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Appraisal of the

3901 Greenmount Avenue Baltimore, MD 21218

Project # 17-000174-01-01

Prepared For:

Mr. Andrew Bowers Silver Hill Funding

4425 Ponce de Leon Boulevard 4th Floor Coral Gables, FL 33146

Prepared By:

Accurate Appraisals 551 Park Road

Washington, DC 20010

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Accurate Appraisals 551 Park Road NW Washington, DC 20010 Phone 202-722-1370 October 3, 2017 Mr. Andrew Bowers Silver Hill Funding 4425 Ponce de Leon Boulevard 4th-Floor Coral Gables, FL 33146 Regarding: 3901 Greenmount Avenue Baltimore, MD 21218 (Project # 17-000174-01-01)

Dear Mr. Andrew Bowers,

Accurate Appraisals has performed an appraisal of the subject property, in consideration of all relevant valuation techniques. The data, analysis and conclusions resulting in the market value estimate are described in the attached appraisal report. The subject property was most recently inspected on September 22, 2017, which serves as the effective date of value. The subject property is a 2.5 level, walk-up style apartment building situated on a 2,400 square foot lot. The building contains 5 apartment units with a unit mix of 3 One-bedroom One-bath units and 2 Studio units. On the date of inspection, 2 of the One-bedroom units were vacant. Based on the inspection, the units are currently 60% occupied. The purpose of this ensuing summary appraisal report is to estimate the “as is” market value of the fee simple interest in the subject property. In valuing this property, we have considered the actions of the market and have concluded with an estimate of market value in consideration of current economic indicators of comparable properties. Our study consisted of a personal inspection of the subject property, as well as a fully comprehensive investigation into the competitive marketplace for properties, which are considered comparable to the subject. All pertinent factors, as they relate to value, were examined in consideration of the economic environment of the subject property under current conditions. This appraisal report has been prepared in conformity with and is subject to the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP). The appraisal is subject to the attached Basic Assumptions and Limiting Conditions and Definition of Market Value.

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3 October 3, 2017 Mr. Andrew Bowers Silver Hill Funding Re: 3901 Greenmount Avenue Baltimore, MD 21218 (Project # 17-000174-01-01) Based upon my findings, it is my opinion that the market value of the fee simple interest in the subject property identified as 3901 Greenmount Avenue Baltimore, MD 21218 in its “as is” condition, as of September 22, 2017, is:

TWO HUNDRED TEN THOUSAND DOLLARS $210,000

The attached appraisal report describes the data and analysis, which serves as the basis for our value conclusion. Separation of the signature pages from the balance of this report is inappropriate. Respectfully submitted,

E. Michael Jordan Principal State of Maryland Certified General Appraiser #11349

REAR VIEW STREET VIEW

SUBJECT PHOTOGRAPHS

FRONT & SIDE VIEW FRONT VIEW

Unit B-Living Unit B-Kitchen Unit B-Bathroom

Unit C-Living Unit C-Kitchen Unit C-Bedroom

Unit 6-Bed 2

Unit A-Living Room Unit A-Kitchen Unit A-Bath

Unit C-Bathroom

SUBJECT PHOTOGRAPHS

Unit A Bedroom

Unit D-Kitchen Unit D-Bathroom

Unit E-Kitchen Unit E-Living Unit E-Bedroom Unit E-Bathroom

SUBJECT PHOTOGRAPHS

Unit D-Living Room

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TABLE OF CONTENTS

Title Page Letter Of Transmittal Photographs Of the Subject Table Of Contents

INTRODUCTION Certificate of Value ............. ........... ...................... ........... .......... ........... .......... ....................... 2 Basic Assumptions and Limiting Conditions ............. ........... .......... ........... .......... ....................... 4 Special Limiting Condition .... ........... ...................... ........... .......... ........... .......... ....................... 5 GENERAL INFORMATION Identification of the Property ........... ...................... ........... .......... ........... .......... ....................... 7 History of Ownership ........... ........... ...................... ........... .......... ........... .......... ....................... 7 Purpose of the Appraisal ...... ........... ...................... ........... .......... ........... .......... ....................... 7 Intended Use of the Appraisal ......... ...................... ........... .......... ........... .......... ....................... 7 Scope of the Appraisal ......... ........... ...................... ........... .......... ........... .......... ....................... 7 Property Rights Appraised ... ........... ...................... ........... .......... ........... .......... ....................... 7 Definitions ........................... ........... ...................... ........... .......... ........... .......... ....................... 7 Date of Value ...................... ........... ...................... ........... .......... ........... .......... ....................... 7 Date of Report .................... ........... ...................... ........... .......... ........... .......... ....................... 7 Definition of Market Value ... ........... ...................... ........... .......... ........... .......... ....................... 8 PART I - DESCRIPTION, ANALYSIS, AND CONCLUSION Neighborhood Analysis ........ ........... ...................... ........... .......... ........... .......... ..................... 10 Market Analysis ................... ........... ...................... ........... .......... ........... .......... ..................... 14 Description of the Site ......... ........... ...................... ........... .......... ........... .......... ..................... 17 Description of the Improvements ..... ...................... ........... .......... ........... .......... ..................... 18 Zoning ................................ ........... ...................... ........... .......... ........... .......... ..................... 21 Real Estate Assessment and Taxes .. ...................... ........... .......... ........... .......... ..................... 21 Highest and Best Use .......... ........... ...................... ........... .......... ........... .......... ..................... 22 PART II - VALUATION OF THE PROPERTY Valuation Methodology ........ ........... ...................... ........... .......... ........... .......... ..................... 24 The Income Capitalization Approach ...................... ........... .......... ........... .......... ..................... 26 The Sales Comparison Approach ...... ...................... ........... .......... ........... .......... ..................... 38 Final Reconciliation .............. ........... ...................... ........... .......... ........... .......... ..................... 42 ADDENDA Engagement Letter Insurable Value Qualifications of the Appraisers

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INTRODUCTION

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2Certificate of Value I, E Michael Jordan, certify that I have personally inspected the subject property. I have considered all of the pertinent facts affecting the value thereof. Also, I certify that all market data accumulated from various sources pertaining to the final value estimate has been, where possible, personally examined and verified as to details, motivation, and validity. Additionally, I certify that: - The statements of fact contained in this report are true and correct. - The reported analyses, opinions, and conclusions are limited only by the

reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions.

- I have performed no (or the specified) services, as an appraiser or in any other capacity regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

- I have no present or prospective interest in the property that is the subject of this report, and we have no personal interest with respect to the parties involved.

- I have no bias with respect to the property that is the subject of this report, or to the parties involved in this assignment.

- My engagement was not contingent upon developing or reporting predetermined results.

- My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event related to the intended use of appraisal.

- My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

- I have made a personal inspection of the property that is the subject of this report.

- No one else assisted the appraiser in performing the formal inspection of the subject property.

Additionally, I certify that: - I am competent to perform this appraisal based upon past experience

appraising similar properties throughout the Baltimore-Washington area. - That the appraisal report conforms to the Federal Financial Institutions Reform,

Recovery and Enforcement Act of 1989 (“FIRREA”). - That this Certificate of Value is only valid when accompanied by the attached

Basic Assumptions and Limiting Conditions. - Use of this report is subject to the requirements of the Appraisal Institute

relating to review by its duly authorized representative. This report has been made in conformity with, and subject to, the minimum requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute (AI) as adopted by the Appraisal Standards Board of the Appraisal Foundation.

