March 20, Fund

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1 March 20, 2014 Management s Discussion and Analysis Timbercreek U.S. Mult ti-residential Opportunity Fund #1 Year ended December 31, 2013

2 FORWARD-LOOKING STATEMENTS Caution regarding forward-looking statements The terms the Fund, we, us and our in this ( MD&A ) refer to Timbercreek U.S. Multi-Residential Opportunity Fund #1 (the Fund ) and its consolidated financial position and results of operations for the year ended December 31, 2013 (the Year ). This MD&A may contain forward-looking statements relating to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent our beliefs regarding future events. These statements are typically identified by expressions like believe, expects, anticipates, would, will, intends, projected, in our opinion and other similar expressions. By their nature, forward-looking statements require us to make assumptions which include, among other things, that (i) the Fund will have sufficient capital under management to effect its investment strategies and pay its targeted distributions to Unitholders, (ii) the investment strategies will produce the results intended by Timbercreek Asset Management Inc. (the Manager ), (iii) the markets will react and perform in a manner consistent with the investment strategies and (iv) the Fund is able to invest in assets of a quality that will generate returns that meet and/or exceed the Fund s targeted investment returns. Forward-looking statements are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will prove not to be accurate. We caution readers of this MD&A not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed or implied in the forward-looking statements. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including but not limited to, general market conditions, interest rates, regulatory and statutory developments, the effects of competition in areas that the Fund may invest in and the risks detailed from time to time in the Fund s public disclosures. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to investing in the Fund, investors and others should carefully consider these factors, as well as other uncertainties and potential events and the inherent uncertainty of forward-looking statements. Due to the potential impact of these factors, the Fund and the Manager do not undertake, and specifically disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. This MD&A is dated March 20, Disclosure contained in this MD&A is current to that date, unless otherwise noted. Additional information on the Fund is also available on the Manager s website at Additional information about the Fund can be found on the SEDAR website at 1

3 BASIS OF PRESENTATION This MD&A has been prepared to provide information about the financial results of the Fund for the year ended December 31, This MD&A should be read in conjunction with the Fund s audited consolidated financial statements for the year ended December 31, 2013 and the period from August 30, 2012 (date of formation) to December 31, 2012 which are prepared in accordance with International Financial Reporting Standards (IFRS). The functional and reporting currency of the Fund is U.S. dollars and unless otherwise specified, all amounts in this MD&A are in thousands of U.S. dollars, except per share and other non-financial data. Copies of these documents have been filed electronically with securities regulators in Canada through the System for Electronic Document Analysis and Retrieval ( SEDAR ) and may be accessed through the SEDAR website at BUSINESS OVERVIEW AND RECENT DEVELOPMENTS About the Fund Timbercreek U.S. Multi-Residential Opportunity Fund #1 (the Fund ) is a limited partnership governed by the laws of the Province of Ontario which was formed on August 30, The Fund was established for the primary purpose of acquiring multi-residential investment properties in the south-eastern United States that are mispriced and/or undermanaged in the view of Timbercreek Asset Management Inc. (the Manager ). The objectives of the Fund are to (i) enhance the value of the investment properties through active management and a stabilization and improvement program with the goal of ultimately disposing of the investment properties to generate significant gains; and (ii) make quarterly cash distributions to Unitholders from Distributable Cash Flow (as defined in the Prospectus). Additional information relating to the investment objectives and investment restrictions of the Fund are contained in the Prospectus. Timbercreek Asset Management Inc. is the Manager of the Fund and provides strategic, advisory, asset management and other services necessary to manage the day-to-day operations of the Fund and the properties. The Manager entered into an operating agreement (the Operating Agreement ) with Elco Landmark Residential Holdings, LLC (together with Elco Landmark Residential Management, LLC, the Operator ) to identify multiresidential property investment opportunities, and ultimately property manage, reposition and redevelop the investment properties, utilizing the Operator s experience and expertise in the Fund s targeted geographic region. The Fund is authorized to issue an unlimited number of Class A Units, Class B Units and Class C Units (the Units and holders of such Units being Unitholders ). Timbercreek Multi-Residential Opportunity Fund #1 G.P. Inc. is the general partner of the Fund (the General Partner ). The General Partner is a wholly-owned subsidiary of the Manager. As at December 31, 2013 the Fund indirectly owns 88.5% (December 31, %) of the Class A limited partnership units of Timbercreek U.S. Multi-Residential Operating LP ( Operating LP ), a limited partnership formed pursuant to and governed by the laws of the state of Delaware. The remaining interest in Operating LP is held by Timbercreek U.S. Multi-Residential (U.S.) Holding L.P. ( US Holding LP ), a controlling interest of which is held by an affiliated entity of the Operator. The assets of the Fund are indirectly held by Operating LP, which 2

