d R-7.31.23 - CHFA Market Study - Sanctuary on Potomac - Aurora CO.pdf

MARKET STUDY

SANCTUARY ON POTOMAC

1290 SOUTH POTOMAC STREET

AURORA, COLORADO 80012

PREPARED FOR:

THE HOUSING AUTHORITY OF THE CITY OF AURORA

2280 SOUTH XANADU WAY

AURORA, COLORADO 80014

EFFECTIVE DATE: JULY 10, 2023

REPORT DATE: JULY 19, 2023

REVISED DATE: JULY 31, 2023

PREPARED BY:

PRIOR & ASSOCIATES

650 SOUTH CHERRY STREET #425

DENVER, COLORADO 80246

INFO@PRIORANDASSOCIATES.COM

(303) 861-2728

THAD RAHN, PRINCIPAL

TYLER BOROWY, PRINCIPAL

JOSH ROBERTS, PROJECT MANAGER

The Housing Authority of the City of Aurora Sanctuary on Potomac Market Study

Page | ii

TABLE OF CONTENTS

INTRODUCTION & SCOPE OF WORK ...................................................................................................................... iv CERTIFICATION ........................................................................................................................................................ v

I. MARKET STUDY SYNOPSIS

A. Project Description

B. Rent Comparison

C. Comparability Analysis

D. Demand and Capture Rates

E. Recommendations & Conclusions

II. PROJECT DESCRIPTION

A. Project Overview

B. Project Concept

C. Site Plan

D. Unit Features, Common Amenities and Tenant Services

E. Parking

F. Utilities

G. Unit Mix, Sizes and Rents

H. Project Development Schedule

III. LOCATION ANALYSIS

A. Project Location

1. Site Location

2. Site Characteristics

B. Adjacent Land Uses

C. Nearby Community Infrastructure

1. Retail Shopping Area

2. Schools

3. Public Transportation

4. Social Services

5. Parks and Recreational Opportunities

6. Public Safety

D. Infrastructure Improvements

E. Marketability

F. Walk Score & Transit Score

IV. IDENTIFICATION OF MARKET AREA BOUNDARIES

V. OVERVIEW OF MARKET CONDITIONS

A. Historic Vacancy Trends

B. Absorption

C. Historic Asking Rent Trends

D. Historic Concessions

VI. COMPARABILITY ANALYSIS

A. Inventory

Page | iii

1. Housing Inventory

2. PSH Inventory

B. Comparable Units

C. Comparative Analysis

1. General Description

2. Amenities

3. Unit Sizes

4. Unit Mix

5. Rent Comparison

6. Rent Per Square Foot Comparison

7. Vacancies and Waitlists

8. Absorption

D. Upcoming Competition

VII. HOMELESS HOUSEHOLD CHARACTERISTICS

A. Total Population

B. Homeless Households

C. Homeless Household Size

D. Households by Tenure

E. Renter Households by Income

F. Homeless Incomes

VIII. DEMAND ANALYSIS

A. Size Eligibility Calculations

B. Income Eligibility Calculations

C. Demand & Capture Rate Calculations

IX. STRENGTHS AND WEAKNESSES

X. RECOMMENDATIONS AND CONCLUSIONS

A. Demand

B. Competitiveness

C. Location

D. Age and Condition

E. Unit Mix

F. Unit Sizes

G. Unit Features

H. Project Amenities

I. Utilities

J. Projected Occupancy

K. Rents, Premiums and Other Revenues

L. Absorption

M. Amenities Offered at Additional Cost

N. Unusual Conditions

O. Subject Historic Occupancy and Impact of Renovation

P. Conclusions

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XI. APPENDIX

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INTRODUCTION & SCOPE OF WORK

This report is a market study for Sanctuary on Potomac that is being developed by The Housing Authority of the City of Aurora.

The market analyst made a physical inspection of the market area, reviewed all relevant data, conducted personal interviews with local apartment managers, government officials, local real estate professionals, and service providers, and independently established the conclusions for this report.

The site work was conducted on July 5, 2023 by Bryan Fierro, while the comparables were surveyed from July 5 to 10, 2023. Josh Roberts completed the market study, which was reviewed by Thad Rahn, who confirmed the conclusions of the report.

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CERTIFICATION

This market study was written according to the Colorado Housing and Finance Authority’s (CHFA) 2023-2024 Market Study Guide. The information included is accurate to the best of our knowledge and the report can be relied upon by CHFA to present a comprehensive assessment of the market for the proposed project.

The document is assignable to lenders and/or syndicators that are parties to the development’s financial structure. We acknowledge and agree that the market study will be shared with the Department of Housing and Urban Development (HUD) as part of HUD’s assistance to CHFA in the analysis of the market study.

Prior & Associates is an independent market analyst. No principal or employee of Prior & Associates has any financial interest whatsoever in the development of which this analysis has been undertaken.

The relationship of the market analyst is limited to that of an independent market analyst. The fee assessed for the study was not contingent on the outcome of the analysis.

To the best of our knowledge, all data contained in this report is correct to the extent that the local, state and federal recording agencies, and demographic suppliers accurately record and publish this data. All projections were based on current professionally accepted methodology.

By: Prior & Associates

Thad Rahn Principal

Josh Roberts Project Manager

Market Study Synopsis Page | 1

I. MARKET STUDY SYNOPSIS

PROJECT NAME: SANCTUARY ON POTOMAC

A. Project Description

• The subject of this report is the market feasibility of Sanctuary on Potomac, a planned 43-unit rental project at 1290 South Potomac Street in Aurora, Arapahoe County, Colorado.

• The subject will be a four-story elevator structure that has a fiber cement siding exterior with brick and metal accents, staggered setback façade and TPO membrane roof. The subject will occupy the western portion of a 7.03-acre parcel, with the remainder occupied by the Aurora Mental Health Center.

• The subject's common amenities will include on-site management, laundry facilities, a community room, exercise room, courtyard, café/community kitchen, package holding area, event room and library/wellness area. It will have limited access entries, surveillance cameras, a courtesy patrol and intercom/buzzer entry for security features, and the tenant services will include social activities and an on-site social worker.