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3Certificate of Value I hold the necessary state certification to appraise the subject property in conjunction with federally related transactions. Based upon my findings, it is my opinion that the market value of the fee simple interest in the subject property identified as 3901 Greenmount Avenue Baltimore, MD 21218 in its “as is” condition, as of September 22, 2017, is:

TWO HUNDRED TEN THOUSAND DOLLARS $210,000

Presentation of this signature page from the balance of our report is not an appropriate use of the document. ACCURATE APPRAISALS

E. Michael Jordan Principal State of Maryland Certified General Appraiser #11349

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4

Basic Assumptions and Limiting Conditions This appraisal report is subject to the underlying assumptions and limiting conditions qualifying the information contained in this report as follows: This appraisal is based on the national and local economic conditions, purchasing power of money, and financing rates prevailing on the effective date of valuation. The valuation estimate and market or feasibility conclusions apply only to the property specifically identified and described in this report. By reason of the purpose of this appraisal, and the function of the report herein set forth, the value reported is only applicable to the property rights appraised and the appraisal report should not be used for any other purpose. Information and data contained in this report, although obtained from public records and other reliable sources and, where possible, carefully checked by the appraiser, are accepted as satisfactory evidence upon which rests the final estimate of property value. Information identified as being furnished or prepared by others is believed to be reliable, but no responsibility for its accuracy is assumed. No responsibility beyond reason is assumed for matters of a legal nature, whether existing or pending. No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated. It is assumed that all information known to the client and relative to the valuation has been accurately furnished and that there are no undisclosed leases, agreements, liens, or other encumbrances affecting the use of the property. The property is appraised free and clears of any or all liens or encumbrances unless otherwise stated. Ownership and management are assumed to be competent and in responsible hands. The appraisers have made no legal survey nor have they commissioned one to be prepared; therefore, reference to a sketch, plat, diagram, or previous survey appearing in this report is only for the purpose of the reader to visualize the property. The appraisers are not engineers, and any references to physical property characteristics in terms of quality, condition, cost, suitability, soil conditions, flood risk, obsolescence, etc., are strictly related to their economic impact on the property. No liability is assumed for any engineering-related issues. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the report. The existence of potentially hazardous materials used in construction or maintenance of the building, such as the presence of urea formaldehyde foam insulation, asbestos, and/or existence of toxic waste, which may or may not be present on the property, has not been considered.

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Basic Assumptions and Limiting Conditions The valuation is subject to change if any such potentially hazardous materials were detected by a qualified expert in these areas. The appraisers reserve the rights to modify this valuation if so warranted. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in the report. It is also assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. The distribution of the total valuation in this report between land and improvements applies only under the existing or proposed program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisals and are invalid if so used. The valuation contained in this report does not include any cost to cure (if necessary) limitations in the improvements that do not satisfy the Americans with Disabilities Act of 1990 (P.L. 101-336). The appraisers were not made aware of any such deficiencies (unless stated in this report) and are not experts in the field of detecting their presence or estimating the costs to cure pre-existing, non-conforming structures. If the subject of this report is a proposed building or project, the appraisers reserve the right to: (A) review finalized plans; (B) require a current on-site inspection prior to release of funds; and (C) recertify the previously reported value. Neither all nor part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm with which they are connected, or any reference to the Appraisal Institute or the MAI or SRA designations) shall be reproduced for dissemination to the public through advertising, public relations, news, or sales media, or any other public means of communication without the prior consent and written approval of the appraisers. Disclosure of the contents of this appraisal report is governed by the By-Laws and Regulations of the Appraisal Institute and has been prepared with the intention of conforming with the reporting standards of the Office of the Comptroller of the Currency, and the Uniform Standards of Professional Appraisal Practice, except that the Departure Provision shall not apply. The appraisers, by reason of this appraisal, shall not be required to give testimony as expert witnesses in any legal hearing or before any court of law unless justly and fairly compensated for such services. Extraordinary Assumptions The subject is encumbered with a ground lease agreement. The ground lease will be expired within the next thirty days. Per the client’s request, I have projected the market value of the fee simple interest. The appraisal is based on the extraordinary assumption that ground lease will expire. Any separation of the signature pages from the balance of our report invalidates the conclusion.

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GENERAL INFORMATION

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7Identification of the Property The subject property is identified in the State of Maryland land records Lot 001, Block 3903B, Section 01 on Map 0009. The subject can also be identified as address 3901 Greenmount Avenue.

History of Ownership Based on a review of the assessment card, the Maximus Property Group LLC is the current owner of the subject property. The current owner acquired the subject property from the Properties International 5, LLC on October 5, 2016 for $180,000 or $36,000/unit. The transfer was a non-arms-length transaction. The Properties International 5, LLC acquired the subject property form the Sunset Holding, LLC on September 16, 2016. The purchase price was $165,000 or $33,000/Unit. The transfer was a non-arms-length transaction. To the best of my knowledge, there have not been any other transfers involving the subject property in the past five years and the subject is has not been offered for sale during the 12 months prior to the effective date of this appraisal. Client and Intended Use of the Appraisal The intended user for the assignment is Silver Hill Funding and or affiliates. The intended use is for loan underwriting and or credit decisions by Bank and or participants. Purpose of the Appraisal The purpose of this appraisal is to estimate the as is market value of the fee simple interest in the subject property in its “as is” condition, as of a current date. Valuation Dates The effective date of the appraisal is the date of our most recent inspection, which occurred on September 22, 2017. The date of report reflects the time period during which I worked on the assignment. This transpired between September 22, 2017 and September 28, 2017. Scope of the Appraisal The appraisal process was initiated with an inspection of the subject property (inside and out), which occurred on September 22, 2017. During this process, I perform a walkthrough of the entire interior and inspected the exterior of the building. In addition to the inspection, the appraiser obtained property specific information from public records, and information obtained from the contact person (rent roll and expenses). General economic data such as population, income, households, employment, etc., was gathered from governmental sources and through secondary sources, such as Loop Net and CoStar. Other information such as taxes, ownership history and zoning was provided by governmental and private sources. The property specific data is analyzed in consideration of the overall economic conditions and investment parameters for similar properties in the market area.

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8Upon inspection of the site and a review of the appraisal problem, it was determined that the Sales Comparison Approach and the Income Capitalization Approach are the only applicable valuation techniques. Due to the subjectivity of estimating depreciation and the lack of comparable land sales, the Cost Approach does not provide a credible value. Market data used in this report was obtained through a variety of sources, including: interviews with commercial real estate brokers, leasing agents and property managers, assessment and land records from the various local jurisdictions, loopnet, the Regional MLS and Costar/Comps. The sales data included herein was confirmed through our conversations with market participants that were involved in the various transactions and the most relevant sales were employed in a comparison to the subject property, wherein adjustments are applied to reflect variances between the subject property and comparable sales. The adjusted indications are then reconciled to extract an indication of market value for the subject property. Upon completion of the applicable valuation techniques, the value indications are weighted based on their relevance to the appraisal problem and the quality of the data available. The appraiser then concludes to an estimate of market value in consideration of the relevant approaches. Definitions Fee Simple Estate: Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.1 Market Value2: means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own

best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special

or creative financing or sales concessions granted by anyone associated with the sale. 1 Appraisal Institute, Dictionary of Real Estate Appraisal, 4th ed. (Chicago: Appraisal Institute, 2002), 113. 2 Dictionary of Real Estate Appraisal, 177.