4 carries out the business of the Fund. The Fund and its controlled subsidiaries are collectively referred to as the Fund in this MD&A. The term of the Fund is four years beginning on October 25, 2012, the closing date of the Fund s initial public offering (the IPO ), subject to a single one-year extension at the discretion of the General Partner (the Term ) or subject to earlier termination upon the sale of the Fund s final investment property. The Term may only be further extended by special resolution of the Unitholders. Recent Developments The Fund commenced operations following the closing date of the Fund s IPO on October 25, Significant developments during the year ended December 31, 2013 include: On March 15, 2013, the Fund completed an offering of 567,500 Class C Units, for net proceeds of approximately $5,568. On May 6, 2013, the Fund completed the acquisition of two multi-residential investment properties, comprised of 788 suites, located in Cary, North Carolina (the Cary Portfolio ) for a total purchase price of $55,700 and incurred transaction costs of $225. The Fund obtained bridge financing to fund the acquisition of Cary Portfolio. The amount of the bridge financing was $6,951 at a rate of 9% per annum, plus a 1% up-front fee of the principal balance. The bridge financing was repaid on July 31, 2013 from proceeds of the equity offering. On May 24, 2013, the Fund completed a follow-on public offering of 1,100,746 Class A Units for net proceeds of $10,499 and 66,500 Class B Units for net proceeds of $611. The Fund also completed a concurrent private placement of 270,298 Class C Units for net proceeds of $2,723. A portion of the net proceeds of these offerings were used to repay the bridge financing. In May 2013, Operating LP completed a private placement of 500,000 Class A units for net proceeds of $5,000 received from US Holding LP. On November 26, 2013, the Fund completed the acquisition of an investment property for a total purchase price of $18,500 and incurred transaction costs of $158. The property is comprised of 296 suites and is located in Orlando, Florida. On December 2, 2013, the Fund received $1,500 and Canadian dollars of $2,000 of bridge financing at a rate of 9% per annum, plus a 1% up-front fee of the principal balance. The maturity date for the bridge financing is March 31, 2014, and is in the process of being extend to September 30, The Fund used the proceeds to fund the acquisition of the investment properties completed on December 10, On December 10, 2013, the Fund completed the acquisition of an investment property for a total purchase price of $15,800 and incurred transaction costs of $149. The property is comprised of 232 suites and is located in Jacksonville, Florida. On December 10, 2013, the Fund completed an offering of 293,477 Class C Units, for net proceeds of $3,061. 3

5 FINANCIAL HIGHLIGHTS Year ended December 31, 2013 Period ended December 31, 2012 OPERATIONS Overall average portfolio occupancy rate 93.3% 96.0% Average in-place rent per unit/month $ 733 $ 906 Total number of suites acquired in the period 1,316 1,380 Total number of suites (as at) 2,696 1,380 OPERATING RESULTS Total assets $ 216,928 $ 111,585 Investment properties $ 204,062 $ 95,922 Mortgages payable, net of financing costs $ 137,919 $ 71,133 Net liabilities attributable to Unitholders and U.S. Holding LP $ 68,986 $ 39,337 Revenue from rental operations $ 18,087 $ 332 Net rental income $ 9,881 $ 167 Net income (loss) and comprehensive income (loss) $ 4,742 $ (514) Funds from operations ( FFO ) $ 3,489 $ (139) FFO per Unit: Class A Unit $ 0.63 $ (0.04) Class B Unit $ 0.69 $ - Class C Unit $ 0.69 $ (0.04) FFO payout ratio 79.5% - Total debt to fair value of investment properties 66.9% 67.0% Total debt to assets 65.1% 63.7% DISTRIBUTIONS Declared distributions $ 3,172 $ - FINANCING Per Class A unit $ $ - Per Class B unit $ $ - Per Class C unit $ $ - Per US Holding LP unit $ $ - Weighted average interest rate 4.0% 3.8% Weighted average mortgage term (years)

6 CURRENT PORTFOLIO Size No. of Occupancy at Property State (sq. ft.) units December 31, 2013 Purchase Price Lake Ellenor Florida 247, % $ 18,658 Alexander Pointe Florida 244, % $ 15,949 Eagle Landing North Carolina 344, % $ 30,219 Watercrest North Carolina 317, % $ 25,706 Granite Park Virginia 369, % $ 32,186 Lynden Square North Carolina 437, % $ 28,827 Chelsea Commons North Carolina 262, % $ 17,814 Saratoga Ridge Texas 179, % $ 17,095 Total/Average 2,402,935 2, % $ 186, acquisitions Eagle Landing Eagle Landing was constructed in 1986 and is located in Cary, North Carolina. The 444 suite asset contains one, two and three bedroom apartment suites situated in a garden-style complex. The property amenities include two leasing offices/clubhouses, two swimming pools, tennis courts, children s playground, fitness center and two laundry rooms. Watercrest Watercrest was constructed in two phases: the first in 1992 and the second in 1995, and is located in Cary, North Carolina. The 344 suite asset contains one, two and three bedroom apartment suites situated in a garden-style complex. The property amenities include two leasing offices/clubhouses, two swimming pools, tennis courts, children s playground, fitness center and two laundry rooms. Lake Ellenor Lake Ellenor was constructed in 1973 and is located in Orlando, Florida. The 296 suite complex contains one, two and three bedroom apartment suites situated in a garden-style complex. The property amenities include a centralized clubhouse, two swimming pools, fitness center and barbeque area. Alexander Pointe Alexander Pointe was constructed in 1986 and is located in Jacksonville, Florida. The 232 suite complex contains one, two and three bedroom apartment suites situated in a garden-style complex. The property amenities include a centralized clubhouse, two swimming pools, fitness center, and tennis courts. 5

