investor Update, Q4 2013

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1 Carroll Co-Invest Fund I, LP Investor Update, Q January 31, 2014 We are pleased to report that the Carroll Co-Invest Fund I concluded the 4th quarter 2013 with continued strong performance across the portfolio. Each community continues to experience high occupancy levels (an average occupancy of 95%), consistent rental rate growth, and active expense control. As a result, net operating income for each property, and the portfolio, remains strong. Details relating to Fund performance, a review of 2013, and a perspective on 2014 are included with your 4 th quarter investor update. Fund Performance Carroll Co-Invest Fund I continues to generate consistent income while the portfolio also continues to increase in value. Net operating income has grown 12% across the portfolio since acquisition. Our analysis also indicates that the fair market value of investments within the Fund is 25% above acquisition price. Based on the fair market value of investments, Fund I has an unrealized gain in value of 50%, including refinance distributions. Inception to date, the Fund has returned 23% of its capital commitment for an annualized return of 10%. Please see the chart below for specific property details. Carroll Co-Investment Fund I Portfolio Cap Equity Closing Property City Units Rate COC * IRR ** Multiple ** Date Bethesda Park Lawrenceville, GA % 10% 30% 2.0x 09/30/11 Shadow Creek Ranch Houston, TX % 20% 25% 2.3x 02/15/12 Green Trails Houston, TX % 5% 22% 2.0x 03/30/12 Fall Creek Houston, TX % 15% 20% 2.0x 04/26/12 Tech Ridge Austin, TX % 10% 25% 2.3x 08/17/12 * Cash-on-cash returns are gross of fund costs, including quarterly G&A, accruals for audit, tax, insurance, and miscellaneous expenses. ** Projected at acquisition. As I mentioned in the third quarter update, we have initiated the process of selling selected properties in Carroll Co-Invest Fund I. We have significant interest in several Fund I assets and I will keep you apprised of developments as the sale process continues.

2 2013 Review 2013 was very exciting for the Carroll Organization. Our business experienced significant growth and our investors and partners seemed pleased with performance results. We started 2013 with approximately 2,800 units owned and a desire to grow our portfolio with acquisitions that meet our stringent investment criteria. While our property management division maintains diverse and broad relationships throughout the Southeast and Mid-Atlantic (at one time we managed nearly 20,000 units for other owners) our portfolio of Carroll owned properties was focused solely on Texas and Georgia. Our joint venture partners and capital sources in early 2013 were strong but needed to expand, and while our sources of off-market investment opportunities were good, they needed to get even better. Importantly, our business management and infrastructure were well staffed and prepared for growth. As I reflect on 2013, I am pleased to report that we excelled in all areas. Our business has grown from approximately 2,800 units owned at the start of 2013 to now nearly 12,000 owned. We resigned from much of our third party managed business to focus our energies on maximizing the performance of the properties we own on behalf of you, our investors. We deployed Carroll Co-Invest Fund II thoughtfully making 15 new acquisitions in 7 cities and 4 states. These acquisitions were made at an average 6.3% cap rate with a projected 2.0x equity multiple. We expanded and grew our relationships with joint venture partners to include leading global institutions such as Goldman Sachs, Northstar Realty Finance, Investcorp, Townsend Group and the sovereign wealth funds of S. Korea and Thailand. An additional highlight of 2013 was the July acquisition of The Resort at Pembroke Pines. Rebranded by Carroll as ARIUM Resort, this was a $225 million acquisition of 1,520 units in the attractive N. Miami submarket. The acquisition attracted national attention to the Carroll Organization and was previewed as the July 31, 2013 Wall Street Journal Deal of the Week. Additionally, we expanded and further developed our pipeline of off-market opportunities. This was a key initiative for the Carroll Organization in 2013 as it enhances our ability to source and acquire investment opportunities which meet our high standards for investment. Finally, our management team and staff executed well during 2013 as the work done in previous years had prepared the team to effectively handle our growth. I have been asked often over the last several months how we were able to make so many attractive acquisitions and effectively handle such an expansion in our business. The answer really falls into 2 areas. First, we were prepared for the growth. I am a firm believer in planning for growth rather than playing catch up. This philosophy paid off in Secondly, we were successful at keeping our investment team focused on one thing, creating value for our investors and partners. I view one of my central responsibilities as keeping our investment team singularly focused and ring fenced on making great investments and then managing those investments to ensure they meet or exceed our investment criteria. This is a core belief of mine and a central theme of the Carroll Organization was indeed a successful and productive year; however, we are already hard at work in the new year and look forward to 2014 with energy and optimism. Page 2