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PART I DESCRIPTION, ANALYSIS, AND CONCLUSION

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10Neighborhood Analysis In the Dictionary of Real Estate Appraisal, 4th Edition, a neighborhood is defined as “a group of complimentary land uses; a congruous grouping of inhabitants, buildings or business enterprise”. The goal of this analysis is to define the relevant governmental, environmental, economic and social factors that most directly influence the value of the subject property. The subject property is located within the Baltimore-Towson Metropolitan Statistical Area. This statistical area includes Baltimore City, Anne Arundel County, Baltimore County, Carroll County, Harford County, Howard County and Queen Anne’s County Maryland. The subject property is located within the Pen Lucy/Waverly neighborhood of Baltimore City, Maryland. The regional economic conditions as well as employment and population n shifts impact the valuation of commercial property in the Baltimore-Towson Metropolitan area. However, due the subject’s small size, the more relevant exterior influences are exerted on a local or neighborhood level. The following maps illustrate the subject’s location in the region and neighborhood.

AREA MAP

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11

Governmental Influences

Baltimore City and the State of Maryland exert the primary government influences on real property in the subject’s neighborhood area. The State of Maryland controls real estate assessments and taxation. Baltimore City controls planning and zoning; police service; fire and rescue services; education and judicial process. Environmental Influences With regard to environmental influences, the relevant characteristics relate to development patterns and access. Development Patterns:

The Waverly/Pen Lucy neighborhood is an urban residential district located approximately 3.17 miles north of the Baltimore City central business district. The neighborhood is defined as the area south of E Cold Spring Lane, north of E 33rd Street, east of Greenmount Avenue and west Loch Raven Boulevard. The residential development in the neighborhood consists of a of urban row-houses, apartment buildings and Victorian Style single family homes. Many of the single family homes have been converted into multi-family properties. Most of the homes were constructed during the 1940’s. The subject is situated along Greenmount Avenue, which is the main commuter and commercial corridor within the neighborhood. Greenmount Avenue is development with mixed use and storefront properties occupied with local businesses.

Because the neighborhood was home to the historic Memorial Stadium, it is designated as an historic district. The Memorial Stadium was Baltimore’s main sports stadium from the early 1920’s until its closure and demolition in 2001. The stadium was home for professional sports including the Baltimore Colts, Baltimore Ravens and the Baltimore Orioles. The site of the former stadium, which is located approximately .70 miles south of the subject property, is now redeveloped with a YMCA Facility and a senior apartment complex known as Stadium Place.

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12

Access and Exposure Greenmount Avenue, which turns into York Road further north, is also a major commuter corridor as it provides access to the Baltimore central business district toward the south and Baltimore County and Interstate 695 toward the north. The subject’s frontage along Greenmount Avenue provides good access. The following chart illustrates linkages and access for the subject property.

Distance to Subject Public bus service 1 Block Grocery Anchored Shopping Center 0.70 Miles Major Roadways I-695 5.30 Miles Convenience Shopping 2 Blocks Schools 1 Mile Radius

Population/Social/Economic Trends To gain a better understanding of the social and economic characteristics among residents in the subject’s neighborhood, we considered statistical information pertaining to residents in a one and three mile radius from the subject property. This data source is the U.S. Census Bureau.

1 mile 3 mile 2010 Population (census) 39,755 268,516 2017 Population (estimate) 39,935 269,700 2022 Population (projection) 39,863 269,380 Change 2010-2017 0.45% 0.44% Projected Change 2017-2022 -0.18% -0.12% 2010 Households (census) 15,602 107,372 2017 Households (estimate) 15,733 107,488 2022 Households (projection) 15,721 107,323 Change 2010-2017 0.84% 0.11% Projected Change 2017-2022 -0.8% -0.15% 2017 Average Household Size 2.10 2.30 2017 Median Household Income $47,652 $44,511 2017 Average Household Income $77,187 $66,202 2017 Households by Income % Households < $25,000 28.10% 31.28% % Households $25,000-$50,000 24.00% 22.81% % Households $50,000-$75,000 13.20% 16.56% % Households $75,000-$100,000 10.31% 9.79% % Households $100,000-$150,000 10.64% 10.50% % Households $150,000+ 13.76% 9.06% 2017 Housing Owner Occupied Housing Units 47.92% 47.57% Renter Occupied Housing Units 52.08% 52.43%

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13The median household income within a 1- mile radius of the subject is $47,652, compared to $66,970 for entire Baltimore Metropolitan Area and $54,442 for all U.S Households. The data suggests that the residents of the immediate neighborhood have lower incomes. The neighborhood has a stable population base with more renter occupied housing. In terms of housing costs, I examined information gathered through the multiple listing services (MRIS) and found that from October 1, 2016 to October 1, 2017 the sale prices for single-family detached homes within the Waverly/Pen Lucy neighborhood ranged from $19,250 to $395,000 with an average of $192,625 and a median of $212,500. There were 30 transfers, which is an indication of an active residential market. The homes required marketing periods from 3 to 499 days with an average of 80 days and a median of 40 days. Most homes were constructed during the 1930’s. Baltimore City Employment The following chart summarizes employment and un-employment trends in Baltimore City over the past years.

BALTIMORE CITY EMPLOYMENT Year Civilian Labor Force Employment Unemployment Unemployment

Rate8/2017 304,046 284,960 19,086 6.3%2016 294,985 274,430 18,555 6.3%2015 295,482 272,756 22,726 7.7%2014 294,209 269,052 25,157 8.6%2013 296,521 267,697 28,824 9.7%2012 297,329 267,128 30,201 10.2%2011 295,579 264,134 31,445 10.6%2010 295,504 262,347 33,157 11.2%Source: LAUS and Bureau of Labor Statistics The 2010 unemployment rate of 11.2% was the highest rate Baltimore City has experienced over the past years. There has been significant improvement as the unemployment rate decreased to 6.3% as of August 2017. The current (August 2017) unemployment rate for the entire Baltimore Metropolitan Area is 4.2%, which is an indication that Baltimore City is still underperforming the other counties. The Johns Hopkins University and the University of Maryland are the top employers within Baltimore City. Conclusion:

The subject property is located within an urban residential district. It has frontage along a main commuter and commercial corridor that provides good access. The neighborhood has a stable population base with below average income levels. With no major redevelopments plans in the pipeline and minimal projected population growth, the neighborhood characteristic will not change in the immediate future.

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14Market Analysis The purpose of this section is to identify and briefly discuss market conditions impacting multi-family properties within the subject’s market area. The subject property will compete most directly with multi-family properties within the Northeast Baltimore City submarket. Data used in this analysis was compiled from recent sales and rentals of multi-family properties. In addition, I interviewed brokers and property managers who are actively involved in selling and leasing of similar properties. Supply and Demand In the course of completing this assignment, we surveyed the occupancy rates of a few larger apartment complexes within the Northeast Baltimore City subarket. These properties are summarized as follows:

Complex # of Units Occupancy Marble Hall Gardens 393 94% Ellerslie Apartments 117 97% Amberwood Gardens 300 95% Dutch Village 840 94% Park Raven 253 96%

Average 1,903 97% The current occupancy rates for a few of the largest apartment complexes within the Northeast Baltimore City submarket range from 94% to 97%. Based on a Costar Database survey, the Northeast Baltimore City submarket contains approximately 9,808 apartment units. The current vacancy rate is projected at 6.3%. The following chart summarizes market statistics obtained from the CoStar database, pertaining to apartment units within the Baltimore-Northeast submarket.