• Each of the subject's units will have central air conditioning, blinds, luxury vinyl tile floors, a refrigerator, stove/oven, dishwasher and microwave.

• The subject will be developed through the Federal Low Income Housing Tax Credit (LIHTC) program and tax-exempt bonds, and restricted to renter households with incomes at or below 50% of the area median income (AMI).

• All 43 units will be restricted to homeless households and be covered by project-based vouchers (PBVs), allowing tenants to contribute 30% of their incomes for rent and utilities. The PBVs will be provided by the sponsor for an initial 15-year period.

• The scope of this market study considers the subject restricted to homeless households with or without project-based rental assistance. Information relative to a scenario where the subject is not restricted to homeless was not provided. As such, an analysis of the project as a traditional LIHTC property is not included in the scope of this market study.

• The following table describes the subject’s unit distribution by type, size and income restriction.

Unit Type 30% AMI 50% AMI Total % of Total Size (Avg.) Type

1BR/1BA 33 10 43 100.0% 455 E/4

Total 33 10 43 100.0% N/A N/A

% of Total 76.7% 23.3% 100.0% N/A N/A N/A

SUBJECT SUMMARY

Source: Project Sponsor

B. Rent Comparison

• All of the subject’s units restricted to homeless households will have rental assistance through Project-Based Vouchers and its proposed rents are its contract rents, which would need to be

Market Study Synopsis Page | 2 lowered to at least the maximum allowable LIHTC amount if the rental assistance was no longer in place.

• All surveyed properties are permanent supportive housing (PSH) projects with rental assistance covering all units, similar to the subject. Therefore, no rent comparisons are made.

• The surveyed Class B PSH property was built in 2020 and is in above average condition. Compared to it, the subject has a comparable location, unit features and project amenities.

• The surveyed Class B PSH projects outside the PMA were constructed from 2002 to 2022, the oldest of which has ongoing renovations, and are in above average or excellent condition.

Compared to them, the subject has a slightly inferior to superior location, similar unit features and comparable or slightly superior project amenities.

• The surveyed Class C PSH development outside the PMA was built in 1906 and 1958, renovated in 2003 and is in average condition. In comparison to it, the subject has a similar location, and slightly superior in-unit and project amenities.

• The subject’s proposed rents are its contract rents, which would need to be lowered to at least the maximum allowable LIHTC amount if rental assistance was no longer in place. The following table represents the subject’s proposed rents by rent threshold and bedroom type, but does not include the rents at the comparables because all tenants contribute 30% of their incomes.

Avg. Avg.

1BR/1BA $1,538 $1,538 $1,538 $1,538 $1,538 $1,538

Total $1,538 $1,538 $1,538 $1,538 $1,538 $1,538

RENT COMPARISON TABLE

Subject

30% AMI 50% AMI

Range Range

Source: Project Sponsor; Survey by Prior & Associates, July 2023

C. Comparability Analysis

• The following table compares the features of the comparables with those of the subject, with “- “indicating lower/inferior, “=” meaning equal to/comparable, and “+” representing something that is higher/superior to the subject.

Providence at the

Heights

Renaissance Legacy

Lofts

Renaissance Off

Broadway Lofts Renaissance at Lowry

Renaissance Stout

Street Lofts

Renaissance at North

Colorado Station

Rents = = = = = = Unit Size + =/+ + N/A + + Unit Mix = = = = = = Quality - = - - - - Amenities = = = = =/- = Location = - + - + -

St. Francis Center at

Cathedral Square

Renaissance

Downtown Lofts

Civic Center

Apartments

Rents = = = Unit Size + =/+ + Unit Mix = = = Quality - - - Amenities = = - Location - - =

COMPARABILITY ANALYSIS TABLE

Source: Project Sponsor; Survey by Prior & Associates, Market Study Synopsis Page | 3

D. Demand and Capture Rates

• The primary market area (PMA) for the subject’s homeless units is equal to the city of Aurora, although homeless tenants can be referred from throughout the Denver MSA.

• The following table indicates that the subject and all other homeless units planned or under construction would have to capture a total of 13.1% of the income- and size-qualified homeless renter households in the PMA to attain full occupancy.

INCOME- AND SIZE-QUALIFIED HOMELESS HOUSEHOLDS

All Units w/ PBV

Total Homeless Households 451 Less Unserved Based On Size 23 Less Unaccompanied Youth 16

Total Size Qualified Households 412 x % Income-Qualified 100.0%

Total Size and Income Qualified Households 412

Under Construction/Planned 11

Subject 43

Total-Existing, Planned, and Under Construction 54

Required Capture Rate 13.1%

• The subject’s required capture rate is below the CHFA threshold of 25% and attainable because:

• There is a limited supply of PSH units relative to the number of homeless households in Aurora. According to the PIT, the homeless count in Aurora continues to increase and special needs housing units are not being built at a commensurate pace.

• The subject is within walking distance of public transportation, medical services, restaurants and major employers that offer service and retail jobs. The subject is 0.3 miles from the Florida light rail station that provides access throughout the metropolitan area.

• The only surveyed PSH property in the PMA was 96% occupied, had steady recent occupancy from 96% to 100% and uses the OneHome Coordinated Entry System (CES) for tenant referrals. The only other PSH property in the PMA is a veteran PSH project and the manager could not be reached for a survey.

• The subject will be the second family PSH property in the PMA, while the number of homeless households in the PMA has increased from 357 in 2018 to 612 in 2022.

• The surveyed PSH developments outside the PMA are all in Denver and were 4.4% vacant.

One property had a three- to five-year wait to be placed in a unit, while the rest use the OneHome CES for referrals.

• Renaissance Legacy Lofts, a 98-unit LIHTC/PSH property in Denver, opened in October 2022 and absorbed 17 units per month, without concessions. It was 97% occupied within two months of opening. This shows strong demand for homeless LIHTC units in the area.

