Monarch Investment and Management Group. Annual Investor Meeting

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1 Monarch Investment and Management Group Annual Investor Meeting Brown Palace Hotel March 8th, 2018

2 Foxhill Apartments, LLC Willowpark Associates, LLC Meadowlark Apartments Associates, LLC Ramblewood Apartments Associates, LLC The Tower Apartments Associates, LLC MIMG XIV Associates, LLC Canon Inn Associates, LLC Victoria Square Associates, LLC Country Green Apartments, LLC MIMG XVI Associates, LLC Mesa Ridge Apartments, LLC MIMG XVII, LLC La Vida Buena Associates, LLC MIMG XVIII, LLC Apache Trace Associates, LLC MIMG XIX Associates, LLC 3958 Montgomery Associates, LLC MIMG XX Associates, LLC Canyon Point Associates, LLC MIMG XXI Sioux Master LLC Canyon Ridge Associates, LLC Mountaineer Village Associates, LLC Mission Hill Associates, LLC Wyoming Place Associates, LLC Mesa Gardens Associates, LLC 2013 MIMG XLII Tiffany Woods, LLC MIMG XLV Town & Country LLC MIMG XLVII Breckenridge, LLC MIMG XLVI Knolls LLC MIMG XLVIII City Limits, LLC MIMG LI The Oaks, LLC MIMG L Wake Robin LLC MIMG XLIX Timber Ridge LLC MIMG LII Arbors at Eastland LLC MIMG LIV Gray's Lake MIMG LV Greenmar, LLC MIMG XCIII Seven Trails LLC MIMG XCII Fairlane East LLC MIMG XCVI Hunters Master LLC MIMG SCVI EMAX Sub LLC MIMG XCV Bronco Club LLC MIMG XCVII 300 At The Circle LLC MIMG XCIX The Heights LLC MIMG XCVIII Sugar Pines Sub LLC MIMG XCVIII Westchester Sub LLC MIMG XCVIII Westport Station Sub, LLC MIMG C Somerset Sub LLC MIMG C Woodridge Sub LLC ,055 Units MIMG LVI Walnut Creek MIMG LVII HR Master LLC Mimg LIX Palo Duro Place LLC MIMG LVIII Camelot LLC MIMG LX Cedar Trace LLC MIMG LXI Stephenville Master, LLC MIMG LXII LaSalle, LLC MIMG LXIII Prairie Walk, LLC MIMG LXV Central Square LLC MIMGLXVI Drakes Pond, LLC MIMG LXVII Omaha Five, LLC MIMG LXIV mi6llc Master, LLC 3,309 Units 5,572 Units 2016 MIMG CI MT Carmel Sub, LLC MIMG CI Hearth Hollow Sub LLC MIMG CII Les Chateaux LLC MIMG CIV Lakeside Sub LLC MIMG CIV Hampton Sub LLC MIMG CIV San Mateo Sub LLC MIMG CIV Solano Sub LLC MIMG CIV Highland Sub LLC CMC 1 Meadows of Coon Rapids, LLC MIMG CIII Timber Cove, LLC MIMG CV Hamilton Trace LLC MIMG CVI Pecan Grove LLC 2011 MIMG XXII Eagles Pointe LLC MIMG XXIII DBA McMillen Woods, LLC MIMG XXIV Commodore Perry, LLC MIMG XXVI Chelsea Park LLC MIMG XXV Executive Towers, LLC MIMG XXXI Camelot Place, LLC MIMG XXIX Block 2 LLC MIMG XXXII Eden Park, LLC MIMG XXX Gateway Townhomes, LLC 2,039 Units MIMG LXVIII Woodland Ridge, LLC MIMG LXXI Vantage Point, LLC MIMG LXX LeClaire, LLC MIMG LXIX Country Club Villas, LLC MIMG LXXII Woodman Park, LLC MIMG LXXIII Central Pointe LLC MIMG LXXIV Colonial LLC MIMG LXXV Brookeville LLC MIMG LXXVI Sedona Ridge, LLC MIMG LXXVII Golfview Village LLC Monarch River Oaks, LLC MIMG LXXXII The Hills, LLC 2017 MIMG CVI Rosewood Sub LLC MIMG CVII Hunters Ridge Sub LLC MIMG CVII Southpointe Sub LLC MIMG CIX Burwick Farms LLC MIMG CVIII Mill Creek Sub, LLC MIMG CVIII Woodridge Sub, LLC MIMG CVIII Woodlands Sub, LLC MIMG CX Brookwood LLC CMC 2 The New Fountains, LLC 7,312 Units 2012 MIMG XXXIII Three Rivers, LLC MIMG XXXV Knollwood, LLC MIMG XXXVI West Tech Lofts, LLC MIMGXXXVII CE Master, LLC MIMG XXXIV Village Green LLC MIMG XXVII Suson Pines LLC MIMG XL Harbor Pointe LLC MIMG XXXVIII Stone Grove LLC MIMG XXXIX Concorde Club LLC MIMG XXVIII HS Master LLC MIMG XLI Country Estates LLC MIMG XLI Sherwood Forest LLC MIMG XLIII Warren Club LLC MIMG XLIV Walnut Creek LLC 2015 MIMG LXXVIII Summit LLC MIMG LXXX San Angelo LLC KR Spring Mill Apartments, LLC MIMG LXXXIII Little Rock Master, LLC MIMG LXXXIV Waukegan Master, LLC MIMG LXXXV Mill Creek LLC MIMG LXXXVII Castle Bluff LLC MIMG LXXXIX Van Buren Village LLC MIMG LXXXVI River Chase LLC MIMG XC Villages At Symmes LLC MIMG LXXXVIII Old Farm Shores LLC 3,940 Units 8,461 Units MIMG CXI Waterford West, LLC MIMG CXIII Woodhollow, LLC MIMG CXIV Toledo 5, LLC MIMG CXIV Toledo 5, LLC LC Country Club B, LLC Fairways at Lowry Aurora, LLC MIMG CXV Master, LLC MIMG CXVI Alexandra, LLC MIMG CXVII Creekside Taylor Square, LLC MIMG CXIX Abilene CCV, LLC Abilene Timber Ridge Apartments, LLC MIMG CXXI Genesee Master, LLC MIMG CXX Madison Master, LLC MIMG CXXII Wichita RR Master, LLC MIMG Grand Rapids, LLC 5899 Units