2013 2014 2015 2016 Current 2017

Total Units 9,803 9,803 9,803 9,803 9,808 Total Vacant Units 562 484 459 634 622 Total Vacancy Rate 5.7% 4.9% 4.7% 6.5% 6.3% Net Absorption 107 78 25 (175) 17

According to brokers in the market, there is good demand and limited supply of affordable housing units within Baltimore City. The current occupancy levels are an indication of moderate demand for rental dwellings. Rental Rates A Regional Multiple Listing survey of similar apartment properties within the immediate market area indicates that rental rates for one-bedroom units range from $595 to $800. Rental rates for studio units range from $ to $450 with a median of $675. The renovated properties and properties that include all utilities within the rental rate tend to have higher rental rates and vice versa. The Northeast Baltimore City submarket contains a significant number of tax credit and government subsidized rental dwellings.

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15Sales In the course of completing this assignment, I researched multi-family property sales within the market area. The following chart is a list of these recent transfers.

Location

Sale date DOM

Unit Mix

Sale Price Total Units Price/Unit

700 Woodbourne Ave. Baltimore, MD 21212

9/2017 133

5 One Bedrooms 3 Two Bedrooms 1 Three Bedrooms

$257,500 9 $28,611

5517 Edna Avenue Baltimore, MD 21214

8/2017 35

1 Studio 2 One Bedroom 1 Two Bedroom

$195,700 4 $48,925

1307 Northern Parkway Baltimore, MD 21209

6/2017 7

3 One Bedrooms 2 Two Bedrooms

$275,000 5 $55,000

4200 Stanwood Avenue Baltimore, MD 21206

3/2017 138

1 Two Bedroom 2 Three Bedrooms

$150,000 3 $50,000

500-502 41st Street Baltimore, MD 21218

2/2017 111

6 One Bedrooms 2 Two Bedrooms

$265,000 8 $33,125

2922 Rosalie Avenue Baltimore, MD 21234

2/2017 142

1 Studio 1 Two Bedroom 1 Three Bedroom

$140,000 3 $46,667

5401 Catalpha Road Baltimore, MD 21214

12/2016 57

4 One Bedrooms

$200,000 4 $50,000

3901 Greenmount Ave. Baltimore, MD 21218

10/2016

2 Studios 3 One Bedrooms

$180,000 5 $36,000

4220 Bayonne Avenue Baltimore, MD 21206

03/2016 27

1 One Bedroom 1 Two Bedroom 1 Three Bedroom

$85,000 3 $28,333

6604 Harford Road Baltimore, MD 21214

01/2016 29

6 One Bedrooms 1 Two Bedroom

$222,200 7 $31,743

900 Cator Avenue Baltimore, MD 21218

07/2015 113

1 One Bedroom 4 Two Bedroom 1 One Bedroom

$350,500 6 $58,333

525 Wyanoke Ave. Baltimore, MD 21218

09/2014 21

1 Studio 3 One Bedrooms 1 Two Bedroom

$111,300 5 $22,260

Low $22,260 High $58,333 Avg. $40,750 Median $41,334

The above-cited sales involve properties that might be a suitable alternative acquisition in comparison to the subject. The sales prices range from $22,260/Unit to $58,333/Unit with an average of $40,750/Unit and a median of $41,334/Unit. The main factors that influence the sales prices include property condition, and unit mix.

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16Estimates for Exposure and Marketing Time The estimated marketing period is a prediction of how long it should take to sell the subject property at the indicated market value/price level, in the period immediately following the effective date of sale. The exposure time estimate is intended to reflect the estimated marketing period, which should be anticipated for the subject property to sell at the estimated market value level, prior to a hypothetical sale on the effective date of appraisal. These predictions are a function of both price and time. For instance, a property could be listed at an unreasonable price 18 months if the price is then dropped to a reasonable level, which results in a sale of the property six months later, the extracted marketing time would be six months, rather than two years. Recent sales of multi-family properties within the market required marketing periods from 21 to 138 days with an average of 74 days. Market evidence suggests that the subject property should sell in 2-3 months, assuming market oriented pricing and professional marketing. Conclusion The current occupancy levels are an indication of healthy market conditions. In addition, there is a shortage of affordable housing units. Overall, market conditions are expected to be positive in the near term. As a result, the prognosis for the marketability and sale potential of the property is positive.

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17Site Description The following description of the subject site is based upon public records and a physical inspection. Address: 3901 Greenmount Avenue Baltimore, MD 21218 Lot size: 2,400 Square Feet 24x100 Shape: Rectangular Topography: Level Utilities: All public utilities are available at the subject site. Frontage: 24 Feet of Frontage along Greenmount Avenue Accessibility: Accessibility is good via Engle Ave. and Greenmount Drainage: Appears to be adequate Easements: Typical public utility easements, which are not considered to

be detrimental to the site. Flood Plain: Based on a review of flood plain map panel #2400870011E

dated 02/02/2012, the site is situated within Zone X, which is an area of minimal flooding

Conclusion: All utilities and public services are available to the site. The

site offers good access and appears to adequately support the existing improvements. If the site were vacant and available for development, it could support a variety of property types.

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18Improvements Description The subject property is a 2.5-level, walk-up style multi-family building. The building contains 5 apartment units. The unit breakdown is as follows:

Unit Mix Unit Type Size (NRA)

3 1BR/1BA 460+SF

2 Studios 370+SF

Year Built: Based on public records the building was constructed in

1920. The actual age is 97 years. The building and units are in average and condition and the effective age is estimated at 30 years.

Gross Building Area: Based on a measurement, the property has a gross living

area of 2,390 square feet. Apartment Interior: The interior of the apartments consist of painted drywall and

ceilings, vinyl tile floors, wood doors, and ceiling-mounted incandescent lighting.

The apartment kitchen fixtures and finishes include a gas

stove, refrigerator, stainless steel sink, wood cabinets and vinyl tile floors.

The bathroom finishes includes ceramic tile floors, painted

walls with ceramic tile tub surround, wall-mounted incandescent lighting. Fixtures include a bathtub, water closet, exhaust fan, medicine cabinet, and wall-hung sink.

Foundations: Crawl Space Exterior Walls: Aluminum Siding Windows: Double Hung Vinyl Windows Roof: Asphalt Shingle Hot Water System: 5 Individual Hot Water Heaters HVAC System: Each unit has a Gas Furnace. Plumbing Fixtures: Assumed to be standard

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19 Improvements Description Separately Metered Utilities: The units are separately metered for electricity and gas. The

landlord pays for water/sewer but passes the expense to the tenants.

Amenities: Balconies Conclusion The building and units appear to be in average condition as I did not observe deferred maintenance items. A building sketch is included on the following page.

