GSLA 2016 Conference & Trade Show How to Make Your Financials Rock ‘N Roll October 25-26, 2016 David Johnston, CEO Beacon Communities, Inc.

Profit & Loss Financial Statement Total Revenues Operating Expenses Net Operating Income Debt Service Net Cash Flow

Profit & Loss Financial Statement Total Revenues Operating Expenses Net Operating Income (EBITDA) Gross Profit Margin % = NOI/Total Revenues Cap Rates

Gross Profit Margins Total Revenues $3M $3M Operating Expenses 2.1M 2,250,000 NOI $900,000 $750,000 G. P. % 30% 25%

Cap Rates NOI (EBITDA) $1M $1M Cap Rate 7% 9% Value (NOI/Cap) $14.3M $11.1M

Cap Rates NOI (EBITDA) $1M $1,100,000 $100k Cap Rate 7% 7% Value $14.3M $15.7M $1.4M

Total Revenues Pre-Leasing Resident Turnover Stabilized Occupancy Rent Roll Management

Pre-Leasing Pre-Leasing Deposits 20% 30% (Assume 100 units) Pre-Leasing Deposits 20% 30% Lease-up Deficit – Yr. 1 ($900,000) ($550,000)

Resident Turnover Resident Turnover % 40% (Assume 100 units) Resident Turnover % 40% # of Units required to lease 140 Est. Marketing Cost per Unit $5,000

Stabilized Occupancy Average 90% 95% Revenues from 5 extra units (Assume 100 units) Average 90% 95% Revenues from 5 extra units - $3,500 rent per mo. = $17,500 - 75% gross profit margin = $13,125 - annualized revenues = $157,500 - value created (7% cap) = $2,250,000

Operating Expenses Controlling Labor Cost Group Purchasing Organizations Professional Employer Organization (“PEO”) Employee Health Insurance

Debt Service Capital Structure Debt vs. Equity Debt Source Primary/Senior Note Mezzanine Note Replacement Reserves Financial Covenants

Questions & Answers David Johnston CEO 678-947-4423