• The subject’s sponsor, the Aurora Housing Authority, has extensive experience with serving very low-income households and its partnership with Aurora Mental Health will provide additional tenant referrals and placement.

Market Study Synopsis Page | 4

• The subject will receive referrals directly from Aurora Mental Health and Recovery who identified 4,402 clients receiving services in 2022 that lacked housing.

E. Recommendations & Conclusions

• The following table rates the subject in seven categories on a scale of one to five, where one is the lowest rating and five is the highest.

1 2 3 4 5 Market Demand X Project Location X Subject Unit Mix X Subject Unit Sizes X Proposed Rents X Overall Marketability-as proposed X Marketability with recommended changes N/A Source: Analysis by Prior & Associates

SUBJECT EVALUATION TABLE

• Homelessness in Aurora is increasing. There will continue to be significant demand for rental housing affordable to homeless in the city, especially developments that provide rental assistance and access to additional homeless services. The subject’s completion will help address the needs of homeless residents.

• In July 2023, the only family PSH property in the PMA was 96% occupied with steady occupancy between 96% and 100% over the last year, while the PSH developments outside the PMA were 4.4% vacant and most properties have high historical occupancy rates.

• There is a limited supply of PSH units compared to the number of homeless households in Aurora.

According to the PIT, the homeless count in Aurora continues to increase and special needs housing units are not being built at a commensurate pace.

• The subject’s in-unit and project amenities are generally comparable to the surveyed Class B PSH developments, in and outside the PMA, while its condition is slightly superior to most and will help compensate for its smaller unit sizes. Overall, the subject will be comparable to existing Class B PSH properties.

• The subject is within walking distance of public transportation, medical services, restaurants and major employers that offer service and retail jobs. It is only 0.3 miles from the Florida light rail station, which provides easy access to areas throughout the metropolitan area.

• There are no recommended changes for the subject.

• As a deeply-subsidized PSH project, the subject should fill around 25 units per month, reaching stabilized occupancy in less than two months, without concessions. If the sponsor is able to start the qualification process before opening, all units could be filled in one month.

• After it completes lease-up, the subject should have a stabilized occupancy physical rate of 97% and a yearly turnover rate of 15%.

Project Description Page | 5

II. PROJECT DESCRIPTION

A. Project Overview

The subject, Sanctuary on Potomac, is a new construction project containing 43 units to be developed through the Federal Low Income Housing Tax Credit (LIHTC) program and tax-exempt bonds, and targeted to homeless households. Of the subject’s 43 units, 33 will be restricted at 30% of the area median income (AMI) and ten at 50% AMI. All will be restricted to homeless households.

Occupancy for the subject’s one-bedroom LIHTC units will be restricted to households with annual incomes below 50% AMI. Households with one or two persons and incomes less than $49,650 are potential tenants for the subject.

Persons 30% 40% 50% 60% 1 $26,070 $34,760 $43,450 $52,140 2 $29,790 $39,720 $49,650 $59,580

3 $33,510 $44,680 $55,850 $67,020

4 $37,230 $49,640 $62,050 $74,460

5 $40,230 $53,640 $67,050 $80,460

6 $43,200 $57,600 $72,000 $86,400

7 $46,170 $61,560 $76,950 $92,340

8 $49,170 $65,560 $81,950 $98,340

2023 LIHTC INCOME LIMITS

Source: HUD

All 43 units will be restricted to homeless households and be covered by project-based vouchers (PBVs), allowing tenants to contribute 30% of their incomes for rent and utilities. The PBVs will be provided by the sponsor for an initial 15-year period. The scope of this market study considers the subject restricted to homeless households with or without project-based rental assistance.

Information relative to a scenario where the subject is not restricted to homeless was not provided.

As such, an analysis of the project as a traditional LIHTC property is not included in the scope of this market study. The scope of this market study considers the subject as restricted to homeless households with or without project-based rental assistance in place. We were not provided with information relative to a scenario where the subject is not restricted to homeless. As such, an analysis of the project as a traditional LIHTC property is not included. Homelessness in Aurora is an increasing problem. There will continue to be significant demand for rental housing affordable to homeless in the city, especially developments that provide rental assistance and access to additional homeless services, and the subject’s completion would help address the needs of homeless residents.

According to HUD, the definition of homelessness includes persons who are:

• Sleeping in places not meant for human habitation, such as cars, parks, sidewalks, or abandoned or condemned buildings

• Sleeping in an emergency shelter or safe haven

• Living in transitional housing

The following table indicates the subject’s eligible income range for each unit type at each income restriction as proposed by the subject. The table assumes that 40% of a tenant’s income goes toward

Project Description Page | 6 the maximum gross LIHTC rents. However, as previously noted, all of the subject’s units will have rental assistance and tenants will have incomes as low as $0.

30% AMI 1BR

Maximum Gross LIHTC Rent $698

1 Person – Minimum Income $20,940 1 Person – Maximum Income $26,070 2 Person – Minimum Income $20,940 2 Person – Maximum Income $29,790

50% AMI 1BR

Maximum Gross LIHTC Rent $1,163

1 Person – Minimum Income $34,890 1 Person – Maximum Income $43,450 2 Person – Minimum Income $34,890 2 Person – Maximum Income $49,650

SUBJECT'S GROSS MAXIMUM RENTS & INCOMES SERVED

Source: HUD; Analysis by Prior & Associates

B. Project Concept

The subject will be a four-story elevator structure that has a fiber cement siding exterior with brick and metal accents, staggered setback façade and TPO membrane roof. The subject will occupy the western portion of a 7.03-acre parcel, with the remainder occupied by the Aurora Mental Health Center. We reviewed the sponsor’s site plan, elevation and floor plans (Davis Partnership Architects;

dated June 23, 2023) and determined that the subject will be competitive with other properties.