7 2012 acquisitions Granite Park Granite Park was constructed in 1970 and is located in Charlottesville, Virginia. The 425 suite asset contains one, two and three bedroom apartment suites situated in 26 two and three storey apartment buildings. The property amenities include a clubhouse, leasing center, fitness center, three swimming pools, playground, barbeque and picnic areas. Lynden Square Lynden Square was constructed in two phases: the first in 1971 and the second in 1980, and is located in Charlotte, North Carolina. The 476 suite asset contains one, two, three and four bedroom apartment suites situated in 35 walk-up, two and three storey apartment buildings. The property amenities include a leasing office/clubhouse, two swimming pools, tennis courts, fitness center, business center, and two laundry rooms. Chelsea Commons Chelsea Commons was constructed in 1987 and is located in Carrboro, Orange County, North Carolina. The 250 suite asset consists of one, two and three bedroom apartment suites situated in 19 walk-up, two storey apartment buildings. The complex includes a leasing office/clubroom, business center, swimming pool, tennis courts, fitness center and laundry facility. Saratoga Ridge Saratoga Ridge was constructed in 1995 and is located in Austin, Texas near Grandview Hills and Concordia University. The asset consists of 229 suites throughout 10 three storey buildings, in addition to a clubhouse. The property amenities include a swimming pool, hot tub/spa, 24 hour fitness center, additional storage, garage and courtyard. 6

8 U.S. MULTI-RESIDENTIAL REAL ESTATE MARKET OUTLOOK AND STRATEGY The Manager and Operator continue to believe there is a compelling opportunity to earn excellent risk adjusted returns through investments made in the U.S. multi-residential real estate market, notably within the south eastern United States. U.S. apartment fundamentals continued to improve nationally, while pricing continues to remain strong across most of the country. The multi-residential sector has been a beneficiary of changing demographics and has prospered because of, rather than in spite of, symptoms of the economic downturn and subsequent initial stages of recovery over the past year in the United States. In the four years following the financial crisis, the multi-residential sector enjoyed robust growth. The surge in rental housing demand has caused an emergence of new multi-residential construction; however additions to supply of multi-residential housing are reverting back to the long-term average. Although there is an increase in new supply of multi-residential product being constructed throughout many markets across the country, including the targeted investment regions of the Fund, the anticipated demand for rental housing is anticipated to continue to grow and exceed the growth in supply. Housing demand is driven by four major factors; (i) job growth and income growth, (ii) population growth, (iii) immigration, and (iv) demographic trends. According to Greenstreet Advisors, it is estimated that household formations will be approximately 6.8 million over the next 5 years. Based upon the long-term averages of the renter capture rate in new household formations, (34% of new household formations become renters), it is estimated that there will be 2.9 million new households seeking rental housing. These rental households will either elect to rent in traditional multi-residential dwellings, or, rent in the single family housing market. As the single family rental market has gained traction in the United States, it is estimated that 60% of renters will now look to the single-family housing rental market, 5% higher than the long-term average of 55%. Even with increased demand in the single-family rental housing market, the forecasted growth of household formations over the next 5 years is projected to create demand for approximately 925,000 additional apartment rentals. If overall renter capture rate outpaces its long-term average, with current estimates according to Greenstreet Advisors being 43%, the estimated demand for apartment rental will be nearly 1.2 million over the same timeframe. 7

9 The anticipated demand for multi-residential housings outpaces the projected net increase in supply of nearly 700,000 multi-residential units over the next 5 years. As the sector enjoyed favorable economics and growth prospects following the financial crisis, there was an increase in permit activity amongst developers to build purpose built rental housing. Development projects typically require months from the commencement of a project to completion. The majority of new rental housing supply being added over the coming year is from approved permits and developments which began over the past 24 months. As new construction permitting reverts to its historical mean, the supply and demand for multi-residential will continues to move back towards its equilibrium levels. The 700,000 net units that are anticipated to become available in the rental universe over the next 5 years are consistent with long-term averages for apartment construction. The single-family housing market in the United States continues to recover. Drivers of the single family housing recovery continue to be historically low mortgage interest rates, job growth and a recovery in both economic conditions and investor confidence. According to Greenstreet research, on a national level, housing prices are still roughly 20% below where they peaked in 2006, even though mortgage rates are at historic lows. The recovery and performance of the single family housing market and rental housing market are not necessarily negatively correlated. As economic growth propels the recovery in the single family housing market, the ensuing job growth, a key driver in household formations, generates demand for rental housing, allowing both segments of the housing market to prosper. 8

10 TIMBERCREEK U.S. MULTI-RESIDENTIAL OPPORTUNITY FUND #1 Management s Discus sion and Analysiss Demographics still look very favorable for the multi-residential sector, a testament to its ongoing sustainability. The number of renters is accelerating. Young adults are more likely to rent, as has historically been the case, due to mobility and financial factors (student loan debt, minimal savings, lack of credit history), however, the renter demographic is substantially widening to encompass more adults, which are increasing their propensity to rent. The younger cohort, those most likely to rent (aged 35 and under), suffered the most during the recession, however are now experiencing job growth, increasing their demand for rental housing. Furthermore, as the younger cohort continues to delay milestones in life, such as getting married, having children and buying their first house, in addition to record levels of student debt associated with this demographic, their demandd for rental housing continues for longer periods of time. TIMBERCREEK U.S. MULTI-RESIDENTIAL OPPORTUNITY FUND #1 9

