Acquisition PROCESS

The following is a brief description of Brass Enterprises’ investment cycle and an outline of the steps involved in the investment process.

Deal Sourcing: Brass Enterprises’ real estate properties are typically sourced through: real estate brokers on a national and local level whom we have dealt with repeatedly and proven Brass Enterprises’ ability to execute; real estate lawyers with a broad client base; owners of buildings with whom Brass Enterprises has developed relationships; mortgage brokers and conduit lenders; consultants; and through a continuous follow up on successful and unsuccessful deals.

Due Diligence: Brass Enterprises’ due diligence process is multifaceted and deals with a broad range of factors on both a macro and microeconomic level, which includes analyses of urban economics specific to the region; supply and demand factors affecting multi-residential housing and new construction starts; absorption of current rental supply and predicted supply; regional employment patterns of growth; family formations and income levels; general demographics; zip code evaluations; the civic development pipeline as set out and approved by local council; and market surveys discussing trends in the surrounding areas.

Specific to the subject property under evaluation, Brass Enterprises relies on: rental and sales comparables; commissioned reports from a reputable, and often national, engineering firm; environmental assessments; appraisals; insurance underwriting, including flood and catastrophe insurance underwriting; and tax forecasting as set out by a tax consultant. Brass Enterprises puts strong emphasis on ensuring that the property has adequate insurance, including flood and catastrophe insurance, where applicable. Finally, Brass Enterprises will complete a property tax analysis and forecast, employing a consultant to review pending tax changes when necessary.

Structure Analysis: The structure analysis is key in understanding the quality and integrity of a property. Brass Enterprises thoroughly examines engineering reports, architectural drawings, structural reports, zoning, and land surveys. Brass Enterprises, along with a team that specializes in this field, conduct a property inspection, including a walkthrough of each individual unit. Finally, Brass Enterprises reviews and audits each individual lease and compliance letters.

Operational Analysis: Brass Enterprises conducts an evaluation of the operational infrastructure of the property/development from both a qualitative and quantitative basis to determine financial feasibility and to examine where operating efficiencies can be achieved. This process includes a review of the management team and key management personnel; a review of the historical financials and current of costs operations, payroll expenses, service contracts, forecasting future operations and utilities costs.

Acquisition: The acquisition process in arguably the most important stage. This includes underwriting the property itself, negotiating the most favorable price and terms, structuring appropriate partnership and corporate agreements, coordinating with local legal teams and in-house legal teams, negotiating insurance, financing, title insurance and finally closing.

Asset Management: Once the property is acquired, Brass Enterprises works to ensure that the property is managed in the most efficient, productive manner. Brass Enterprises’ asset management includes performing accounting reviews, adequate reporting, tax appeals, consistent budgeting, capital renovations, human resource management, and financial distributions.

Exit Strategies: Brass Enterprises carefully scrutinizes opportunities to exit from each investment. A map of potential exit strategies is considered as part of the acquisition process. While Brass Enterprises assumes a hold period of 5 years, Brass Enterprises, regularly, throughout the life of the investment, evaluates the relative merit of each strategy in order to determine if and when to exit an investment or to capitalize on its appreciation through a refinancing or partial sale.

During the refinancing cycle of individual properties, Brass Enterprises will determine if it is appropriate to lock in further financing or sell the property. These decisions will be based on both qualitative and quantitative analysis. If Brass Enterprises receives a favorable market bid for the property or believes that there is favorable risk reward for selling an individual property, a sale will be considered.