18.5'

3.5'

4.95

'

5'

4.95'3'

18.5'

3.5'

4.95

'

5'

4.95'3'

16'

4'

8'

4'

KitchenBath

Living

Utility

UNIT B

Bath

Bedroom

Kitchen

Living

UNIT A

Bedroom

Bath

Kitchen

Living

UNIT C

Utility

KitchenBath

LivingUNIT D

Bedroom

Living

Kitchen

Bath

FIRST FLOOR SECOND FLOOR

THIRD FLOOR

UNIT E

TOTAL Sketch by a la mode, inc. Area Calculations Summary

Living Area Calculation DetailsFirst Floor 954.75 Sq ft 0.5 × 3.5 × 3.5 = 6.12

0.5 × 3.5 × 3.5 = 6.125 × 3.5 = 17.550 × 18.5 = 925

Second Floor 954.75 Sq ft 0.5 × 3.5 × 3.5 = 6.120.5 × 3.5 × 3.5 = 6.125 × 3.5 = 17.550 × 18.5 = 925

Third Floor 480 Sq ft 8 × 10 = 8025 × 16 = 400

Total Living Area (Rounded): 2390 Sq ft

Property AddressCity County State Zip Code

Form SKT_LT.BldSkI — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE

Building SketchMaximus Property Group, LLC3901 Greenmount AveBaltimore Baltimore City MD 21218Silver Hill Funding

Borrower/Client

Lender/Client

18.5'

3.5'

4.95

'

5'

4.95'3'

18.5'

3.5'

4.95

'

5'

4.95'3'

16'

4'

8'

4'

KitchenBath

Living

Utility

UNIT B

Bath

Bedroom

Kitchen

Living

UNIT A

Bedroom

Bath

Kitchen

Living

UNIT C

Utility

KitchenBath

LivingUNIT D

Bedroom

Living

Kitchen

Bath

FIRST FLOOR SECOND FLOOR

THIRD FLOOR

UNIT E

TOTAL Sketch by a la mode, inc. Area Calculations Summary

Living Area Calculation DetailsFirst Floor 954.75 Sq ft 0.5 × 3.5 × 3.5 = 6.12

0.5 × 3.5 × 3.5 = 6.125 × 3.5 = 17.550 × 18.5 = 925

Second Floor 954.75 Sq ft 0.5 × 3.5 × 3.5 = 6.120.5 × 3.5 × 3.5 = 6.125 × 3.5 = 17.550 × 18.5 = 925

Third Floor 480 Sq ft 8 × 10 = 8025 × 16 = 400

Total Living Area (Rounded): 2390 Sq ft

Form SKT_LT.BldSkI — "WinTOTAL" appraisal software by a la mode, inc. — 1-800-ALAMODE

Building SketchMaximus Property Group, LLC3901 Greenmount AveBaltimore Baltimore City MD 21218Silver Hill Funding

Borrower/Client

Lender/Client

Property AddressCity County State Zip Code

Page #1Main File No. 17-000174-01-01

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21Zoning Based on a review of the Baltimore City Zoning Ordinance and Map, the subject property is within the R-5 (Transitional Residential) Zoning District. The R-5 Transitional Residential Zoning District is intended for those areas that facilitate a transition from primarily single-family neighborhoods to neighborhoods that contain a wider mix of housing types. The R-5 District is meant to accommodate single-family units in both detached and semidetached dwellings, rowhouse developments, and limited low-rise multi-family garden apartment developments of a moderate density. The basic multi-family development standards are as follows: Minimum Lot Area: 2,500 SF/du Maximum Lot Coverage: 40% Maximum Floor Area Ratio: 0.90 Maximum Height: 35 to 45 Feet Minimum Setbacks: Front Yard 25 feet, and Side Yard 15 Feet Conclusion: The subject has a lot area of 2,400 SF. Because the subject does not contain the minimum lot area of 2,500 SF/du for multi-family development, the current improvement is a legal non-conforming use under the grandfathered clause. Real Estate Assessment and Taxes Real property in the State of Maryland is reassessed every three years at 100% of the fair market value. For any increase in the assessed value of a property, State law requires that the increase in value over the old assessment is to be “phased-in” over the next three years. If the assessments are decreased, the change becomes effective immediately. The subject was last reassessed in January 2017 at $149,700, which represents a 8.95% increase from the previous assessment value of $137,400. The combined state and local tax rate for the subject property amounts to $2.360/$100 of assessed value. This includes the Baltimore City assessment of $2.2480/$100 and the Maryland state assessment of $0.1120/$100. The tax year for property in the State of Maryland extends from July 1 - June 30. The subject’s assessment and tax liability for fiscal year 2018, which extends from July 2017 to June 2018, is as follows.

SUBJECT PARCEL ID Lot 001, Block 3903B LAND ASSESSMENT $30,000 IMPROVEMENT ASSESSMENT $111,500 TOTAL ASSESSED VALUE $141,500 Tax Rate: $2.360/$100 Tax Liability: $3,339.40 Plus Other Charge: $0.00 Total 2016 Tax Liability: $3,339.40

Conclusion: The current assessment value for the subject property is consistent with comparable properties. In projecting this expense in the In come Capitalization Approach, I have included the cost at the current tax liability of $3,339.40.

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22 Highest and Best Use Highest and best use may be defined as: "That reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value."1

A second corresponding definition is as follows: "That reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability."2

The highest and best use of a property generally sets the parameters within which that property is valued or evaluated. In arriving at the Highest and Best Use of the subject property, it is necessary to carefully examine the area in which the property is located and the actions of the market, past, present, and future. As if Vacant The subject contains a 2,400 SF lot that is rectangular in shape with a level topography. The site has 24 feet of frontage along a commuter roadway and 100 feet along a residential Street. The lot is within the R-5 (Transitional Residential) Zoning District that allows for residential and some special purpose uses. Given the physical characteristics and zoning of the site, the physically possible and legally permissible options would be development with a residential building or special purpose use. Based a land residual analysis, residential and special purpose properties are financially feasible. Based on demand for affordable dwelling units within the market, the highest and best use of the site “as if vacant” would be for development of a residential building to the highest allowable density. As Improved The subject property is improved with a 5-Unit apartment building. It is adequately-maintained, with no deferred maintenance. The improvements generate substantial cash flow to ownership and it would be difficult and expensive to reposition the building for an alternative use. There are no alternative uses of the site or improvements that warrant demolition or a major reconfiguration of the existing improvements at this time. The highest and best use of the subject property “as improved” is for continued operation in its current capacity.

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23

PART II VALUATION OF THE PROPERTY

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Valuation Methodology Definitions In estimating the value of real property, there are three recognized approaches or techniques available to the appraisers that, when applicable, can be used to process the data considered to be significant to each of the three approaches into market value indications. They are defined as follows: The Income Approach or Income Capitalization Approach is "A set of procedures through which an appraiser derives a value indication for an income-producing property by converting its anticipated benefits (cash flows and reversion) into property value. This conversion can be accomplished in two ways. One year's income expectancy can be capitalized at a market-derived capitalization rate or at a capitalization rate that reflects a specified income pattern, return on investment, and the change in the value of the investment. Alternatively, the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate."3 The Sales Comparison Approach is "A set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments to the sales prices of the comparables based on the elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most common and preferred method of land valuation when comparable sales data are available."4 The Cost Approach is "A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of, or replacement for, the existing structure; deducting accrued depreciation from the reproduction or replacement cost; and adding the estimated land value plus an entrepreneurial profit. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised."5 We have placed equal reliance on the Income Capitalization Approach and the Sales Comparison Approach in the reconciliation of market value. Due to the lack of recent land sales in the immediate area and the subjectivity associated with estimating accrued depreciation for a property of this age (physical, functional and economic), the Cost Approach has limited applicability and is not included. 3 The Appraisal Institute, an Illinois Not for Profit Corporation, The Dictionary of Real Estate Appraisal, Third Edition

(1993), page 178. 4 Ibid, page 318. 5 The Appraisal Institute, an Illinois Not for Profit Corporation, The Dictionary of Real Estate Appraisal, Third Edition

(1993), page 81.