11 Individuals who suffered financially during the recession have either been forced to, or now prefer to rent due to more stringent regulations and requirements surrounding obtaining mortgage financing, not desiring to have their biggest equity investment to be their home, or preferring the mobility that renting presents, allowing them to be easily transient for employment purposes. AUSTIN, TX Austin is a diverse and thriving economy. Austin is the capital of Texas and is the 11 th largest city in the United States, being home to approximately 845,000 people and having a metropolitan statistical area ( MSA ) of approximately 1.8 million residents. Austin s economy is very diverse and is driven by government, healthcare, education and technology. Austin is home to the University of Texas at Austin, the fifth largest university in the United States with over 50,000 undergraduate and graduate students, as well as 24,000 faculty and administrative staff. The university has been labelled one of the Public Ivies, meaning it is a publically funded university however provides the educational quality comparable to the Ivy League universities. Being the state capital of Texas, there is significant employment in the government and public service sector. However, Austin s economy has diversified to become one of the leading technology focused business centers in the United States. Austin is home to many Fortune 500 companies headquarters and regional offices, including Advanced Micro Devices ( AMD ), Apple Inc., ebay, Google, IBM, Intel, Texas Instruments and Whole Foods. Dell s worldwide headquarters is located in Round Rock, Texas, a nearby suburb of Austin. A diverse economy, strong job growth and steady rental demand makes Austin an attractive investment market from a multi-residential perspective. The Texas apartment market shows continued signs of strength. Texas has experienced some of the highest levels of rental growth in the United States over the past year. Occupancy levels are also historically high and new supply is being quickly absorbed. Dallas, Houston and Austin are among the nation s top markets for apartment construction with over 46,000 units scheduled for completion. Although experiencing growth in supply of multi-residential housing product, Austin is anticipated to continue to experience job growth, fueling rental demand. Vacancy is anticipated to increase slightly due to the additions of new supply, however, rental growth rates are anticipated to remain strong and above national averages, with rent growth forecasted between 4.50% - 5.0%. Austin is considered one of the best performing regions for multiresidential and is increasingly becoming a market which is garnering institutional demand for multi-residential product. A driver of Austin s economic growth and performance in the multi-residential sector has been the addition of white-collar jobs. Much of the job growth is focused on the technology sector, which are relatively high paying jobs and attract a younger demographic seeking more of a live-work environment. For example, Apple Inc. has begun development and will open in phases, starting in 2014, on a $304 million, 38 acre America`s Operations Center which is anticipated to create nearly 3,650 full-time jobs when fully complete, and Oracle is anticipated to add 200 new jobs in the Austin market. 10

12 Market Metrics Current U.S. Average Average Overall Asking Rent $ 947 $ 1,000 Occupancy 96.0% 95.0% Unemployment Rate 4.5% 6.7% Home Ownership Rates 60.1% 65.3% Metro Households (000) ,000 Total Inventory (000) ,244 Ratio Households: Inventory 24.4% 15.9% CHARLOTTE, NC Charlotte is the largest city in the state of North Carolina and has been one of the fastest growing cities in the South Eastern United States over the past decade. Charlotte s population has grown from approximately 540,000 in 2000 to nearly 775,000 in 2012, resulting in significant growth of household formations. Charlotte has become a major U.S. financial center and is the second largest banking center in the U.S. next to New York City. It is headquarters to Bank of America and Wells Fargo s east coast operations, as well as other financial institutions, such as TIAA-CREF. Charlotte s economy is further propelled the energy sector, being dubbed The New Energy Capital with more than 260 companies and nearly 28,000 jobs tied to the energy sector. Charlotte is anticipated to have continued job and population growth over the coming years as the U.S. economy continues its recovery. Expansions in the financial services and retail sector are anticipated to add approximately 22,300 jobs in Although single family housing remains relatively affordable and there are above average levels of new supply of multi-residential forecasted to become available over the next 24 months, employment growth will continue to fuel rental demand. Vacancy rates are anticipated to increase slightly for 2014 as the new supply is absorbed into the market, however, the market is anticipated to continue to exhibit strong rental growth as average rents are anticipated to increase approximately 3.5% throughout Market Metrics Current U.S. Average Average Overall Asking Rent $ 852 $ 1,000 Occupancy 95.1% 95.0% Unemployment Rate 6.6% 6.7% Home Ownership Rates 58.3% 65.3% Metro Households (000) ,000 Total Inventory (000) ,244 Ratio Households: Inventory 14.0% 15.9% 11