C. Site Plan

The subject will have one vehicular entrance off South Potomac Street, which leads to a driveway that circles the exterior of the site and leads to parking spaces along the subject’s western boundary and a driveway along the subject’s eastern boundary with surface parking spaces on each side. This entrance will provide sufficient access and visibility. Resident parking is alongside the eastern and western sides of the building, while the building will face the parking areas and outdoor amenity spaces. The common areas are centrally located on site or on the first floor of the building. The subject's site plan does not have any aspects that will restrict its market appeal.

Project Description Page | 7

D. Unit Features, Common Amenities and Tenant Services

Each of the subject's units will have central air conditioning, blinds, luxury vinyl tile floors, a refrigerator, stove/oven, dishwasher and microwave.

The subject's common amenities will include on-site management, laundry facilities, a community room, exercise room, courtyard, café/community kitchen, package holding area, event room and library/wellness area. It will have limited access entries, surveillance cameras, a courtesy patrol and intercom/buzzer entry for security features, and the tenant services will include social activities and an on-site social worker.

E. Parking

The project will have 27 surface parking spaces, or 0.63 per unit, an adequate ratio for a homeless target market. The rent will include parking on a first-come, first-served basis. The subject's parking arrangement is comparable to the PSH property in the PMA and to three PSH projects outside the PMA, which have a similar ratio of parking spaces per unit, and slightly superior or superior to the remaining PSH properties that have less parking spaces per unit or no on-site parking. According to Article 145 Section 4.6.3, affordable housing structures must provide 0.85 spaces per unit and one additional space per five units for guest parking. This results in 45 required spaces for the subject, which is higher than the number of spaces provided. Therefore, the sponsor will need to request a reduction in the overall number of parking spaces, which is appropriate given its homeless target market.

F. Utilities

The following table describes the subject’s utility combination and estimated tenant utility costs:

Project Description Page | 8

1BR

Heat Electric Owner --- Electricity N/A Owner --- Hot Water Electric Owner --- Cooking Electric Owner --- Air Conditioning Central Owner --- Water N/A Owner --- Sewer N/A Owner --- Trash Collection N/A Owner ---

TOTAL $0

Type Who Pays

Source: The Housing Authority of the City of Aurora

UTILITY ALLOWANCE SCHEDULE

Utility Utility

G. Unit Mix, Sizes and Rents

The following chart, supplied by the project sponsor and HUD, lists the subject's proposed unit distribution by unit type, size, income restriction, and rent. The sponsor will not charge any premiums and does not plan to lease additional items or services.

Unit Type Number of

Units

Square

Footage

% of Median

Income

Maximum

Gross LIHTC

Rent

Utility

Allowance

Maximum Net

LIHTC Rent

Proposed Net

Rent

Proposed Net

Rent per SF

1BR/1BA* 33 455 30% $698 $0 $698 $1,538 $3.38

1BR/1BA* 10 455 50% $1,163 $0 $1,163 $1,538 $3.38

*Units w/ Contract Rent

UNIT TYPES, SIZES AND RENTS

Source: Project Sponsor; HUD

H. Project Development Schedule

The sponsor will begin construction of the subject in June 2024, complete the project in July 2025 and begin leasing upon completion.

Location Analysis Page | 9

III. LOCATION ANALYSIS

A. Project Location

1. Site Location

The subject site is on the east side of South Potomac Street in the Utah Park neighborhood of west-central Aurora. The subject is at 1290 South Potomac Street in Aurora, Arapahoe County, Colorado 80012.

Aurora is nine miles east of Downtown Denver. Interstate 225 runs through the city from north to south, and Interstate 70 runs from east to west through the northern portion.

The Utah Park neighborhood includes the lands that are north of East Jewell Avenue, south of East Mississippi Avenue, east of South Peoria Street and west of Interstate 225. This area is a low- to moderate-income, mixed residential and commercial community that was developed primarily in the 1980s.

The subject's immediate neighborhood includes commercial and healthcare land uses. Most nearby single-family homes are ranch and two-story structures that were built in the 1970s and are well maintained. Most homes contain between 1,600 and 3,500 square feet of living space, three to five bedrooms, two to three baths, a two-car garage, and sell for $484,000 to $639,000. The nearest multifamily project is Liberty Creek Apartments, 55 feet southwest of the subject. It is an average condition, Class C, 1980s project with market-rate rents ranging from $1,360 to $1,734 per month.

Location Analysis Page | 10

The neighborhood commercial facilities are well-maintained big box retail, national chain and small independent stores that opened from the 1980s to 2000s.

2. Site Characteristics

The subject is on a collector street. This location has a moderate to high traffic volume that provides good visibility. The subject has approximately 320 feet of frontage along South Potomac Street.

The subject site is a vacant, level, almost rectangular, 7.03-acre parcel that is graded. The following aerial photo of the subject site was taken in May 2023. The subject is not within a growth corridor and the area has not been attracting significant development.

B. Adjacent Land Uses

The following narrative describes the site’s adjacent land uses and their impacts on the subject.

North: The subject's northern border is a neighborhood strip mall that is in average condition.

Location Analysis Page | 11

Past the strip mall, 0.1 mile from the subject, East Mississippi Avenue is a six-lane minor arterial that has a high traffic volume and runs east-west from eastern Aurora to western Denver.

Across the minor arterial, 0.13 miles from the subject, are the Gateway Medical Center, with approximately 36,000 square feet, and CitiBank with around 10,000 square feet. Both buildings are in above average condition.

South: The subject's southern boundary is the Utah Park Business Center, which has a variety of medical, office and service tenants.

Past the business park, almost 0.15 miles from the subject, is an office building that is in good condition.

Further south, 0.2 miles from the subject, is Aurora-Denver Cardiology Associates-Aurora, which is in a building that is in good condition.

East: Immediately east of the subject is Interstate 225, an eight-lane limited access freeway that has a high traffic volume and connects to Interstate 25 and Interstate 70.

Across Interstate 225, 270 feet from the subject, are RTD light rail tracks for a commuter line that travels throughout the Denver MSA. The nearest light rail stop is the Florida Station, 0.3 miles southeast of the subject.