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25

T H E I N C O M E A P P R O A C H

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26 The Income Approach A value estimate pursued through the Income Capitalization Approach requires an analysis of the comparable and competing market for the type of property being appraised and a determination of market oriented rents, vacancy, and expenses for that property, as well as an analysis of current investment parameters among today's income property investors. The subject property represents income producing real estate, which would most likely be purchased for the purpose of generating a cash flow (net income) to ownership. In other words, net income would be the primary benefit of ownership and is the basis for determining value when value is recognized as the present worth of future benefits arising out of ownership to typical users or investors. As such, the Income Capitalization Approach is a technique or method wherein the future benefits of ownership are transformed through capitalization into a present worth or value estimate. When estimating value by this approach, the appraisers must determine and clearly define future benefits and identify today's typical user or investor. There are two primary methods used in the Income Capitalization Approach: 1) direct capitalization of a stabilized upcoming year's income; 2) the use of a discounted cash flow analysis. In the valuation of the subject property, we performed a direct capitalization analysis. Future benefits are estimated by forecasting the potential gross income of the property under prevailing and foreseeable market conditions. Appropriate allowances for vacancy/credit loss and operating expenses, based on the prevailing and foreseeable market, are then deducted from gross earnings. This process will result in an estimate of monetary benefits (net operating income) to ownership, which will then be capitalized into a present value. Potential Gross Income The first step in the income capitalization approach is to estimate the potential gross income that the property will generate. The subject’s potential gross income is based upon the existing apartment leases in place and the prospective income from leasing any vacant units at market lease rates. The following paragraphs include an analysis of the subject’s in place lease rates and current leasing activity at similar apartment properties

27

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Apartment Rent Analysis The subject property contains 5 apartment units with a unit mix of 2 studio units and 3 one-bedroom units. Based on the most recent rent roll provided and an inspection of property, the units are 60% leased and occupied. To derive a market rental rate for the subject units and to gauge the in place lease rates, we have analyzed current rental rates in competing apartment properties. The following chart summarizes comparable rentals, as well as the subject’s in-place lease rates

Comparable Apartment Rental Summary Complex Rental Rates Utilities Included Amenities

Subject 3901 Greenmount Avenue Baltimore, MD 21218

Unit A-1Bedroom Unit B-Studio Unit C-1Bedroom Unit D-Studio Unit E-1Bedroom

Vacant $650 Vacant $675 $850

Water/Sewer None

1.) 3633 Greenmount Avenue Baltimore, MD 21218

Studio

$650

Water/Sewer

None

2.) 824 Argonne Drive Baltimore, MD 21218

Studio

$525

Water/Sewer None

3.) 2503 N Calvert Street Baltimore, MD 21218

Studio

$600

Water/Sewer

None

4.) 3435 Greenmount Avenue Baltimore, MD 21218

1-Bedroom

$795

Water/Sewer None

5.) 500-502 41st Street Baltimore, MD 21218

1-Bedroom

$700

Water/Sewer None

6.) 3637 Greenmount Avenue Baltimore, MD 21218

1-Bedroom $750 Water/Sewer None

7.) 813 Dumbarton Avenue Baltimore, MD 21218

1-Bedroom $700 Water/Sewer None

28

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Map of Comparable Rentals

29

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Photo

30

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The previously-cited apartment rentals are considered the most relevant for direct comparison to the subject property. In order to establish market rent for the subject property, we are comparing it to the comparable rentals in terms of location, physical characteristics (unit size, condition/effective age) and amenities. The following paragraphs describe the adjustments under consideration. Lease Provisions: The subject property requires the tenants to pay electricity and gas. The water/sewer and trash collections are included within the month rent. The comparable rentals are similar to the subject and do not require adjustments. Location: The location adjustment is intended to account for differences in overall access, visibility and proximity to shopping centers, major roadways and public transportation. Comparable rental 3 is within closer proximity to grocery anchored shopping center. As a result, it is superior to the subject in terms of location and requires a downward adjustment. Physical Characteristics: This adjustment category is intended to account for differences in age/condition, and building quality. The subject is a walk-up style apartment building that is in average condition. Because the comparable rental 2 is a basement level unit it is inferior to the subject units. Unit Size: The subject’s average unit sizes are smaller than comparable 1, 4 and 6. As a result, these comparable require downward adjustments to equate to the subject. Amenities: The subject does not include amenities. . The comparable rentals are similar to the subject. On-Site Parking: The subject does not include on-site parking. The comparable rentals are similar to the subject. Apartment Market Rent Conclusion The following charts quantify the adjustment process and our conclusion of market rent.

Studio Rental 1 2 3

Rent $650 $525 $600

Concessions 0 0 0

Lease Provisions 0 0 0

Adjusted rent $650 $525 $600

Location 0 0 -$25

Phys. Characteristics 0 +$50 0

Amenities 0 0 0

Unit Size -$50 0

Parking 0 0 0

Total Adjustment -$50 +$50 -$25

Adj. Indications $600 $575 $575

31

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The adjusted comparable rentals indicate a market rent range from $575 to $600 for the studio units. Based on the comparable date, the market rent for the subject’s studio units is projected at $600.

1Bedroom Units Rental Subject 4 5 6 7

Rent $795 $700 $750 $700

Concessions 0 0 0 0

Lease Provisions 0 0 0 0

Adjusted rent $795 $700 $750 $700

Location 0 0 0 0

Phys. Characteristics 0 0 0 0

Amenities 0 0 0 0

Unit Size -$50 0 -$50 0

Parking 0 0 0 0

Total Adjustment -$50 -$50 -$50 $700

Adj. Indications $745 $700 $700 $700

The adjusted comparable rentals indicate a market rent range from $700 to $745 for the 1 bedroom units. Based on the comparable date, the market rent for the subject’s 1 bedroom units is projected at $700. Potential Gross Rental Income Within the direct capitalization analysis we have included the estimated market rental rates for the subject’s vacant units. Because the in-place rates are currently month to month, we applied the market rents for the occupied units. The following chart illustrates the subject’s potential gross income for the upcoming year.

Unit Type Unit# Monthly Rent Annual Rent 1BR/1BA A $700 $8,400 STUDIO B $600 $7,200 1BR/1BA C $700 $8,400 STUDIO D $600 $7,200 1BR/1BA E $750 $9,000 Annual Potential Income $40,200

The potential gross annual rent for the upcoming year is projected at $40,200.

32

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Vacancy and Collection Loss The vacancy and collection loss factor reflects the fact that most income-producing properties have a certain amount of vacancy and credit loss. The vacancy factor is determined primarily by current market conditions; however, other determinants such as management can also affect this factor. The rent loss attributed to vacancy is deducted from the estimated net potential rental income to determine the effective gross income. Based on a Costar Database survey, the Northeast Baltimore City submarket contains approximately 9,808 apartment units. The current vacancy rate is projected at 6.3%. The following chart summarizes market statistics obtained from the CoStar database, pertaining to apartment units within the Baltimore-Northeast submarket.