13 RALEIGH-DURHAM, NC Raleigh is one of the largest cities in the state of North Carolina, home to approximately 425,000 residents. Raleigh is part of one of the largest MSAs located in the South Eastern United States, the Raleigh-Durham- Chapel Hill MSA, being home to approximately 2 million people. The Raleigh-Durham-Chapel Hill MSA is nicknamed the Research Triangle Park ( RTP ) and is home to one of the most prominent high-tech research and development centers in the United States. Over 50,000 jobs across 170 technology focused companies are found in the RTP. RTP has a very well educated labor pool and there is an average of $2 billion annually invested in research and development throughout the RTP, making it one of the world s most renowned research, development and technology areas. Chapel Hill is the smallest of the three areas in the RTP, however, is home to one of the highest ranked, oldest and most prestigious publically funded universities, the University of North Carolina at Chapel Hill. The university, and thus Chapel Hill has a consistent source of rental housing demand due to its large student demographic population, with nearly 30,000 students and an additional 14,000 faculty and staff. The Raleigh market is anticipated to see growth in supply of multi-residential housing throughout 2014 as building completions as a result permits issued during are completed. This increase in supply is anticipated to slow the rapid rate of rental rate growth; however rent growth is anticipated to remain positive. The key driver in Raleigh`s ability to absorb the additional supply will be continued job growth throughout the region. Market Metrics Current U.S. Average Average Overall Asking Rent $ 860 $ 1,000 Occupancy 96.2% 95.0% Unemployment Rate 5.2% 6.7% Home Ownership Rates 67.7% 65.3% Metro Households (000) ,000 Total Inventory (000) ,244 Ratio Households: Inventory 15.5% 15.9% CHARLOTTESVILLE, VA Charlottesville is located approximately one hour outside of Richmond, Virginia and is located within the Charlottesville MSA, home to nearly 210,000. Charlottesville s economy is characterized by a relatively defensive economy as much of the employment is found in the public sector, healthcare and education, notably the University of Virginia. As home to the University of Virginia, Charlottesville is greatly influenced by the employment, educational and cultural opportunities provided by the University. The area also benefits from a tourist trade drawn by the University and other historical sites. The local population has high percentages of residents between the ages of 16 and 34, the prime apartment renting ages, which contributes to the demand for rental housing. 12

14 Median household income within the Charlottesville MSA for 2011 is $54,334, which is slightly lower than Virginia at $58,556, however, slightly higher than the U.S. overall at $49,697. The unemployment rate in Charlottesville MSA fell 50 basis points to 4.1% versus the Virginia unemployment rate of 5.0% and 6.7% for the U.S. Overall, given the improving economic outlook, apartment fundamentals appear to be strengthening and stable and consistent demand for rental housing, mainly derived from the University of Virginia continue to characterize the stable and predictable nature of Charlottesville s multi-residential market. Market Metrics Current U.S. Average Average Overall Asking Rent $ 867 $ 1,000 Occupancy 93.9% 95.0% Unemployment Rate 4.0% 6.7% Home Ownership Rates N/A 65.3% Metro Households (000) N/A 115,000 Total Inventory (000) N/A 18,244 Ratio Households: Inventory N/A 15.9% JACKSONVILLE, FL Jacksonville continues to exhibit healthy economic fundamentals as economic statistics continue to improve. Positive trends such reduced unemployment have allowed for further increases in rent levels, strengthening the multi-residential investment market. Professional service firms have led the broad-based job growth. Total employment levels are still below prerecession levels, however, it is anticipated that job growth will eclipse that level during Firms such as Clean Energy, Deutsche Bank, Amazon and Bank of America are all scheduled to add new jobs to the Jacksonville economy in Job growth will generate household formations translating improved occupancy and an ability to increase rental rates. Forecasted job growth for the coming year is roughly 12,300 jobs. Jacksonville has exhibited relatively minimal supply growth of apartments over the past few years, quieting concerns of oversupply of multi-residential housing. As the market continues to strengthen, it is anticipated that occupancy rates will continue to improve. Occupancy rates are anticipated to improve by 50 basis points in 2014, following an increase of nearly 130 basis points in In addition to improving occupancy, rent growth is projected to remain strong in Average market rent is becoming aligned with the national average of approximately 3.0% for 2014, with some submarkets outperforming. 13

15 Market Metrics Current U.S. Average Average Overall Asking Rent $ 823 $ 1,000 Occupancy 93.0% 95.0% Unemployment Rate 5.6% 6.7% Home Ownership Rates 66.6% 65.3% Metro Households (000) ,000 Total Inventory (000) 71 18,244 Ratio Households: Inventory 12.9% 15.9% ORLANDO, FL Orlando is the economic focal point of Central Florida and one of the Florida s largest growing metropolitan areas. Orlando s employment market continues to strengthen due to the improving fundamentals in the leisure and hospitality sectors. Orlando is one of the most visited cities in the United States due to its many leisure and hospitality attractions, including Walt Disney Resort, Universal Orlando Real, Sea World and many others. Furthermore, Orlando is one of the busiest American destinations for conferences and conventions. In addition to an economy being buoyed by leisure and hospitality, Orlando s economy has diversified to include industrial, technology and education. Orlando is home to the University of Central Florida, the second largest university in the U.S. measured by enrollment. Nearly 60,000 undergraduate and graduate students attend the university, in addition to nearly 10,000 faculty and administration. Furthermore, Orlando is home to many major employers focused on technology such as General Dynamics, Siemens and Boeing, in addition to industries relatively resilient to economic activity such as national defense. Lockheed-Martin and the United States Military are substantial employers in Orlando. The construction of the $1.3 billion SunRail, a 31 mile commuter rail system, linking downtown Orlando to neighboring submarkets has begun, adding job growth to the construction industry. As the economic and job growth improved in Orlando, development activity in both the single family housing market and multi-residential market increased. It is anticipated that nearly 5,700 new multi-residential units will become available in 2014, an increase from the 3,000 added in 2013, however, as job growth and economic activity continue to strengthen, the additional supply is not anticipated to cause a significant decrease in occupancy rates. Average rents are forecasted to grow around the national average at a rate of approximately 3.50% for Market Metrics Current U.S. Average Average Overall Asking Rent $ 910 $ 1,000 Occupancy 94.7% 95.0% Unemployment Rate 5.5% 6.7% Home Ownership Rates 68.0% 65.3% Metro Households (000) ,000 Total Inventory (000) ,244 Ratio Households: Inventory 14.5% 15.9% 14