3 2018 MIMG CXXIV Arlington Village, LLC MIMG CXXVI Grandridge LLC MIMG CXXIII Lakeshore Portfolio Master LLC MIMG CXXV 756 OP LLC CMC 4 Seasons on Chelsea, LLC 2583 Units

4 PROPOSED OPERATING AGREEMENT AMENDMENTS Ande Yahr General Counsel of Real Estate

5 AMENDMENT ONE Issue: Eminent Domain Proposed Solution: Authorize the manager to transfer Company property in connection with a threatened or pending exercise of eminent domain

6 AMENDMENT TWO Issue: Admission of assignees to membership Proposed Solution: Authorize the manager to admit an assignee of a membership interest to all of the rights of membership

7 AMENDMENT THREE Issue: Counting operating and financing distributions toward return of capital Proposed Solution: Clarify that quarterly distributions and financing distributions are counted toward return of capital for purposes of calculating distribution of sale proceeds

8 AMENDMENT FOUR Issue: Sale distribution waterfall payments to equity profits interest holders Proposed Solution: Replace older disbursement of sale proceeds provisions with current-form waterfall payment provision

9 AMENDMENT FIVE Issue: Onerous requirements for estate-planning, divorce, death, and charitable transfers Proposed Solution: Amend the operating agreement to allow the following membership interest transfers without an opinion of counsel regarding securities compliance or evidence that the transferee is an accredited investor: to immediate family, to an ex-spouse, through a will, to the member s trust, or to a charity.

10 AMENDMENT SIX Issue: Rights of first refusal and first offer Proposed Solution: Remove any provision that grants members a right of first refusal or right of first offer to a membership interest

11 AMENDMENT SEVEN Issue: Treatment of profits interests with respect to Section 1031 like-kind exchange Proposed Solution: Provide that, in the event the Company elects to do a like-kind exchange, (a) contingent profits interest and equity profits interest holders may either redeem their interests or convert their interests to capital interests, and (b) the Company may grant new contingent profits interests and equity profits interests.

12 AMENDMENT EIGHT Issue: Transfer of profits interests Proposed Solution: Amend the operating agreement to allow transfers of profits interests to be made (a) to another member, if consented to by the manager, in its discretion, (b) upon a Member s death by his or her estate, (c) for estate-planning or divorce purposes, or (d) to a charity.

13 AMENDMENT NINE Issue: Bipartisan Budget Act of 2015, Tax Cuts and Jobs Act of 2017, and other tax law updates Proposed Solution: Update the operating agreement, as needed, to comply with the BBA and TCJA, and potentially other tax-related updates TBD

14 Bob Nicolls Opening Remarks

15 PORTFOLIO UPDATE Andy Newell CEO/CFO

18 Monarch Expenses as a portion of Income % 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Admin Insurance Real Estate Taxes Payroll Utilities Maintenance/SP Mortgage Interest

19 $400 Monarch Expenses from (in millions) $350 $300 $250 $200 $150 $100 $50 $ Admin / Insurance Real Estate Taxes Payroll Utilities Maintenance/SP Mortgage Interest

20 Historical Trends Expenses as a Percentage of Income % Admin/Insurance/Marketing/Management Fee 10.6% 10.0% 9.9% 9.8% 10.2% % RE Taxes 8.0% 8.1% 8.0% 8.0% 8.3% % Payroll 13.1% 13.0% 13.3% 12.9% 13.3% %Utilities 10.5% 10.5% 9.7% 9.1% 8.9% % Maintenance + Special Projects 13.3% 13.2% 11.5% 12.1% 12.0% Total 55.43% 54.74% 52.43% 51.91% 52.65%