2013 2014 2015 2016 Current 2017

Total Units 9,803 9,803 9,803 9,803 9,808 Total Vacant Units 562 484 459 634 622 Total Vacancy Rate 5.7% 4.9% 4.7% 6.5% 6.3% Net Absorption 107 78 25 (175) 17

Taking into consideration the subject’s current status, as well as the current state of the immediate apartment market, a vacancy rate of 6.3% is considered stabilized. Additionally, a deduction of 3.0% to 4.0% for credit loss, to account for uncollected rents is typical for the market. Therefore, a combination vacancy and credit loss factor of 10.0% has been deducted in the direct capitalization analysis. EXPENSES In estimating expenses for the subject property, it was necessary to analyze the expenses for the subject property as well as expenses at comparable apartment buildings. The following chart illustrates the per unit expenses from comparable properties and the owners per unit expense budget for the subject.

Property # Units Expense Year

Subject 6 Units 2017 Budget

Expense Comp 1 5 Units 2015

Expense Comp 2 15 Units 2015

Expense Comp 3 4 Units 2015

$/Unit $/Unit $/Unit $/Unit Real Estate Taxes: $800 $686 $810 $500 Insurance: $600 $314 $400 $346 Repairs & Maintenance $1,050 $1,453 $1,125 $2,188 Utilities $1,015 $627 $1,560 $1,813 Administrative: $200 $100 $100 $550 Management Fee $0 $692 $845 $0 Total: $3,665 $3,872 $4,840 $5,396

33

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Real Estate Taxes: As discussed, the subject’s tax liability is estimated at $3,339, or $668/unit. A complete discussion of the taxes is included in the Real Property Taxes and Assessments section of this report Insurance: The insurance expenses at comparable apartment properties range from $314/unit to $600/unit. The subject’s 2016 expense was $507.80/unit. In this instance I have given most weight to the prior year expense and projected the insurance expense at $510/unit. Repairs & Maintenance: The repairs and maintenance expenses are those associated with the general upkeep of the building and grounds. The repairs and maintenance expenses at similar properties range from $1,000/unit to $2,188/unit. Based on the comparable data, I have projected the upcoming expense at $1,000/unit. Utilities: The subject units are separately metered for electric and gas. The landlord pays the water/sewer charges. The utility expenses at similar properties range from $40/unit to $1,813/unit. Based on the comparable data, I have projected the expense at $480/unit. Administrative: Based on the comparable property and expenses, I have projected the upcoming administrative expense at $100/unit.

Management Fee: In considering management fees, the market currently indicates from 2.0 percent to 5.0 percent of the effective gross income. In the appraisers’ opinion, an appropriate management fee would be one at the higher end of the range due to the smaller size of the subject property. I have applied a 5.0 percent management fee or $362/unit. The annual expenses are approximately 43.1% of the projected effective income. According to property owners and brokers within the market, typical expenses ratio for similar multi-family properties tend to range from 35% to 45%. Reserves for Replacement Reserves must be set aside for future replacement of items such as the roof, HVAC system, parking lot, apartment fixtures, appliances and other capital items. Generally, reserves range from $150/unit for a newer complex to as much as $800/unit for older complexes in poor condition. The subject property appears to be in average condition. Therefore, taking into consideration the age of the property, a market-oriented estimate of $200 per unit is included for the subject property. The appraisers note that investors in this market typically capitalize net operating income after a deduction for reserves. Net Operating Income Net operating income (NOI) for the subject is that amount of annual income remaining after applying all expenses incurred in the operation of the subject. This net income affords the owner capital, which satisfies the debt service and provides a return on the owner's equity. After reserves, the property's net operating income equates to $19,582 or $3,916/unit.

34

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DIRECT CAPITALIZATION Due to the size and occupancy of the asset, direct capitalization is considered the appropriate technique to complete the Income Capitalization Approach. The direct capitalization analysis converts the projected first year NOI into an indication of value, by dividing the anticipated income by a market oriented capitalization rate. In order to establish the financial parameters for our analysis, we have analyzed information obtained from national investor surveys and data collected on local building sales. This data are presented as follows. National Investor Surveys For this assignment, the appraiser consulted the 2nd Quarter 2017 edition of Realty Rates. Select responses are summarized as follows: Realty Rates – Apartments – 2nd Quarter 2017 Overall Capitalization Rates Low 4.29% High 13.12% Average 8.00% Market Extraction In addition to the National Investor Surveys, the appraiser considered recent investment sales of retail properties in the Washington DC Metropolitan area. This data is summarized as follows: Identification #Units Year Built Sale Date Price/Unit Ro 700 Woodbourne Ave Baltimore, MD 9 1920 09/2017 $28,611 10.00% 1307 Northern Parkway W Baltimore, MD 4 1888 04/2017 $68,750 9.20% 500-502 41st Street Baltimore, MD 8 1915 02/2017 $33,125 10.80% 900 Cator Avenue Baltimore, MD 6 1940 07/2015 $58,333 9.50%

Market capitalization rates from recent transactions range from 9.00% to 10.00%. Overall Capitalization Rate The two methods used to determine an overall capitalization rate suggest a range between 8.00%-10.00%. In selecting the overall rate for the subject’s stabilized valuation, we considered the following factors: Positive

- The market/neighborhood occupancy rate is 94% and there is strong demand for affordable rental units.

- The subject has good access to employment centers, schools and public transportation. Negative

- The subject is an older property built in 1920. - The subject does not contain project amenities. - The submarket area has income levels that are well below average.

35

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Considering market trends, as well as the subject’s location, physical characteristics, functional characteristics and tenant quality, an overall rate around the average of the market-extracted data should be considered. In the direct capitalization analysis, an overall capitalization rate of 9.25% is applied. Conclusion of Value by the Income Capitalization Approach

Therefore, the estimated market value of the fee simple interest in the subject property identified as 3901 Greenmount Avenue Baltimore, MD 21218, as defined by the Income Capitalization Approach, in its “as is” condition, as of September 22, 2017 is:

TWO HUNDRED TEN THOUSAND DOLLARS

$210,000

The chart on the following page illustrates the direct capitalization calculation.