16 RESULTS OF OPERATIONS The Renovation and Repositioning Program As at December 31, 2013, the Fund s investment property portfolio is comprised of eight garden style multiresidential investment properties. The following is a summary of the progress to date of the renovation and repositioning program. GRANITE PARK Charlottesville, Virginia Date of acquisition December 20, 2012 Number of suites 425 Purchase price $ 32,186 Occupancy on acquisition 93.4% Current occupancy as at December 31, % Average in-place rent on acquisition $ 706 Average rent in place as at December 31, 2013 $ 739 Market rent on acquisition $ 761 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 1,516 $ 2,003 Exterior upgrades $ 189 $ 189 Common area upgrades $ 181 $ 203 Building systems upgrades $ 32 $ 62 Structural upgrades $ 131 $ 131 Total $ 2,049 $ 2,588 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Granite Park and was formerly referred to as Autumn Hill Apartments. Granite Park s rehabilitation program is now substantially complete. Renovations have been completed to amenities such as the leasing office, clubhouse, fitness center, dog park and various other amenities aimed at improving overall tenant satisfaction. The majority of exterior renovations have been completed, notably landscaping, site signage and parking lot repairs. The in-suite renovation program has been completed, assisting in further repositioning of the property. Granite Park is anticipated to generate a net operating income in the first year of operations after the acquisition that is consistent with the initial underwriting expectations. Although average in-place rental rates and occupancy lagged the initial forecast during the first two quarters of 2013 due to temporary effects of the repositioning program, the asset began to stabilize and its performance improved during the second half of Average inplace rental rates increased by nearly 4.5% during Furthermore, occupancy continued to improve and the property achieved occupancy close to 95% by the end of Q4 2013, exceeding our target. As the property continues to experience natural turnover in the tenant base, rental rate increases aligned with initial targets and continued levels of high occupancy are anticipated. 15

17 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Year 2 Year 3 Targeted Rental Rates $790 $770 $750 $730 $710 $690 $670 $650 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 In Place at Acquisition Budget Actual 16

18 LYNDEN SQUARE Charlotte, North Carolina Date of acquisition December 20, 2012 Number of suites 476 Purchase price $ 28,827 Occupancy on acquisition 95.0% Current occupancy as at December 31, % Average in-place rent on acquisition $ 625 Average rent in place as at December 31, 2013 $ 660 Market rent on acquisition $ 685 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 1,660 $ 2,079 Exterior upgrades $ 121 $ 127 Common area upgrades $ 200 $ 216 Building systems upgrades $ $ 15 Structural upgrades $ 330 $ 330 Total $ 2,311 $ 2,767 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Lynden Square and was formerly referred to as Heatherwood Apartments. Lynden Square s rehabilitation program is substantially complete. The majority of the amenity upgrades originally planned at Lynden Square have been completed, in addition to the renovations to exterior finishes of the complex. The majority of in-suite renovations have been completed which have assisted in the successful repositioning of the property within its local submarket. Average in-place rents are closely aligned with the initial underwriting expectation and increased approximately 5.6% during Although occupancy levels were below expectations during the first two quarters of 2013, the asset has seen significant improvements in occupancy levels throughout the second half of 2013 and achieved occupancy of approximately 94% during Q4 2013, which aligned with initial underwriting expectations. As the property continues to experience natural turnover in the tenant base, rental rate increases aligned with initial targets and continued levels of high occupancy are anticipated. 17

19 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Year 2 Year 3 Targeted Rental Rates $700 $680 $660 $640 $620 In Place at Acquisition Budget Actual $600 $580 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 18

20 CHELSEA COMMONS Orange County, North Carolina Date of acquisition December 20, 2012 Number of suites 250 Purchase price $ 17,814 Occupancy on acquisition 98.8% Current occupancy as at December 31, % Average in-place rent on acquisition $ 741 Average rent in place as at December 31, 2013 $ 790 Market rent on acquisition $ 801 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 1,009 $ 1,101 Exterior upgrades $ 238 $ 238 Common area upgrades $ 288 $ 288 Building systems upgrades $ 30 $ 30 Structural upgrades $ 154 $ 154 Total $ 1,719 $ 1,811 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Chelsea Commons and was formerly referred to as Highland Hills Apartments. Chelsea Commons repositioning program is substantially complete. Completed renovations include new signage, renovated leasing office and clubhouse, upgraded fitness center and the addition of a kid s room, renovated sport court and a dog park. Exterior renovations include siding repair and painting, garbage facility enclosures, plumbing repairs and HVAC upgrades. The in-suite program is complete with renovations focused on kitchen and bathroom areas. Average in-place rents grew in 2013 by nearly 6.5%, aligned with original underwriting expectations. Although occupancy levels have declined below the initial underwriting expectations temporarily during Q3 2013, the property continued to stabilize and occupancy improved to 92.5% by the end of The increased vacancy was attributed to short-term inconveniences associated with the construction during the repositioning program and higher than anticipated turnover. Occupancy is trending back towards the initial underwriting expectations and improved each month during Q As the property continues to experience natural turnover in the tenant base, rental rate increases aligned with initial targets and continued levels of high occupancy are anticipated. 19