3 2014 The Year Ahead We begin 2014 with the macro environment and capital markets continuing to favor the multifamily sector. A core element of our investment philosophy includes acquiring assets in markets experiencing strong population and job growth. Our thesis is rather simple, growth drives results, meaning that markets with strong employment growth and growing population provide the essential elements required to make attractive investments. While many other variables must exist before a potential investment can be considered these two basic growth drivers are essential. The shaded cities in the chart below are current ARIUM owned locations; and as you can see, we have been successful at making investments in many of the markets experiencing the strongest gains in employment and population since 2012 as well as those forecasted to excel thru Employment Growth (In Thousands) Population Growth (In Thousands) Rank Metro Area Gain Rank Metro Area Gain 1 New York-Wayne, NY-NJ Houston-Baytown, TX Houston-Baytown, TX Phoenix-Mesa-Scottsdale, AZ Los Angeles-Long Beach, CA Atlanta-Sandy Springs, GA Dallas-Plano, TX Dallas-Plano, TX Chicago-Naperville, IL Los Angeles-Long Beach, CA Atlanta-Sandy Springs, GA Washington-Arlington, DC-VA-MD-WV Phoenix-Mesa-Scottsdale, AZ Las Vegas-Paradise, NV Minneapolis-St. Paul, MN-WI Orlando, FL Washington-Arlington, DC-VA-MD-WV Riverside-San Bernardino, CA Denver-Aurora, CO Austin-Round Rock, TX Philadelphia, PA Fort Worth-Arlington, TX Austin-Round Rock, TX San Antonio, TX Santa Ana-Anaheim, CA Charlotte-Gastonia, NC-SC Orlando, FL Denver-Aurora, CO Fort Worth-Arlington, TX Portland-Vancouver, OR-WA Tampa-St. Petersburg, FL San Diego-Carlsbad, CA San Antonio, TX New York-Wayne, NY-NJ Seattle-Bellevue, WA Seattle-Bellevue, WA San Diego-Carlsbad, CA Minneapolis-St. Paul, MN-WI Charlotte-Gastonia, NC-SC Raleigh-Cary, NC Baltimore-Towson, MD West Palm Beach-Boynton Beach, FL San Francisco-San Mateo, CA Tampa-St. Petersburg, FL Las Vegas-Paradise, NV Santa Ana-Anaheim, CA Portland-Vancouver, OR-WA Fort Lauderdale-Pompano Beach, FL Riverside-San Bernardino, CA Chicago-Naperville, IL Page 3

4 Several attractive markets in the previous graph are ones which we have not yet made investments but which investors in Carroll Multifamily Real Estate Fund III (which includes many Fund I and Fund II investors) should expect us to target as we deploy that capital later in An additional macro factor that favors continued strength in the multifamily sector is our belief that improvements in the economy will influence a shift of young adults moving from living at home to living in apartments. I have commented on this important factor previously, but as the graph below highlights, the last few years have produced approximately 1.8 million more young adults living at home than at any time since As the economy improves this pent-up demand will shift those young adults to apartments and we expect those young adults will locate in those markets where employment opportunities are greatest. These are many of the same markets currently targeted by the Carroll investment team. The capital markets also remain attractive for multifamily. As I have mentioned in previous letters, low interest rates and our ability to lock in long term debt at attractive terms continues to benefit the sector. While we do not forecast interest rates, we remain pleased with our debt partners and expect the capital markets and the interest rate environment to be a positive contributor to each new investment we make in Page 4

5 Final Thoughts The 4 th quarter and indeed all of 2013 was positive for the Carroll Organization. We hope that you have been pleased with our communication and investment results with the capital you have entrusted to us. I can assure you, all of us at the Carroll Organization work hard to justify the confidence you have placed in us. With 2013 behind us and a new year having already started, we are full steam ahead at Carroll with our investment team focused on sourcing and identifying attractive investments, asset management and property management teams focused on enhancing value at each ARIUM property, and our executive team focused on managing the business effectively and efficiently. I remain focused on ensuring that all areas of the firm work hard to deliver value to you.our investors and partners. I would be remiss if I did not mention the strong interest that we have in the Carroll MultiFamily Real Estate Fund III. We have an exceptional pipeline of investment opportunities and welcome all existing Carroll investors to continue to invest with us. If you have not already committed to Fund III and have interest, contact me or my assistant Elika Maserrat and we would be happy to send you a PPM and the other relevant information. Thank you for your continued confidence in the Carroll Organization and as always please reach out to me or any member of the Carroll team with any questions or observations. Sincerely, M. Patrick Carroll CEO Page 5