Past the commuter line, 380 feet from the subject, South Abilene Street is a three-lane collector street that has a low to moderate traffic volume and connects to East Mississippi Avenue and East Iliff Avenue.

West: Along the subject’s western border is South Potomac Street, a two-lane collector street that has a moderate traffic volume and connects to East Mississippi Avenue and East Jewell Avenue.

Across South Potomac Street, 75 feet from the subject, is the Medical Center of Aurora, a 269-bed acute care hospital in good condition.

Beyond the hospital, 0.13 miles from the subject, South Wheeling Way is a two-lane minor street that has a low traffic volume and connects to East Mississippi Avenue and South Uvalde Street.

Location Analysis Page | 12

C. Nearby Community Infrastructure

1. Retail Shopping Area

Around the intersection of South Potomac Street and East Mississippi Avenue, adjacent to 0.2 miles north and northwest of the subject, is a commercial corridor. The tenants include Planet Fitness, Goodwill Outlet Store, Bud’s Warehouse, IHOP, AutoZone and Senor Ric’s.

Maverik Adventure’s First Stop is a convenience store that is open 24 hours a day at 13480 East Mississippi Avenue, about 0.1 mile northwest.

Safeway is a grocery store at 12200 East Mississippi Avenue with approximately 45,000 square feet,

0.7 miles west of the subject.

Walmart Supercenter is a big box retail and grocery store at 14000 East Exposition Avenue, 0.5 miles northeast of the subject.

The Town Center at Aurora, at 14200 East Alameda Avenue, 0.9 miles northeast, is an enclosed mall with approximately 1,000,000 square feet. Macy's, Dillard’s, JC Penney and Field House USA are its primary tenants. The other tenants include Foot Locker, Champs Sports, Finish Line, Claire’s, smaller shopping venues and restaurants.

2. Schools

The subject is in the Aurora Public School District. Children will attend the Virginia Court Elementary School, which is one mile northwest of the subject, Aurora Hills Middle School, 0.5 miles northwest, and Gateway High School, 0.6 miles east. Busing is available all schools. The Community College of Aurora is 2.1 miles northeast of the subject, and Colorado State University-Global Campus, 3.2 miles northeast, is the closest four-year college.

3. Public Transportation

RTD provides bus service in the market area. The nearest bus stop is at South Potomac Street and Louisiana Avenue, 120 feet miles west of the subject. Residents can ride Route 11 buses from this location to destinations throughout Aurora, with connections that travel throughout the MSA. The buses run every 30 minutes, from 6:00 am to 11:00 pm, seven days a week. The standard one-way fare is $3.00, and $1.50 for senior citizens.

RTD provides rail service. The nearest station is the Florida Station at East Florida Avenue and Interstate 225, 0.3 miles southeast. The H and R Lines provide service from this location to destinations throughout the Denver MSA, with trains available every 15 minutes from 4:00 am to 11:00 pm, seven days a week. The one-way fare starts at $3.00 for all riders and $1.50 for senior citizens, and increases depending on the number of zones traveled and for airport access.

4. Social Services

Sunrise Day Care, 0.7 miles west of the subject, provides childcare services, and Ironton Head Start is two miles east. English as a Second Languages (ESL) is offered at the Community College of Aurora, Location Analysis Page | 13

2.1 miles northeast of the subject, the Iliff Square Public Library is 1.5 miles southwest and government services are available at the Aurora Municipal Center, 1.4 miles northeast. A U.S. Post Office is 1.6 miles northwest of the subject. The Aurora Center for Active Adults, 2.2 miles northwest from the subject, offers fitness classes, meals, crafts and activities for seniors, from 7:00 am to 4:00 pm, weekdays.

The Medical Center of Aurora, the nearest full-service hospital, is 70 feet southwest of the subject, Gateway Medical Clinic is 0.1 mile south, and The Outpatient at the Medical Center of Aurora is 70 feet southwest.

5. Parks and Recreational Opportunities

Peoria Hills Park is a neighborhood park at 12401 East Florid Avenue, 0.6 miles southwest of the subject. This facility has children’s play equipment, picnic areas and other amenities. Around 0.9 miles east of the subject is the Village Green Recreation Center, at 1300 South Chambers Circle. The center has tennis courts, an outdoor swimming pool, children’s play equipment and other amenities.

It is open from 10:00 am to 6:00 pm, Tuesday, Thursday and Sunday.

6. Public Safety

According to the Bureau of Justice Statistics, the violent crime rate in Aurora increased 8% annually from 2011 through 2020, while the property crime rate rose 2% per year. Over the past ten years, the average annual violent crime rate in Aurora was 51% above the national average, while its property crime rate was 25% higher. Since the end of 2017, the violent crime rate in Aurora has grown 13% per year and the property crime rate has increased 4% annually. The crime statistics only go through 2020 because the Bureau of Justice Statistics started reporting crime data differently in 2021.

Violent Crime Property Crime Violent Crime Property Crime 2011 442.2 2,998.0 387.1 2,905.4 2012 421.3 3,002.4 387.8 2,868.0 2013 420.1 3,168.9 369.1 2,733.6 2014 414.2 2,885.7 361.6 2,574.1 2015 474.0 3,029.7 373.7 2,500.5 2016 547.7 3,159.6 397.5 2,451.6 2017 636.3 3,076.1 394.9 2,362.9 2018 745.9 3,037.5 383.4 2,209.8 2019 754.5 2,992.1 380.8 2,130.6 2020 920.0 3,464.8 398.5 1,958.2

Year

CRIME STATISTICS PER 100,000 RESIDENTS

NationalAurora

Source: Bureau of Justice Statistics; Claritas

Safety is an important factor that tenants consider when renting in the market area. Nearby apartment complexes have limited access entries, and properties and street signs near the subject have sporadic graffiti. The Aurora Police Mini-Station is 1.2 miles northeast of the subject and the Aurora Fire Rescue Station 5 is 0.6 miles northwest.