21 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Year 2 Year 3 Targeted Rental Rates $820 $800 $780 $760 $740 In Place at Acquisition Budget Actual $720 $700 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 20

22 SARATOGA RIDGE Austin, Texas Date of acquisition December 20, 2012 Number of suites 229 Purchase price $ 17,095 Occupancy on acquisition 97.0% Current occupancy as at December 31, % Average in-place rent on acquisition $ 702 Average rent in place as at December 31, 2013 $ 818 Market rent on acquisition $ 762 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 78 $ 176 Exterior upgrades $ 111 $ 111 Common area upgrades $ 175 $ 175 Building systems upgrades $ 22 $ 22 Structural upgrades $ 40 $ 40 Total $ 426 $ 524 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Saratoga Ridge and was formerly referred to as Canyon Hills Apartments. Saratoga Ridge s rehabilitation program is complete. The amenity upgrade has been completed with renovations focused on improvements to the clubhouse and leasing center, outdoor grill and gazebo, as well as outdoor pools and the dog park. The majority of exterior renovations have been primarily focused on upgrades to landscaping and site signage. Although occupancy levels initially lagged underwriting expectations at the beginning of 2013, the property continuously exceed occupancy projections during Q3 and Q Actual average in-place rental levels have improved significantly since acquisition, increasing by nearly 16.5% during 2013, which is ahead of initial underwriting expectations. Saratoga Ridge is anticipated to continue to generate strong growth in rental rate levels, while occupancy levels remain strong. 21

23 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Year 2 Year 3 Targeted Rental Rates $830 $820 $810 $800 $790 $780 $770 $760 $750 $740 $730 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 In Place at Acquisition Budget Actual 22

24 WATERCREST Cary, North Carolina Date of acquisition May 6, 2013 Number of suites 344 Purchase price $ 25,706 Occupancy on acquisition 96.5% Current occupancy as at December 31, % Average in-place rent on acquisition $ 736 Average rent in place as at December 31, 2013 $ 805 Market rent on acquisition $ 801 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 1,174 $ 1,580 Exterior upgrades $ 41 $ 83 Common area upgrades $ 213 $ 249 Building systems upgrades $ 14 $ 14 Structural upgrades $ 261 $ 344 Total $ 1,703 $ 2,270 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Watercrest and was formerly referred to as Hidden Oak Apartments. Watercrest s rehabilitation program is currently underway, with upgrades nearly complete to the amenity areas, the club-house and leasing center, landscaping and signage. Upgrades to the interior finishes are currently underway and are nearly complete with remaining investments to be made in appliance upgrades which are anticipated to occur as suites become vacant on turnover to new tenants. Remaining items within the rehabilitation program include improvements to the irrigation systems and targeted exterior repairs. The rehabilitation program is anticipated to be completed in accordance with the original underwriting budget and to be completed by the end of Q Average in-place rent levels are exceeding anticipated levels as new leases are being completed at the forecasted rent levels and renewals are exceeding original expectations. Since the acquisition of the property in May 2013, average in-place rents have increased nearly 9.5%. Current occupancy at Watercrest is slightly below the initial underwriting target; however, occupancy has begun to improve as the repositioning process is completed. Occupancy improved to 92.5% by December 2013, which is slightly above occupancy at the end of Q When the renovations are completed, significant increases in rental traffic and successful closing ratios will follow, improving the occupancy level. Furthermore, rental rate growth is anticipated to continue, exceeding initial underwriting expectations. 23

25 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 Year 2 Year 3 Targeted Rental Rates $850 $800 $750 $700 In Place at Acquisition Budget Actual $650 $600 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 24

26 EAGLE LANDING Cary, North Carolina Date of acquisition May 6, 2013 Number of suites 444 Purchase price $ 30,219 Occupancy on acquisition 94.1% Current occupancy as at December 31, % Average in-place rent on acquisition $ 677 Average rent in place as at December 31, 2013 $ 718 Market rent on acquisition $ 737 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 1,198 $ 2,055 Exterior upgrades $ 105 $ 124 Common area upgrades $ 171 $ 191 Building systems upgrades $ 84 $ 120 Structural upgrades $ 90 $ 90 Total $ 1,648 $ 2,580 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Eagle Landing and was formerly referred to as Woodbridge Apartments. Eagle Landing s rehabilitation program is currently underway, with upgrades completed to the amenity areas, club-house and leasing center, landscaping and signage. Upgrades to the interior finishes are currently underway and approximately 65% complete. The rehabilitation program is anticipated to be completed in accordance with the original underwriting budget and to be completed by the end of Average in-place rent levels are currently exceeding the anticipated levels, as new leases are being completed at the forecasted rent levels and renewals are exceeding original expectations. Since the acquisition of the property in May 2013, average in-place rental rates have increased by approximately 6.0%. Occupancy at Eagle Landing rebounded during the latter half of Q and continued through Q4 2013, increasing to nearly 95% and slightly ahead of initial underwriting expectations. As the rehabilitation program continues, the property is anticipated to enjoy strong levels of rent growth and maintain its targeted occupancy. 25

