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2003-2004 Townlake Budget 2004 Budget Jefferson Commons — UT Town Lake Austin , Texas ANNUAL OPERATING JEFFERSON C S at TOWN LAKE UNIVERSITY S AUSTIN XAS r°e are e for: Texas Student Housing Corporation November , Jefferson Commons at Town Lake Austin, Texas November 15, 2003 ANNUAL OPERATING PLAN 2003-2004 STRATEGIC BUSINESS PLAN EXECUTIVE SUMMARY Location: Approximately 2.5 miles southeast of The University of Texas Completion: August 2003 Land: 18.2 acres on a rolling site. Density is 11.2 units per acre. Construction: 9 3-story apartment-style buildings with wood frame construction,stucco and siding exteriors,and asphalt shingle roofs. Parking: The project has 150 carport spaces,36 garages and 492 open spaces for a parking ratio of approximately 1 space per bedroom. Amenities: Common area amenities include a recreation center with a game room,fitness center,computer center and tanning room. Exterior amenities include an expansive resort-style pool,Jacuzzi spa,lighted basketball court,bar-b-que grills,picnic areas,and a sand volleyball court. The site also contains an Office/Leasing Center with an attached model. Current Occupancy: 87% Unit Mix: Bed/Bath #Units #Beds Market Rents Starting Rents 9/04 1/1 36 36 $735 $735 2/2 36 72 588 575 3/3 36 108 505 499 4/2 54 216 412 429 414 54 216 470 475 Totals/Avg 216 648 485 489 Rental rate Includes: Furniture,water,sewer,washer and dryer,trash pickup,premium cable with HBO and ESPN,internet access,and use of all amenities. Rental rate Excludes: Local telephone service,long distance,electricity and gas. Market Located minutes from The State of Texas' flagship university,Jefferson Commons is located in the Riverside sub-market of Austin,Texas. The Austin MSA had a population of 1.33 million in 2001,a 2.75%increase over 2001. Despite the slower Austin economy at present,population growth is expected to continue albeit at a slower pace of 3%per annum due to its popularity as a"quality of life"destination. Similarly employment growth has slowed,but is estimated to grow by approximately 3%per year through 2005. The current employment base is approximately 675,000 and is based primarily on services and government. Most recent statistics indicate a 5%unemployment rate for Austin. The University of Texas at Austin boasts the largest enrollment in the nation with a total of 50,616 students. UT accounts for 13 percent of the higher education in public universities in Texas. As of 2003, approximately 38,600 of total enrollment were undergraduates compared to 12,000 graduate students. The University has been trying to cap its enrollment at 50,000,and their most recent figures reflect a decrease of over 700 students from Fall 2002. It is expected the university will try to maintain 50,000 in enrollment over the next several years,but they will feel continued pressure by the increase in the number of high school graduates. The student population primarily lives near the university campus and in the Riverside area. 50 percent of the student population lives in the central university area and approximately 15%of students live in the Riverside area. The average age of the undergraduate students is 20.8. Additionally,the UT Austin Student comes from a more affluent family with an average family income of$85,000. Approximately 48 percent of undergraduates receive some sort of financial aid. The student-oriented apartment rental market is well established and growing. Freshmen are not required to live on campus. Current on-campus supply totals 6,500 beds. The Riverside area has had construction of approximately 8,000 beds since 1996. Jefferson Commons Town Lake is the most recent development in the area,leasing up to 87%,when the average occupancy for the submarket was only 68%. Jefferson Commons is competitive with the highest quality communities in the sub-market. The property is 87%occupied for fall 2003 with leases that expire in August 2004. Supply exceeded demand during this last leasing period resulting in lower average occupancy for this sub-market. Crossing Place with 1,131 beds was delivered in the fall of 2002 and UT Towne Lake with 648 beds came on line in 2003. Budget and 0 perata® s Jefferson Commons is currently 87%occupied and has begun pre-leasing for Fall 2004. The marketing strategy for 2004 will be implemented in two parts. From October 2003 until January 2004,residents will be eligible to renew with the financial benefit of a one-time discount. If they do not lease by the deadline established in January,market rates will apply and the one-time concession will not be given. The targeted renewal rate is 25%. The proposed budget contains realistic operating expense expectations for newly constructed community. The leases establish strict guidelines for resident reimbursement of damages or costs associated with condition at turnover. Enforcing this policy has resulted in recovery of a portion of those costs on other projects and will be a management focus going forward. The attached budget provides adequate funds to operate and maintain the property in a superior manner. Ca ital There are no major structural issues or any identified environmental concerns to be addressed in the coming year. A capital budget is included in the approved operating budget to maintain the quality of the asset and enhance the property's long-term value. Risks Due to its high quality of product and amenities,Jefferson Commons is the price leader in the sub-market. Without a high level of attention to its physical condition,resident programs,and customer service,it could lose that edge to local competitors. Property si ess Plan PROPERTY ST TKGY Monitor rental rates during the lease up period to insure maximum rents at desired occupancy of 90% ® Continue to provide the"resident friendly"service that helps differentiate the community in the market Monitor resident satisfaction in order to improve relations and increase renewals ® Continued utilization of Turn Caddy software to improve turnover process and monitor expenses. ® Effectively manage and maintain property to achieve budgeted NOI MARKET CONDITIONS Current—2003 Enrollment for Fall 2003 was 50,616, with no increase over enrollment from Fall of 2002. The average market occupancy from the competitors in the Riverside market ending for Fall 2003 was 68%. ➢ The overall average market rent increased by 2.57% in 2003. Projected rents are expected to increase .8% in 2004. Crossing Place opened in Fall 2002,and has 1,131 beds. Town Lake opened in Fall 2003 with 648 beds. Other major competitors in the market that are similarly located,—Sterling University, Melrose,University Commons,Village at Riverside, College Park have occupancies at 81%,53%, 52%, 87%,and 70%respectively. Future—2004 ➢ Projected enrollment for Fall 2004 is expected to remain stable at 50,616. UT has no plans to expand the number of dormitories it has on or off campus. MARKETING STRATEGY Advertising Internet advertising and the Jefferson Commons web site(improved community website) Co-Op marketing efforts with local business Student Newspaper advertising Apartment Guide and Student Guide advertisements ➢ Distribution of flyers and snack bags to students on campus ➢ Direct mailers Flyers and interactive CD's at Longhorn Saturday (incoming freshmen orientation) Distribute to Campus organizations as well as fraternities/sororities STAFFING PLAN Projected Staff • Community Manager • Resident Services Manager • Leasing Manager • Leasing Professional • Leasing Professional (P.T.) • Lead Maintenance • Assistant Maintenance • Groundskeeper(P.T.) • Community Assistant • Community Assistant • Community Assistant • Community Assistant • Community Assistant • Community Assistant ® Community Assistant The Community Assistants are employees who work 16 hours per week in exchange for a bedroom in a four-bedroom apartment.