D. Infrastructure Improvements

The Community College of Aurora’s new Center for STEM, Power Mechanics and Applied Technologies is under construction just south of the subject. The $14 million, 54,000 square-foot facility received funding from the American Rescue Plan Act (ARPA) as well as donations from several

Location Analysis Page | 14

C-suite executives. The new space allows for double the number of students in the diesel power program, and a partnership with non-profit BuildStrong Academy should boost enrollment in construction programs. According to a March 2022 quote from CCA’s executive director John Wolfkill, the programs “will support more local residents to earn those college credentials that are going to prepare them for economic mobility.” It should be complete and ready for the Fall 2024 class.

Kroger, America’s largest grocery retailer, opened a new 300,000 square foot customer fulfillment center in northern Aurora in June 2022. The new center was expected to bring nearly 400 new jobs to the city of Aurora and adjacent communities. It is unclear how many of these jobs have already been filled.

KeHE Distributor’s, a distributor of natural and organic, specialty and fresh products, expanded their Aurora distribution center with a new 124,000 square foot facility in September 2022.

Fitzsimons Innovation Community, a 125-acre residential and commercial project, is being developed at 12635 East Montview Boulevard, 4.5 miles from the subject. Over 80 companies are already working at the site, including Taiga Biotechnologies, Atara Biotherapeutics and InVitria. The final building, Bioscience Five, has 93,600 square feet and was completed at 2251 North Revere Street in fall 2022. The community has five buildings with 427,000 square feet of custom laboratory, office and meeting space, community conference rooms, a 100-seat auditorium and café. It also has flexible manufacturing, assembly and distribution space.

The Citadel on Colfax is a development on a 29-acre site at the corner of Colfax Avenue and Altura Boulevard. The project, developed by Galloway, will include open space, retail and restaurant uses, residential townhomes, a veteran’s housing project and medical office space.

Benson Hotel and Faculty Club, a 106-room property, is under construction at the Fitzsimons Innovation Community. It was complete in late April 2023 and includes a ballroom, event space, rose garden, full-service bar and restaurant, and multiple meeting rooms.

E. Marketability

The subject is within 0.5 miles of a bus stop, light rail station, hospital, medical clinic, convenience store, neighborhood shopping center, Walmart and middle school, and within one mile of a grocery store, shopping mall, elementary school, high school, childcare center, park and recreation center.

The subject’s proximity to community services and public transportation is appropriate for its homeless target market.

F. Walk Score & Transit Score

The subject’s walk score is 47, which is 9% higher than the Aurora score of 43, 40% lower than the comparable average and is considered “Car-Dependent.” The subject’s transit score is 49, which is 40% higher than the Aurora score of 35, 29% lower than the comparable average and is considered “Some Transit.”

Location Analysis Page | 15

Walk Score

(Out of 100)

Transit Score

(Out of 100) Avg.

Subject 47 49 48 Providence at the Heights 18 47 33 Renaissance Legacy Lofts 90 79 85 Renaissance Off Broadway Lofts 96 81 89 Renaissance at Lowry 43 33 38 Renaissance Stout Street Lofts 96 81 89 Renaissance at North Colorado Station 66 50 58 St. Francis Center at Cathedral Square 97 82 90 Renaissance Downtown Lofts 95 85 90 Civic Center Apartments 98 81 90 Comp Average 78 69 73

Aurora Average 43 35 39

Source: Walkscore.com

WALK SCORE COMPARISON

Location Analysis Page | 16

SITE & NEIGHBORHOOD PHOTOS

LOOKING NORTH AT THE SITE

LOOKING SOUTH AT THE SITE

Location Analysis Page | 17

LOOKING EAST AT THE SITE

LOOKING WEST AT THE SITE

Location Analysis Page | 18

FROM THE SITE LOOKING EAST

NORTH – STRIP MALL

Location Analysis Page | 19

NORTH – EAST MISSISSIPPI AVENUE LOOKING EAST

NORTH – EAST MISSISSIPPI AVENUE LOOKING WEST

Location Analysis Page | 20

SOUTH – UTAH BUSINESS PARK

SOUTH – OFFICE BUILDING

Location Analysis Page | 21

EAST – LIGHT RAIL COMMUTER LINE

WEST – SOUTH POTOMAC STREET LOOKING NORTH

Location Analysis Page | 22

WEST – SOUTH POTOMAC STREET LOOKING SOUTH

WEST – HOSPITAL CAMPUS

Location Analysis Page | 23

GROCERY STORE

CONVENIENCE STORE

Location Analysis Page | 24

NEIGHBORHOOD SHOPPING

WALMART

Location Analysis Page | 25

MALL

BUS STOP

Location Analysis Page | 26

LIGHT RAIL STATION

ELEMENTARY SCHOOL

Location Analysis Page | 27

MIDDLE SCHOOL

HIGH SCHOOL

Location Analysis Page | 28

HOSPITAL

CHILDCARE

Location Analysis Page | 29

PARK

RECREATION CENTER

Location Analysis Page | 30

COMMUNITY FACILITIES MAP

COMMUNITY FACILITIES & DISTANCE FROM THE SUBJECT

Service or Facility Distance from Subject

Neighborhood Shopping Adjacent to 0.2 Miles Hospital 75 Feet Pharmacy 75 Feet Bus Stop 120 Feet

Convenience Store 0.1 Mile Medical Clinic 0.1 Mile Light Rail 0.3 Miles Walmart 0.5 Miles Middle School 0.5 Miles High School 0.6 Miles Park 0.6 Miles Fire Department 0.6 Miles Grocery Store 0.7 Miles Child Care 0.7 Miles Mall 0.9 Miles Recreation Center 0.9 Miles Elementary School 1.0 Mile Police Station 1.2 Miles City Hall 1.4 Miles Library 1.5 Miles Post Office 1.6 Miles College 2.1 Miles ESL 2.1 Miles Senior Center 2.2 Miles University 3.2 Miles Source: Analysis by Prior & Associates

Identification Of Market Area Boundaries Page | 31

IV. IDENTIFICATION OF MARKET AREA BOUNDARIES

The subject is in the Utah Park neighborhood of southwest Aurora, a mixed residential and commercial neighborhood that provides shelter for low- to middle-income residents who are primarily from Aurora, other areas throughout the MSA or outside the state, and typically work in retail, service, transportation, construction, office, healthcare, professional and blue-collar jobs throughout the MSA. The Utah Park neighborhood includes the lands that are north of East Jewell Avenue, south of East Mississippi Avenue, east of South Peoria Street and west of Interstate 225.