27 Project Occupancy 100.0% 98.0% 96.0% 94.0% 92.0% Budget 90.0% 88.0% 86.0% Actual 84.0% 82.0% 80.0% May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 Year 2 Year 3 Targeted Rental Rates $720 $710 $700 $690 $680 $670 $660 $650 $640 $630 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 In Place at Acquisition Budget Actual 26

28 LAKE ELLENOR Orlando, Florida Date of acquisition November 26, 2013 Number of suites 296 Purchase price $ 18,658 Occupancy on acquisition 100.0% Current occupancy as at December 31, % Average in-place rent on acquisition $ 728 Average rent in place as at December 31, 2013 $ 728 Market rent on acquisition $ 751 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ 57 $ 646 Exterior upgrades $ 11 $ 360 Common area upgrades $ 75 $ 344 Building systems upgrades $ $ 50 Structural upgrades $ $ Total $ 143 $ 1,400 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Lake Ellenor and was formerly referred to as Bella Lakes Apartments. Lake Ellenor s rehabilitation program is currently underway, however still in its infancy. Targeted capital investments include renovations to the clubhouse and leasing centers, addition of fitness center and various tenant amenities such as barbeque areas, improved exterior pool areas and the addition of a dog park. Replacement of site signage has begun, as well as some exterior painting. In-suite renovations are anticipated to be completed during the first two quarters of 2014 with investments focused on the renovations of kitchens, bathrooms and in-suite flooring. Targeted rental rate growth is approximately 4.2% for Year 1 of operations with occupancy at a target of 96%. 27

29 ALEXANDER POINTE Jacksonville, Florida Date of acquisition December 10, 2013 Number of suites 232 Purchase price $ 15,949 Occupancy on acquisition 92.7% Current occupancy as at December 31, % Average in-place rent on acquisition $ 741 Average rent in place as at December 31, 2013 $ 741 Market rent on acquisition $ 881 Renovation and Repositioning Program Since inception Total Budget Insuite upgrades $ $ 680 Exterior upgrades $ $ 55 Common area upgrades $ $ 237 Building systems upgrades $ $ 52 Structural upgrades $ $ 26 Total $ $ 1,050 As part of the Fund s repositioning efforts, the asset has been rebranded as Landmark at Alexander Pointe and was formerly referred to as Blanding Place Apartments. Alexander Pointe s rehabilitation program is currently underway, however still in its infancy. Targeted capital investments are consistent with many of the repositioning strategies either successfully executed upon, or currently underway within the Fund s portfolio. Renovations include the clubhouse and leasing centers, addition of fitness center and various tenant amenities such as barbeque areas, improved exterior pool areas and the addition of a dog park. Replacement of site signage has begun, as well as some exterior painting. In-suite renovations are anticipated to be completed during the first two quarters of 2014 with investments focused on the renovations of kitchens, bathrooms and in-suite flooring. Targeted rental rate growth is approximately 6.6% for Year 1 of operations with occupancy at a target of 94%. 28

30 ANALYSIS OF FINANCIAL INFORMATION Below is an analysis of the Fund s financial information for the three months and year ended December 31, 2013, and period ended December 31, The Company did not have any operations from the date of formation to September 30, Statement of Income and Comprehensive Income Three months Year ended Period ended ended December December 31, December 31, 31, Revenue from rental operations $ 5,537 $ 18,087 $ 332 Total rental expenses 2,558 8, Net rental income 2,979 9, General and administrative expenses Asset management fees , Net income (loss) before undernoted items 2,661 8,768 (66) Foreign exchange gain/(loss) 1,871 3,172 (268) Net Finance costs (3,024) (8,233) (180) Net income (loss) before undernoted items 1,508 3,707 (514) Fair value adjustment of investment properties 83 3,049 - Current and deferred tax expense - 2,014 - Net income (loss) and comprehensive income (loss) $ 1,591 $ 4,742 $ (514) The Fund generated net income of $4,742 for the year ended December 31, 2013, which represents the first full year of operations of the Fund, and $1,591 for the three months ended December 31, Whereas, for the period ended December 31, 2012 the Fund incurred a net loss of $514, which represented only 11 days of rental operations of the Fund. The current year operations represent a full year of operations for 4 properties acquired in 2012 and operations from the date of acquisition of 4 properties acquired in The significant revenue and expense items are as follows: Net Rental Income The rental revenue for the three months and year ended December 31, 2013 was $5,537 and $18,087, respectively, and predominately represents the revenue earned from the leasing of suites. The rental revenue for the period from August 30, 2012 (date of formation) to December 31, 2012 was $332, which represented 11 days of operations from December 20, 2012 to December 31,