36

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Direct Capitalization Analysis

3901 Greenmount Avenue Baltimore, MD 21218

Number of Contract Potential Potential Units Rent/Unit Monthly Rent Annual Rents

Unit A - 1BR/1BA 1 $700 $700 $8,400 Unit B - STUDIO 1 $600 $600 $7,200 Unit C - 1BR/1BA 1 $700 $700 $8,400 Unit D - STUDIO 1 $600 $600 $7,200 Unit E - 1BR/1BA 1 $750 $750 $9,000

Annual Potential Rents $40,200

Income Per Unit Total Potential Gross Rent $8,040 $40,200 Other Income $0 $0 Potential Gross Income $8,040 $40,200 Less:Vacancy,credit & concessions(10%) ($804) ($4,020) Effective Gross Income $7,236 $36,180

Expenses

Real Estate Taxes $668 $3,339 Insurance $510 $2,550 Repairs and Maintenance $1,000 $5,000 Utilities $480 $2,400 Administrative/Advertising $100 $500 Management Fee 5.0% $362 $1,809 Total Expenses $3,120 $15,598 Expense Ratio 43.1% Income Before Reserves $4,116 $20,582 Replacement Reserves $200 $1,000 Net Operating Income $3,916 $19,582 Overall Rate 9.25% Value Indication $42,339 $211,697 Rounded $42,000 $210,000

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T H E S A L E S C O M P A R I S O N A P P R O A C H

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38 The Sales Comparison Approach The Sales Comparison Approach involves a process of comparing market data; that is, the price paid for similar properties, prices asked by owners, and offers made by prospective purchasers willing to buy. This market data provides good evidence of value because it represents the actions of users and investors. The Sales Comparison Approach is based on the principle of substitution, which states that a prudent buyer will not pay more to buy a property than it will cost to buy a comparable substitute property. This process recognizes that the typical buyer will compare asking prices and work through the most advantageous acquisition. In the Sales Comparison Approach, the appraisers are observers of the buyer's actions. The buyer is comparing those properties which constitute the market for a given type and class. Analysis of Comparable Sales I have conducted an extensive search for sales of comparable apartment properties in the subject’s market area. The sales selected for direct comparison to the subject property are summarized in the chart on the following page. A map illustrating their location relative to the subject property and photographs of the comparable sales follows the chart.

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39Comparable Apartment Sales

Location Year Built

Occupancy Sale date

Unit Mix

Sale Price Total Units Price/Unit

1.) 5517 Edna Avenue Baltimore, MD 21214 1924

75% 8/2017

1 Studio 2 One Bedrooms 1 Two Bedroom

$195,700 4 $48,925

2.) 500-502 41st Street Baltimore, MD 21218

100% 2/2017 6 One Bedrooms 2 Two Bedrooms

$265,000 8 $33,125

3.) 5401 Catalpha Road Baltimore, MD 21214

75% 12/2016

4 One Bedrooms

$200,000 4 $50,000

4.) 4200 Stanwood Avenue Baltimore, MD 21206

67% 3/2017

1 Two Bedroom 2 Three Bedrooms

$150,000 3 $50,000

5.) 2922 Rosalie Avenue Baltimore, MD 21234

100% 2/2017

1 Studio 1 One Bedroom 1 Two Bedroom

$140,000 3 $46,667

Map of Comparable Sales

SALE 5

SALE 5

SALE 3

SALE 3

SALE 4

SALE 3

SALE 3

PHOTOGRAPHS OF COMPARABLE SALES

SALE 1

SALE 1 SALE 2

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41Prior to adjustment, the sales presented indicate a market value range from $33,125/unit to $50,000/unit with an average of $45,343/unit. In the following analysis, adjustments to these unit prices will be made to account for the different value influencing characteristics such as market conditions, condition of sale, financing, location and physical characteristics. The verification of each sale revealed that all sales were market oriented cash equivalent sales. Therefore, the main adjustment factors include location, age and condition, unit mix, occupancy, amenities, utility provisions, and parking. In order to quantify the previously noted adjustments, we have presented an adjustment grid below.

#1 #2 #3 #4 #5

Sale Price $48,925 $33,125 $50,000 $50,000 $44,667

Property Rights -- -- -- -- --

Financing -- -- -- -- --

Market Conditions -- -- -- -- --

Adjusted Price $48,925 $33,125 $50,000 $50,000 $44,667

Location -0- -0- -0- -0- -0-

Age/Condition -0- -0- -0- -0- -0-

Size -0- +15% -0- -0- -0-

Amenities -0- -0- -10% -5% -0-

Utility Provisions -0- -0- -0- -0- -0-

Parking -5% -5% -5% -0- -0-

Unit Mix -10% -10% -0- -10% -10%

Occupancy -0- -0- -0- 0 -0-

Net Adjustment -15% 0% -15% -15% -10%

Adjusted $/SF $41,586 $33,125 $42,500 $42,500 $40,200 The adjusted comparables indicate a market value range from $33,125/unit to $42,500/unit with an average of $39,982/unit. Based on the comparable data, we have concluded to a market value of $40,000 per unit for the subject property. Therefore, it is my opinion that the estimated “As Is” market value of the fee simple interest of the subject property, derived by the Sales Comparison Approach, as of September 22 2017 is:

TWO HUNDRED THOUSAND DOLLARS ($200,000)

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42Final Reconciliation We have considered the described traditional approaches in the estimation of the prospective market value upon completion of the subject property.

As Is The Income Approach ................................................................ $210,000 The Sales Approach .................................................................... $200,000 The Cost Approach ................................................................... Not utilized

The value indicated by the income approach is a reflection of a prudent investor's analysis of an income-producing property. In this approach, income is analyzed in terms of quantity, quality, and durability. After a projection of gross economic income, estimated expenses and vacancy allowance are then deducted. Due to the fact that the subject is income producing in nature, this approach has been deemed the most appropriate method of valuing the subject property, and it has been primarily relied upon in our value conclusion. The sales comparison approach reflects an estimate of market value as indicated by the sale market. In this approach, we search the local market for transfers of similar type properties. These transfers are analyzed for comparative units of value based upon the most appropriate market indicators (i.e. $/unit, $/SF). Adjustments must be made in this approach in order to reconcile comparable sales to the subject property. Due to the lack of comparable 5 unit apartment sales within the submarket, we have given secondary consideration indications derived through this analysis. The cost approach is, on occasion, one of the main steps of the appraisal process. The value indicated by this approach is derived by first estimating the value of the land. Next, the replacement cost of the improvement, less depreciation from all causes is deducted. In essence, value by this approach consists of land value plus the cost of the improvements. Due to the subjectivity associated with estimating accrued depreciation for a property of this age and the lack of comparable land sales, the cost approach has not been included in our analysis. In the final analysis of the subject property, we have considered the influence of the described approaches in relation to one another and in relation to the subject. We have given most weight to the income approach.

Based on the analysis and conclusions described in the attached appraisal report, it is our opinion that the “As Is” market value of the fee simple interest in the subject property, as of the 22nd day of September 2017, is:

TWO HUNDRED TEN THOUSAND DOLLARS ($210,000)

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ADDENDA

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ENGAGEMENT LETTER

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I N S U R A B L E V A L U E

1

Estimate of Hard Costs Marshall Valuation

Multiple Residences Class D– Good Section 12 Page 14

Base Cost/SF $77.77 Plus: Sprinklers $0.00 Adjusted Base Cost/SF $77.77 Current Cost multiplier 1.01 Local Current Cost multiplier 1.03 Perimeter Multiplier 0 Height Multiplier 0 Adjusted Base Price/SF $80.90

INSURABLE VALUE Base Building Cost ($80.90 x 2,390 SF) $193,351 Rounded Less: Architectural Fees, Foundation & Subsurface (10%) $19,335 Plus: Site Improvements 0 Plus: Added Soft Costs 0 Base Replacement Cost – Improvements $212,686 Plus: Land Value 0 Subtotal: Buildings $212,686 Entrepreneurial Profit (0%) 0 Replacement Cost New $212,686 Less: Functional Obsolescence 0 Less: Economic Obsolescence 0 Less: Physical Depreciation 0 Insurable Value $212,686 $215,000

Accurate Appraisals

QUALIFICATION OF THE APPRAISERS