The subject is under the jurisdiction of the City of Aurora. The local government offers basic municipal services to residents of the city. Public school students attend classes in the Aurora Public School District, which serves a large portion of the city. The distribution area of the Denver Post includes the Denver MSA. Local businesses belong to Aurora Metro Chamber of Commerce, which includes members from throughout the city.

The subject is in the Utah Park submarket, as defined by CoStar, which has the same neighborhood boundaries. The surveyed homeless properties draw most of their tenants from Aurora, Denver or throughout the MSA. Some tenants have service and retail occupations, while most homeless households receive assistance from Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), or Department of Human Services or Veterans Administration benefits, with reported annual incomes from around $5,000 to $17,000.

The subject’s sponsor is the Aurora Housing Authority and Aurora Mental Health will refer candidates to the subject. Aurora’s Housing and Community Services Department conducts the annual homeless point-in-time (PIT) count for the city. The Metro Denver Continuum of Care (CoC) is the regional system that coordinates services and housing for the homeless and it is divided into seven counties.

The subject is in Arapahoe County. These factors suggest that the subject’s primary market area (PMA) is equal to the city of Aurora, which had 612 homeless persons as of the 2022 Point in Time count. However, the regional coordination of services suggests that some households could originate from outside the city.

Identification Of Market Area Boundaries Page | 32

MARKET AREA MAP

Overview of Market Conditions Page | 33

V. OVERVIEW OF MARKET CONDITIONS

A. Historic Vacancy Trends

From 2018 through June 29, 2023, the average apartment vacancy rate in the Denver MSA fluctuated, but was at 6.9% at the start and end of the period. From 2018 through 2020, the vacancy level grew from 6.9% to 7.4%, then declined to 6.1% in 2021 and increased to 6.9% so far in 2023. From 2018 through June 29, 2023, the average apartment vacancy rate in the PMA increased from 6.3% to 7.0%.

In 2019, it lowered from 6.3% to 6.1%, then rose to 6.6% in 2020, decreased to 6.2% in 2021 and grew to 7.0% in 2022, where it has remained so far in 2023.

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

2018 2019 2020 2021 2022 YTD 2023

AVERAGE ANNUAL VACANCY RATES

Denver MSA PMA

As of June 29, 2023, according to CoStar, the average Denver MSA vacancy rates were 6.2% in studios, 7.0% in one-bedroom apartments, 6.9% in two-bedroom dwellings and 7.8% in three-bedroom units. Since 2018, the vacancy rate decreased 0.3 percentage points in studios and 0.2 in one-bedroom units, but grew 0.2 in two-bedroom apartments and 0.7 percentage points in three-bedroom units.

4%

5%

5%

6%

6%

7%

7%

8%

8%

2018 2019 2020 2021 2022 YTD 2023

VACANCY RATES BY UNIT TYPE - DENVER MSA

Studio 1BR 2BR 3BR

Overview of Market Conditions Page | 34

As of June 29, 2023, according to CoStar, the average PMA vacancy rates were 5.9% in studio units, 7.4% in one- and three-bedroom apartments and 6.8% in two-bedroom dwellings. Since 2018, the vacancy rate rose 1.2 percentage points in studios, 0.7 in one-bedroom units, 0.6 in two-bedroom apartments and 1.9 percentage points in three-bedroom units.

0%

2%

4%

6%

8%

10%

12%

2018 2019 2020 2021 2022 YTD 2023

VACANCY RATES BY UNIT TYPE - PMA

Studio 1BR 2BR 3BR

Prior & Associates conducted surveys of a similar group of PSH comparables in Denver in October 2021, December 2022 and July 2023. The vacancy rate at the permanent supportive housing developments increased marginally, from 1.4% in October 2021 to 1.8% in December 2022, then grew to 4.4% in July 2023. The managers of PSH projects noted that vacancies are filled as fast as possible through the CES process or waitlist applicants, but tenant screening procedures can slow this process.

The PSH property in the PMA had stable occupancy between 96% and 100% over the last year, while six PSH properties outside the PMA had were steady at or near 100% or between 97% and 100%. One property, Renaissance at North Colorado Station, was underperforming with a steady rate between 85% and 90% over the last year, while Renaissance Stout Street Lofts had a decrease in occupancy, from 100% to 80%, which the manager attributed to a recent spike in evictions.

B. Absorption

According to CoStar, from 2018 through June 29, 2023, the MSA averaged 9,616 apartment absorptions and 10,062 deliveries annually. During this period, the vacancy rate fluctuated, but was at 6.9% at the start and end of the period. The deliveries were concentrated in 2019 and 2022, with an average of 12,598 per year, while absorption was greatest in 2018 and 2021. Since the start of 2022, deliveries have outpaced absorption, causing the vacancy rate to increase.

Overview of Market Conditions Page | 35

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2018 2019 2020 2021 2022 YTD 2023

ABSORPTION, DELIVERIES, VACANCY - DENVER MSA

Deliveries Absorption Vacancy Rate

According to CoStar, from 2018 through June 29, 2023, the PMA averaged 803 apartment absorptions and 896 deliveries annually. During this period, the vacancy rate increased from 6.3% to 7.0%. The deliveries were concentrated in 2020 and 2022, with an average of 1,291 per year, while absorption was greatest in 2020 and 2021. Since the start of 2022, deliveries have outpaced absorption and the vacancy rate has grown, although it has lowered so far in 2023.