21 REFINANCE AND SUPPLEMENTAL LOANS Refinance Loans Expected Property Name Distribution Meadow Lark Apartments 5,936,000 Granite Valley Apartments 814,170 Hampton at Coral Ridge 997,956 Mission Hill Apartments 3,245,000 Country Green Apartments 2,996,250 Michigan 6 Portfolio 18,000,000 Camelot Apartments 2,280,000 Madison Grove Townhomes 3,700,000 Country Estates Townhomes 4,463,090 Total: 42,432,466 Property Name Supplemental Loans Expected Distribution Fox Hill Apartments 3,915,000 Ramblewood Apartments 2,584,000 Village Green Apartments 2,740,000 Prairie Walk Apartment Homes 1,015,000 Central Square Apartments 3,465,000 Central Pointe Apartment Homes 1,870,000 Total: 15,589,000

22 WHAT S UP WITH PREPAYMENT PENALTIES Long-Term Commercial Debt isn t like Residential Debt Penalties Range from 2%-7% of the new loan proceeds So Why?

23 10 Year Treasury 3.00% 2.90% 2.80% 2.70% 2.60% 2.50% 2.40% 2.30% 2.20% 10 Yr Trendline 2.10% 2.00% 9/7/2017 9/14/2017 9/21/2017 9/28/ /5/ /12/ /19/ /26/ /2/ /9/ /16/ /23/ /30/ /7/ /14/ /21/ /28/2017 1/4/2018 1/11/2018 1/18/2018 1/25/2018 2/1/2018 2/8/2018 2/15/2018 2/22/2018 3/1/2018

25 HISTORICAL INTEREST RATE NORMS (BASIS POINTS) Spread to Ten Year Spread to Mortgage Inflation Low Average High Low Average High ADJUSTING OUT Spread to Ten Year Spread to Mortgage Inflation Low Average High Low Average High

26 REFINANCES AND SUPPLEMENTALS Projected Spread to Ten Year Spread to Mortgage Year Inflation Low Average High Low Average High

27 REFINANCES AND SUPPLEMENTALS Projected Estimated All In Rate (basis points) Year Inflation Low Average High

28 SO EITHER WAY IT S A WIN-WIN If Rates Increase to Historic Norms we will recover prepayment penalties in the first year or so compared to waiting and refinancing at higher rates If rates don t move as much

29 $58,000,000 Refinance Loans Expected Property Name Distribution Meadow Lark Apartments 5,936,000 Granite Valley Apartments 814,170 Hampton at Coral Ridge 997,956 Mission Hill Apartments 3,245,000 Country Green Apartments 2,996,250 Michigan 6 Portfolio 18,000,000 Camelot Apartments 2,280,000 Madison Grove Townhomes 3,700,000 Country Estates Townhomes 4,463,090 Total: 42,432,466 Property Name Supplemental Loans Expected Distribution Fox Hill Apartments 3,915,000 Ramblewood Apartments 2,584,000 Village Green Apartments 2,740,000 Prairie Walk Apartment Homes 1,015,000 Central Square Apartments 3,465,000 Central Pointe Apartment Homes 1,870,000 Total: 15,589,000 And we have locked in great long-term rates

30 Quarterly Reporting Planning to debut new cover sheet to give a quick synopsis of performance Existing report narrative to remain unchanged

31 Distributions By Quarter Quarterly Distributions (annualized) 20% 15% 10% 5% 0% QT QT QT QT QT QT QT QT QT QT QT QT QT QT QT QT % 40% 30% 20% 10% 0% Special Distributions 1,000, , , , ,000 0 Quarterly Distribution Special Distribution Occupancy and Financial Performance By Quarter QT QT QT QT QT QT QT QT QT QT QT QT QT QT QT QT Occupancy Total Income NOI 98% 96% 94% 92% 90% 88% 86% 84% 82%

32 TAX UPDATE Darryl Dischler Convergence CPA Group

33 20% DEDUCTION ON PASS-THROUGH INCOME Subtract 20% from the income shown on your K-1 Reduces top rate from 37% to 29.6% on RRE income (full 10% reduction from old rate of 39.6%) Notable no distinction between passive or active investors Example: $10m building ($3m in land) could produce annual deduction up to $175k ($7m x 2.5%) Guidance and clarification coming in 2018

34 DEDUCTIBILITY OF INTEREST EXPENSE Lots of discussion and concern early on about whether interest expense would be limited Final result generally limited to 30% to cash flow (NOI or EBITDA). Limitation can be avoided. If limited, carried forward indefinitely Trade-off is reduced benefits available for new depreciation changes

35 MODIFICATIONS TO 1031 LIKE KIND EXCHANGES Starting 2018, tax deferral is only available on real property assets personal property no longer eligible Minimal impact, since personal property is small

36 INDIRECT BENEFITS TO MULTIFAMILY Doubling Standard Deduction Lower caps on mortgage interest and HELOC is eliminated Carried interest tax preference for Developers is reduced Bonus depreciation increased to 100% and now applies to used property.

37 QUESTIONS?

FORM 4 [ ] Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. SeeInstruction 1(b).

FORM 4 [ ] Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. SeeInstruction 1(b). UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION Washington,D.C.20549 STATEMENTOFCHANGESINBENEFICIALOWNERSHIPOF