Yield PRO TV Rate Desk

Yield PRO TV Rate Desk host Michael Thomas talks with Breea Nunemaker, Director of Real Estate Finance of The Sterling Group, Inc.

December 9, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Consumer spending is up and rates are low. Lock it in. Rate Desk notes December 9, 2020 • Indices down • Crude $45.46 • UST yields .93 • 223(f) 2.31% • 221(d)(4) 2.91% • Fannie 2.97% • Freddie 3.48% • Consumer spending up • Inclusive Capitalism • Smaller market cap rates in 5% range • Interest rates go up, cap rates go down • HUD COVID escrow 9 months mandatory, 12 months discretionary • Fannie small balance reduced P&I to 12 months

December 2, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Potential for economic deceleration early 2021 and post‐vaccine expected strong growth. Don’t rely on historically low interest rates indefinitely, lock in those rates now. Rate Desk notes December 2, 2020 • DIJA, S&P up; NASDAQ down • Crude $44.96 • UST yields .94 • 223(f) 2.30% • 221(d)(4) 2.99% • Fannie 2.99% • Freddie 3.30% • Interest rate Q4'21 high forecast: 2.17%; Average: 1.20% • Potential for economic deceleration • Post‐vaccine expect strong growth • Historically low interest rates not indefinitely • 10YR UST yield up 3x since March lows • Bridge financing: recourse vs. non‐recourse • More risk • Transaction costs

November 25, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Happy Thanksgiving! Window closing to lock in your rates as agencies are shifting to the new 2021 matrix. Rate Desk notes November 25, 2020 • DOW, S&P down, NASDAQ up • Crude $45.80 • UST yields .89 • 223(f) 2.39% • 221(d)(4) 2.99% • Fannie 3.04% • Freddie 3.40% • Window closing to lock your rates • Twilight time of year for funding • Need more housing • No secret sauce • Cut red tape to get more units delivered • Increase incentives to drive up supply

November 18, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. HUD requirements tightening in response to record submissions. Requiring complete applications to speed up processing times. Rate Desk notes November 18, 2020 • Indices down • UST yields .87 • Crude $41.66 • 223(f) 2.39% • 221(d)(4) 2.99% • Fannie 2.94% • Freddie 3.30% • Procedure update for HUD MF lenders in the West requires: o Complete applications o CNA noting Fair Housing Accessibility • 5 days to cure, HUD keeps app fee after the second fail • Priority: affordable housing processing • New construction and tax credits

November 11, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. With historical low FHA rate opportunities, hotel conversion opportunities are providing great per unit returns. Rate Desk notes November 11, 2020 • Dow down, NASDAQ, S&P up • UST yields .98 • Crude $41.45 • 223(f) 2.45% • 221(d)(4) 3.05% • Fannie 2.98% • Freddie 3.07% • Bridge lending active on new construction • Lower occupancy, non‐agency eligible • Conversion opportunities: Hotel/motel to multifamily • $15‐$30K per unit on levered return • Shopping malls? • Historical low FHA rate opportunities

November 4, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. $11.5 billion in HUD lending in 2020 and getting ahead by addressing non-critical repairs in your PCNA before applying for a HUD loan. Rate Desk notes November 4, 2020 • Indices up • UST yields .78 • Crude $39.05 • 223(f) 2.37% • 221(d)(4) 2.97% • Fannie 2.82% • Freddie 3.10% • Top 10 HUD lenders reporting $11.5 billion in firm commitments in 2020 • SE region total $3.3 billion (largest loan type: 223(f)) • Walker and Dunlop starting to quote Secured Overnight Financing Rate (SOFR) • SOFR tracking just below 1-month LIBOR • Physical Capital Needs Assessment (PCNA) completed before applying for HUD loan • Address non-critical repairs in PCNA

September 9, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. With lower home supply and no declines in MF property value, higher demand for workforce housing drives the market. Rate Desk notes September 9, 2020 • Indices up • Crude $38.15 • UST yields .70 • 223(f) 2.17% • 221(d)(4) 2.77% • Fannie 2.75% • Freddie 2.90% • Family friendly amenities • Low home supply • Concentrated amenities in multifamily • No substantial value drop due to COVID‐19 • Some short‐term collection issues • No declines in value • Affordability vs luxury • Higher demand for workforce housing • Luxury units harder to fill

