1. #MAMConf14 Incremental and Ancillary Revenue Strategies Driving Revenue, Returns and Value Mark P. Vernon Vice President

2. #MAMConf14 Ancillary Income: Driving revenue, returns and value Compete with others to drive revenue Transform the landscape to create value Seek out the opportunities Project the returns (ROI) Track the income Watch for the tipping point

3. #MAMConf14 Multi-family Owners Multi-family Property Managers Multi-family Developers Self Storage Big Box Retailers Hotels Airlines “Relax, Roger, everybody's doing it…” Bud Fox, Wall Street Ancillary Income: Who are our competitors?

4. #MAMConf14 Ancillary Income: Transform the landscape Utilize the economies of scale to leverage income opportunities Increase property portfolio income through multi-stream revenue sources Monetize resident service demands Impact property valuation at sale or refi Boost property bottom-line value

5. #MAMConf14 Ancillary Income Opportunity: Gumball machines

6. #MAMConf14 Results: Gumball machine usage increases resident tooth decay at the community

7. #MAMConf14 Ancillary Income Opportunity: Community Rickshaw Service

8. #MAMConf14 Results: Increase in the number of beer cans, cigarette butts and volume of emesis to clean up

9. #MAMConf14 Results: Corresponding increase in the number of internal transfers

10. #MAMConf14 Ancillary Income: Seek out opportunities Income generating measures Services Cable and wireless (must have ample bandwidth) Laundry (in unit and internet based laundry facilities) Rooftop antennas for wireless transmission Vending (traditional versus healthy vending) Renters insurance (standard versus self administered) Furniture rental Coffee services After hours concierge services Alarm monitoring Parking space rental Pet washing stations Carwash income Language interpretation services (dial-in)

11. #MAMConf14 Ancillary Income: Seek out opportunities (cont’d) Utilities Resident utility pass through Deregulated markets – electricity and gas related Mineral and gas rights Rate increases through applicable regulatory authorities Rate negotiations – flat rate versus spot rates Tax incentives, energy conservation and utility audits Vacant utility recovery Recycling /waste reduction Valet Waste In-house utility billing

12. #MAMConf14 Ancillary Income: Seek out opportunities (cont’d ) Property fees Pet fees Pet DNA fees Amenity fees Transfer fees Lease break fees Late fees Charging station fees Bicycle rack fees

13. #MAMConf14 Washer and Dryer - 5 Year Lease Projections (2012-2017) MonthsMonthly RentalTotal Rental/Set (Cost) Lease Washer and Dryer60$40.00$1,800.00 7% taxes $126.00 Total Costs: $1,926.00 MonthsMonthly IncomeTotal Income/Set (Benefit)Monthly Income60$45.00$2,100.00 Total Yearly Benefit: $2,100.00 Net Income $174.00 5 Year ROI:9% Payback Period (Mos): 55.0 Assumptions: * $5.00 is the leasing premium/set; The rental fee is $40 and resident pays $45. **Based on a 5 year lease cycle. ***Net income achieved after 55 months of rental; 4.5 months maximum vacancy allowed. Ancillary Income: Define the risks (return on investment – simple case study)

14. #MAMConf14 Washers and Dryers - 5 Year Purchase Projections (2012-2017) W/D CostInstall LaborTotal Cost/Set (Cost)Purchase W/D$1,100.00$20.00$1,120.00 7% taxes $78.40 Total Costs: $1,198.40 MonthsMonthly IncomeTotal Income (Benefit)Monthly Income60$35.00$2,100.00 Total Yearly Benefit: $2,100.00 Net Income $901.60 5 Year ROI:43% Payback Period (Mos): 34.2 *$600 for top load washer and $500 for top load dryer. **$300 buy back after 5 years ***5-7 year life based on usage. Calculation assumes 5 years. Ancillary Income: Define the risks (return on investment – simple case study)

15. #MAMConf14 Ancillary Income: Track Performance Identify income opportunity Negotiate the terms Track income and performance Drive ancillary income strategy through reporting Renegotiate the terms

16. #MAMConf14 Ancillary Income : The tipping point “Are we simply trading rent increases for ancillary revenue.” “This property nickels and dimes us to death.”

17. #MAMConf14 Thank you! Mark Vernon, Vice President Purchasing Bell Partners Inc. 336.232.1900 mvernon@bellpartnersinc.com Photos uploaded via internet Google search

18. #MAMConf14 Incremental and Ancillary Revenue Strategies Driving Revenue, Returns and Value Kevin Huss Director of Revenue Management

19. #MAMConf14 Maximizing Revenue is about Balance Ancillary Revenue Occupancy % Rental Rates

20. #MAMConf14 Ancillary Revenue The Basic Fees Application Administration Pet Fee/Rent Water/Sewer Trash Gas/Electric Common area deduction The Resisting Fees Door to door trash pickup Parking fee (every car) Bulk cable or internet Amenity fee Revenue Shares Cable, internet or voice services Laundry centers Vending ATM’s

21. #MAMConf14 Optional Parking – garages, carports & reserved Storage W/D rentals Accent walls Clubhouse rental Guest suites Indirect Revenue Food truck festival Farmers market Wine and cheese events Blood drives 5K walk/run Risk Management Renters Insurance: liability, pet & bed bug Deposit alternatives Ancillary Revenue cont.

22. #MAMConf14 Understanding your property is key? In place rents vs. current asking rents Current asking rents vs. market rents How long will you hold the property? Short? Long? Are your ancillary fees consistent with your market? Indirect income generators

23. #MAMConf14 How do you sell your monthly ancillary fees? Include in the rent? Rent$635 Payment from resident$635 ($25 door to door trash pick up and $10 parking fee included) Not include in the rent? Rent$600 Door to Door Trash$25 Parking fee$10 Payment from resident$635 On the surface this looks no different, but when you market your property there could be a calculated difference….

24. #MAMConf14 How will a buyer underwrite your property? Include in the rent? Rent$650 Door to Door Trash$0 Parking Fee$0 Total Revenue Per Unit$650 Not include in the rent? Rent$650 Door to Door Trash$25 Parking fee$10 Total Revenue Per Unit$685 The next buyer will underwrite a targeted rent value Existing ancillary accounts will be included $685 vs. $650 = $35/unit of additional revenue $35 x 12 months x 300 units = $126,000 $126,000 at a 7% cap rate = $1.8 million of value

25. #MAMConf14 Kevin Huss Director of Revenue Management Harbor Group Management Co. khuss@harborg.com 212.644.0513