5.6%

5.8%

6.0%

6.2%

6.4%

6.6%

6.8%

7.0%

7.2%

1,000

1,200

1,400

1,600

2018 2019 2020 2021 2022 YTD 2023

ABSORPTION, DELIVERIES, VACANCY - PMA

Deliveries Absorption Vacancy Rate

Prior & Associates surveyed a homeless property in the PMA that opened in 2020, but the manager was unable to provide lease-up information. However, we previously obtained lease-up information for four homeless and homeless/LIHTC properties that opened outside the PMA, in Denver, over the past five years:

• Renaissance Legacy Lofts, a 98-unit LIHTC/PSH development, started pre-leasing units in July 2022, opened in October 2022 and reached stabilized occupancy in mid-December for an average monthly absorption rate of 17 units per month, without concessions. As of our survey on December 21, 2022, the property was nearly 100% occupied after being open for just over two months.

Overview of Market Conditions Page | 36

• Brandon Courtyard, a 104-unit LIHTC/PSH property, started leasing at the end of 2019, opened in early 2020 and reached stabilized occupancy in November 2020 for an average absorption rate of nine units per month, without concessions. However, the manager indicated lease-up was significantly slowed by COVID-19.

• Renaissance Downtown Lofts, a 101-unit Class B special needs LIHTC/deeply-subsidized project, opened in January 2019 and filled all 100 revenue-producing units in 60 days, for a monthly absorption rate of 50 units, without concessions.

• St. Francis Center at Cathedral Square, a 50-unit Class B special needs LIHTC/deeply-subsidized project, opened in January 2018 and filled all 49 revenue-producing units in one month, for a monthly absorption rate of 49 units, without concessions. All units were pre-leased prior to opening, but management sought to stagger move-ins.

C. Historic Asking Rent Trends

The average rent in the MSA and PMA grew 4.8% and 5.4% per year, respectively, from 2018 through June 29, 2023. In 2019, average rents in the MSA rose 2.6%, followed by a decrease of 0.3% in 2020 and average annual increases of 4.2% through year-to-date 2023. Rents rose each year in the PMA during this period.

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

2018 2019 2020 2021 2022 YTD 2023

AVERAGE ANNUAL EFFECTIVE RENTS

In a stable rental market, the vacancy rate will remain around a balanced level of 5%, while rents will increase incrementally at levels similar to renter household incomes. When supply in the market is not sufficient to meet demand, vacancy rates will lower and rents will grow at higher levels until additional units are constructed to return the market to balance. The rent changes in the short-term will lag the variations in vacancy rates and supply. As such, a market with many rental units in the development pipeline and recent growth in vacancy levels will likely start to experience slower short-term rent growth, or even decreases.

The following chart shows the rent and vacancy changes in the MSA since 2018. During this period, the vacancy rate did not change, while the average effective rent rose 4.8% annually. The annualized rent increase since 2021 has been 4.8%, which is equal to the average growth since 2018.

Overview of Market Conditions Page | 37

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

2018 2019 2020 2021 2022 YTD 2023

EFFECTIVE RENT VS. VACANCY - DENVER MSA

Average Effective Rent Vacancy Rate

The following chart shows the rent and vacancy changes in the PMA since 2018. During this period, the vacancy rate increased from 6.3% to 7.0%, while the average effective rent rose 5.4% annually.

The annualized rent increase since 2021 has been 4.9%, a somewhat slower rate than the average growth since 2018.

5.6%

5.8%

6.0%

6.2%

6.4%

6.6%

6.8%

7.0%

7.2%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2018 2019 2020 2021 2022 YTD 2023

EFFECTIVE RENT VS. VACANCY - PMA

Average Effective Rent Vacancy Rate

All surveyed projects are permanent supportive housing with deeply-subsidized units and contract rents. As such, rent changes at the comparables are not relevant because tenants contribute 30% of their incomes for rent and utilities.

D. Historic Concessions

According to CoStar, the average rent loss in the MSA due to concessions was 1.3% from 2018 through June 29, 2023, and declined from 1.9% to 0.8% during that period. The average in the PMA was 1.1% since 2018 and lowered from 1.5% to 0.8%. Since 2021, the concession rates in both the MSA and PMA has increased, but have decreased since 2022 and remain low.

Overview of Market Conditions Page | 38

0.0%

0.5%

1.0%

1.5%

2.0%

2018 2019 2020 2021 2022 YTD 2023

AVERAGE ANNUAL CONCESSION RATE

None of the surveyed rental projects were offering concessions in July 2023.

Comparability Analysis Page | 39

VI. COMPARABILITY ANALYSIS

A. Inventory

1. Housing Inventory

From 2013 to 2022, permit-issuing jurisdictions in the Denver-Aurora-Lakewood MSA (Denver MSA) authorized the construction of 208,501 new residential dwellings. Multifamily permits averaged 10,558 per year and accounted for 51% of the development activity. The number of multifamily permits in 2022 was 13,368, compared to averages of 10,558 per year in the past ten years and 12,920 annually in the last three, while there were 10,108 single-family permits in 2020, with ten- and three-year averages of 10,292 and 11,485, respectively. In Arapahoe County, from 2013 to 2022, 36,277 residential building permits were issued, with 15,477 multifamily permits that accounted for 43% of the total development activity. The number of multifamily permits in 2022 was 2,555, with averages of 1,548 per year in the past ten years and 2,078 annually over the last three years. In the county, there were 1,770 single-family permits in 2020, compared to ten- and three-year averages of 2,080 and 2,575, respectively. From 2013 to 2022, 23,523 residential building permits were issued in Aurora, including 9,445 multifamily permits, which accounted for 40% of the residential development activity during that period. There were 1,966 multifamily permits in 2022, compared to averages of 945 annually over the last ten years and 1,569 per year in the past three years. In Aurora, 1314 single-family permits were issued in 2020, with ten- and three-year averages of 1,408 and 1,824, respectively. From January through April 2023, there were 4,326 multifamily permits issued in the Denver MSA, including 546 in Arapahoe County and 474 in Aurora.

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

RESIDENTIAL BUILDING PERMITS - DENVER MSA; 2013-2022

M…