June 3, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Growth of resort markets with modular solutions and bolstered by new work-from-home normals. Rate Desk notes June 3, 2020 • Indices up on session highs • Crude $36.75 • UST yields .75 • 223(f) 2.51% • 221(d)(4) 3.16% • Fannie 3.15% • Freddie 3.20% • GSEs move toward leaving conservatorship • Bank-like capital levels • Resort markets o Historically cost-prohibitive o Modular solutions for remote and inaccessible areas o Bolstered by new work-from-home normal o Growing with year-round work

October 28, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. ROI with cash‐on‐cash returns and real quantitative metrics to measure social impact of CRE investment. Rate Desk notes October 28, 2020 • Indices down • UST yields .78 • Crude $37.49 • 223(f) 2.28% • 221(d)(4) 2.78% • Fannie 2.90% • Freddie 3.00% • Cash‐on‐cash return least speculative measure of ROI • 8% is the new target • Terminal ROI: 18‐20% • Dividend yield of S&P 500: 1.7% (2x higher than yield on 10YR UST) • OZ fund target: 5.5% preferred distribution with 12% return • Metrics to measure social impact

October 21, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Utilizing FHA loans to subsidize states' low LIHTC supply and making your affordable housing projects pencil. Rate Desk notes October 21, 2020 • Dow down, S&P, NASDAQ up • UST yields .81 • Crude $40.07 • 223(f) 2.26% • 221(d)(4) 2.86% • Fannie 2.75% • Freddie 3.00% • Affordable Housing update: o LIHTC 4% credit short supply with states o Reduced equity o AFR at 3.07% in October o Equity pricing between $0.86-$0.90 per credit for non‐CRA o HUD FHA 221(d)(4) loan proceeds 20‐30% higher o Minimal negative arbitrage costs (.50 during construction) • Market Rate update: o 8% cash‐on‐cash return hard to find o Cap rates have narrowed between 4‐4.50%.

October 14, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Choosing the right type of lending fits your needs and leveraging the HUD energy efficiency mortgage insurance premium (MIP) on new construction. Rate Desk notes October 14, 2020 • Indices down • UST yields .72 • Crude $40.96 • 223(f) 2.23% • 221(d)(4) 2.83% • Fannie 2.84% • Freddie 3.05% • What type of lending fits your needs? • Mission of lending: access to capital • Conventional v. mission-focused lending • HUD launches fully-electronic application submission portal • HUD energy efficiency mortgage insurance premium (MIP) • Statement of Energy Design Intent (SEDI) from plans • Statement of Energy Performance (SEP) 12 months post-closing with usage data • ENERGY STAR certification 12 months post-closing based on SEP • Annual Data Acquisition plan ($500-$1,000)

October 7, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Leveraging green benchmarks to maximize lending potential and a look at HUD for statutory constrained urban markets. Rate Desk notes October 7, 2020 • Indices up • UST yields .78 • Crude $39.95 • 223(f) 2.29% • 221(d)(4) 2.89% • Fannie 2.85% • Freddie 3.05% • Freddie green quotes saving borrowers 15bps • Use HUD green benchmark standards on new developments • Watch for financial leverage when loan constant exceeds cap rate • HUD viable in urban core where PE equity is less available • Boost loan size with HUD 220 program in urban and mixed-use developments • 15% boost to allowable max of EGI • Statutory constrained urban core markets

September 30, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. HUD added online queues to track your HUD loan application, and offsetting land costs with HUD statutory limit constraints. Rate Desk notes September 30, 2020 • Indices up • UST yields .68 • Crude $39.83 • 223(f) 2.16% • 221(d)(4) 2.76% • Fannie 2.69% • Freddie 3.11% • HUD record volume, application queues now online • Track your loan application • Must have ALL application items upon submission • Suburban mixed-use • Outdoor amenities • Land is expensive • HUD statutory limit constraints

September 23, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. With capital sources slowing down on lending, HUD FHA construction financing remains available to keep your construction projects going. Rate Desk notes September 23, 2020 • Indices down • UST yields .67 • Crude $39.58 • 223(f) 2.15% • 221(d)(4) 2.75% • Fannie 2.69% • Freddie 3.11% • MF rents increased by $1 in August • Institutional equity seeks outside major urban core markets • 22 of 30 major markets at negative rent growth • MF permits down 14.2% • HUD FHA construction financing available

September 2, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Relationships of leverage to risk; probability of loss vs loss given default and which carries more risk. Rate Desk notes September 2, 2020 • Indices up, rally of record closings • Crude $41.35 • UST yields .65 • 223(f) 2.15% • 221(d)(4) 2.75% • Fannie 2.95% • Freddie 2.95% • US passed 100% debt-to-GDP • Is leverage a bad thing? • Relationship of leverage to risk • Probability of loss vs loss given default • HUD FHA leverage provides better cash-on-cash return • Low rate + longer term = lowest loan constant • 11K HUD FHA mortgages—only 6 were 30-days past due • GSEs use interest-only • Which carries more risk? You decide? • Lower leverage does not mean lower risk

