1. The Mural District: Rebirth in Downtown Fresno 950-960 Divisadero Street, Fresno, CA Jason Mochizuki MBA ’14 Fin 565 Term Project

2. Why Fresno? Fresno is the economic hub of Central California with an MSA population of 949,700. Fresno enjoys a low cost of living (1.9% below national average), as well as an unemployment rate that is projected to fall by 30% between 2012 -2016. Fresno was devastated by the economic downturn, however, current job growth from the housing market recovery and expansion of the healthcare sector, as well as the fact that Fresno County is expected to absorb 25% of California’s population growth through 2050 make this market undervalued relative to other more expensive MSA areas in California. Why Mural District Neighborhood? The Mural District is ground zero of Fresno’s culture and arts scene. The neighborhood is part of The Fulton Corridor Specific Plan, the City’s long-term vision for revitalizing downtown into a vibrant, walkable 24/7 destination. The implementation of this plan has led to the development of funky new retail and entertainment venues that excite the sidewalk, as well as new mixed-use projects that target late-20’s to early 30’s young professionals. Surprisingly these neighborhood improvements have not translated into large price increases making the market a great opportunity. Walk Score: 72/100 Area Amenities 1.Chukchansi Park (10 min walk): Minor league baseball stadium and entertainment complex 2.Fulton Mall (10 min walk) : Mixed use pedestrian mall, this retail/office concept is undergoing a major redevelopment as part of FCSP 3.Iron Bird Café (<0.1 mile): neighborhood favorite with outdoor seating 4.Fulton 55 (<0.1 miles): live music club, neighborhood is less than 5 mins from eight live entertainment theaters 5.High Speed Rail: California’s high speed rail station in Fresno will be within 5 mins of site #1 #2 #3 #4

3. The Property: 950-960 Divisadero Property contains seven 2-bed/1-bath bungalow style cottages with an average unit size of 684 SF Project was built in 1925, but the cottages were extensively remodeled in 2011 with new roof, flooring, plumbing, electrical, and new appliances 1 of 7 cottages has interior fire damage and cannot be occupied, a local realtor indicated that seller may be experiencing financial distress and does not have the capital to fix the 7 th unit (property sold “as is”) Asking price is $400K or $57K/unit and $83.54/SF All units excluding damaged unit include a living room, fully-equipped kitchen, and granite countertops Sales Comparables AddressDistancePricePrice/SFDate SoldBuiltBeds/Bath Square Feet AdjustmentsAdj. Price/SFNotes 950-960 Divisadero (Subject) 0$57,143/Unit$83.54N/A19252.0/1.0684/Unit*N/A$83.54*4,788 SF Total 2890 Huntington, Apt 166 1.2 mi$113,000$74.939/26/201319802.0/2.251508($25,000)$58.36 Comp has better façade, more recent construction, an additional bath, larger floor plan 390 N. San Pablo (Duplex) 0.6 mi$55,000/Unit$95.074/29/201319252.0/1.01157$10,000$103.72 Comp has not been renovated in recent past like subject 2881 N. Huntington, Apt 206 1.3 mi$68,000$78.708/26/201319802.0/1.0864($5,000)$72.91 Comp has more recent construction, but is materially similar to subject in quality Avg Excluding Subject:$97,000$82.90-- - 1176 ($6,666.67) $77.37 * Subject property appears fairly priced for market relative to average adjusted sales price. The recent remodeling will spare me substantial costs on both construction and new appliances (excluding the fire damaged unit) while also allowing the property to generate rents commensurate with comp set.

4. Rental Market Rent Comparables AddressDistanceRent/MonthRent/SFBuiltBeds/Bath Square Feet Notes 950-960 Divisadero (Subject) 0$800$1.1719252.0/1.0684/Unit* 1901 Fulton St.0.07 mi$1,350$1.2320092.0/2.01097 Larger floor plan and newer, higher quality construction than subject 925 N. San Pablo0.7 mi$825$0.9719862.0/1.0850 Similar to subject in quality, comp has not been renovated within last 7 years 1805 Broadway0.16 mi$800$1.2720052.0/1.0630 Newer construction, however overall quality of property looks similar to subject Avg Excluding Subject:$991.67$1.16- - 1176 *Subject property was fully renovated in 2011, which brought its build quality and finishes up to a level similar to the newer developments. According to REIS Reports, average metro vacancy is 3% (8/31/13) indicating a strong rental market. The subject asking rent of $1.17 is in line with the average of direct market comparables at $1.16/SF. *Fresno’s rent growth is flat with an average rent of $836. Of 343 multifamily properties within the city, 75% of units rent for $872 or under. (www.reisreports.com) Median Per Unit Asking Price for Multifamily Properties in Fresno is up 9.7% YOY (Loopnet.com)

5. Assumptions Gross potential income is based upon rental rate of $800/unit Vacancy rate based upon average MSA rate in Fresno Property operating expenses are based upon the averages from a survey that I conducted amongst local investors and realtors, tenants pay own utilities Assumes income generating periods are a full 12 months Interior of 950 Divisadero

6. Assumptions Cost of improvements estimated at $20K to repair fire damage to 1 unit; this estimate is anecdotal by a realtor who saw the property and estimated improvements between $15-20K I’m not utilizing an owner-occupied financing plan, because property contains more than 4 units, I would have to obtain commercial mortgage The prevailing underwriting standards for a small portfolio multifamily mortgage is ($400K-$3MM) 80% LTV at 4.75% amortized over 30 years due in 10 (http://www.steelheadcapital.com/rates/)http://www.steelheadcapital.com/rates/ Multifamily cap rates in downtown Fresno range from 5-9%, with an average of 7%, which was utilized for this analysis Accumulated depreciation is calculated on a straight line basis over 27.5 years Property disposition would occur at the end of year 4 16% Unleveraged IRR