August 26, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Markets close on record highs and HUD offices hit record volume, with Southeast office closing over $3.4 billion in 2020. Rate Desk notes August 26, 2020 • Indices up, record highs • UST yields .69 • Crude $43.40 • 223(f) 2.20% • 221(d)(4) 2.80% • Fannie 2.87% • Freddie 3.09% • GSEs shifting to conservative lending for traditional student housing • Scrutinizing collections and occupancy • July rents are stabilizing • Up $2 on average per rent in July • HUD: record volume • Southeast region up $800M Y/Y • SE HUD office closed 188 loans for +$3.4B in 2020

August 19, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. With MF construction soaring nationwide, take advantage of lower rates to maximize your borrowing power. Rate Desk notes August 19, 2020 • Indices down • UST yields .67 • Crude $42.89 • 223(f) 2.16% • 221(d)(4) 2.76% • Fannie 2.69% • Freddie 3.15% • MF construction soaring nationwide • 63,429 units under construction • 221(d)(4) boom • Longer processing times balanced by dropping construction costs • Lower rates, more borrowing power • Are you maximizing in your new construction loans? • Yield maintenance, defeasance • Pre-payment penalty • Lender calculated indemnity

August 12, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. HUD/FHA loan refinance options, building customer service increases resident retention. Rate Desk notes August 12, 2020 • Indices up • UST yields .67 • Crude $42.56 • 223(f) 2.27% • 221(d)(4) 2.87% • Fannie 2.75% • Freddie 2.95% • HUD/FHA loans: unprecedented times • Low rates plus investor pre-pay covers refi costs • Jobs = paid rents • Hire local to build customer service • Happy residents lead to more lease renewals

August 5, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Capital markets and deals are in motion. What definition does your lender use for property replacement costs for casualty insurance? Rate Desk notes August 5, 2020 • Indices up • UST yields .55 • Crude $42.15 • 223(f) 2.25% • 221(d)(4) 2.75% • Fannie 2.85% • Freddie 3.01% • Debt is churning • Capital markets and deals in motion • Property replacement costs for casualty insurance • RSMeans (HUD) • Marshall & Swift (appraisers) • What definition does your lender use?

July 31, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. What does the future hold for Transit Oriented Development (TOD) as ridership shifts toward biking over public transit? Rate Desk notes July 31, 2020 • Indices up • UST yields .53 • Crude $40.43 • 223(f) 2.35% • 221(d)(4) 2.95% • Fannie 2.80% • Freddie 2.80% • Future of TOD • Increased bike transit • Public transit ridership down due to C19 • Major cities going car-free on select streets • Is your property bike-friendly? • New Rate Desk episodes every Wednesday • Next Friday: o New NAHB Power Hitters o Premiere of Money Talks

July 24, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Partnering with employers in the new landscape to capitalize on the trifecta of economics: owners, tenants and employers. Rate Desk notes July 24, 2020 • Indices down • UST yields .59 • Crude $41.34 • 223(f) 2.35% • 221(d)(4) 2.95% • Fannie 2.75% • Freddie 3.00% • July collections coming in lower • Stimulus bridge without an exit • Partnership with employers in new landscape • Trifecta of economics: owners/tenants/employers

July 23, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Fannie Mae Green is back with opportunity for savings up to .30bps and conventional lending remains strong. Rate Desk notes July 23, 2020 • Indices down • UST yields .59 • Crude $41.11 • 223(f) 2.33% • 221(d)(4) 2.93% • Fannie 2.75% • Freddie 3.00% • Fannie Mae Green is back • Must achieve 30% combined savings water/sewer and energy • At least 15% from energy • Engineering firm audit around $3,500 • Savings up to .30bps • Conventional 65-70% LTC • Good markets, strong sponsorship

July 22, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Growing families drive home sales highlighting need for more 3BR units in suburban MF. Rate Desk notes July 22, 2020 • Indices up • UST yields .60 • Crude $41.89 • 223(f) 2.34% • 221(d)(4) 2.95% • Fannie 2.75% • Freddie 3.00% • Existing home sales up 20.7% in June • Demographic driver: growing families • Short supply of 3-bedroom units in suburban MF • More 3BR rental housing needed as young families move to suburbs