Poulsbo Lincoln Cottages 02-22-2021

POULSBO LINCOLN COTTAGES POTENTIAL INVESTMENT OPPORTUNITY 02/22/2021 POULSBO LINCOLN COTTAGES 1 02/22/2021

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TANAGER HOMES WORK FORCE HOUSING BUSINESS CASE In many areas of the United States over the past few dian household income and well within range of years, the new home industry has largely abandoned both retirees and local workers– private (mill, medi- what’s sometimes called the “entry level” segment, cal, etc.) as well as public (teachers, police officers, choosing instead to focus on more expensive move- city workers etc.) Most two-person households in up and luxury segments of the market. Builders have the West Sound should be easily able to afford one of been given this discretion in desirable areas because these homes. generally, land supplies are tight and demand for The homes will be cost efficient, but not “cheap”. higher-end product remains high. One way builders They will be single-family, detached on small lots. measure profit is by “revenue per acre” and since – They’ll have separate, private yards and front porch- everything else being equal– the upper end products es. The site will be dense (approximately 6 to 7 units can provide a higher dollar-per-acre return, the entry per acre) but it will be attractive with double-loaded, -level homes don’t get built. tree-lined streets with sidewalks located on both Predictably, the entry-level segment now suffers dra- sides of the streets. The homes will feature modern matic shortages. Single-family homes under finishes and will be highly energy efficient. On-street $450,000 are practically non-existent in the West parking is allowed on both sides of the street, plus, Sound area of Western Washington today, both new each home will feature a full-length driveway and a as well as existing. We call this neglected segment one-car garage for two off-street parking spaces per the “Workforce” segment because these are the home. homes that would otherwise be affordable to median We’re certain demand for these homes will be very -household income families: first time owners, work- strong. We believe that we can deliver profits in the ing couples, and retirees. 10% to 14% range (as a percent of sales price) which Tanager Homes sees this shortage as an opportunity. should provide equity returns in the 20% to 30% We think we can find and develop property and then range for our investors. build and sell single-family “cottage-style” homes at The mission of Tanager Homes is to become a leader “workforce housing” prices—prices that are well be- in “workforce” housing. We think the market is high- low the current median resale price. These homes ly neglected and essentially “inexhaustible”. The would then be affordable to homebuyers with house- competition is looking the other way. The opportuni- hold income starting in the high-$50 thousand dollar ty is there. range—roughly equal to the current West Sound me- POULSBO LINCOLN COTTAGES 3 02/22/2021

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TANAGER HOMES POULSBO LINCOLN COTTAGES BIG PICTURE DEAL POINTS 10 BIG PICTURE POINTS 1 Poulsbo Lincoln will consist of 15 Cottages styled single-family homes on 2.94 acres in Poulsbo, WA 2 The project will feature 3 models with base prices running from $364,000 to $434,000 (today's prices). The homes are designed to serve an 'entry-level' / 'work- force housing' / retirement market segment. 3 According to Zillow, the middle-tier home value in the Poulsbo, WA market area as of 02/21/21 is $517,042 and the Redfin Median Home Sale Price is $525,000. 4 Total Projected Investment Amount: $650,000 5 Development Loan Amount $810,000 6 No personal guarantees from the Investor. Tanager Homes provides any guarantees required on Development or Construction Loans. 7 Investment Timing (# Months from Initial 24 Investment until Final Payout): 8 Investment Profit: $411,417 9 Internal Rate of Return: 27.1% 10 Contribution Schedule: EQUITY DATE AMOUNT May-21 $650,000 POULSBO LINCOLN COTTAGES 5 02/22/2021

TANAGER HOMES PORT TOWNSEND HASTINGS REDFIN MARKET REPORT POULSBO LINCOLN COTTAGES 6 02/22/2021

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TANAGER HOMES POULSBO LINCOLN COTTAGES CONCEPTUAL SITE PLAN POULSBO LINCOLN COTTAGES 8 02/22/2021

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TANAGER HOMES COTTAGES HOMES PLAN 1066 POULSBO LINCOLN COTTAGES 10 02/22/2021

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TANAGER HOMES COTTAGES HOMES PLAN 1302 POULSBO LINCOLN COTTAGES 12 02/22/2021

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TANAGER HOMES COTTAGES HOMES PLAN 1520 • 1520 sf 14 • 3 Bedrooms with Bonus Room • Optional 4th Bedroom • 2—1/2 Baths • 1-car garage • Front porch • Stacked Laundry • Walk in Master Closet POULSBO LINCOLN COTTAGES 02/22/2021

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TANAGER HOMES COTTAGES HOMES TYPICAL LOT CONFIGURATION POULSBO LINCOLN COTTAGES 16 02/22/2021

TANAGER HOMES COTTAGES HOMES TYPICAL LOT CONFIGURATION We believe in the enduring desirability of single-family homes as opposed to multi-family. We want to provide yards on all four sides. The front of the home is set back at a proper dis- tance to encourage social interactions between neighbors (porch to sidewalk), while the rear yards are private and large enough for children and pets to play safely. The standard lot size is 48’ wide by 70’ deep, 3,360 square feet. Side yard setbacks are 5’ and there’s a minimum 10’ front and rear setback with a minimum of 20’ driveway setback—enough for a car to be completely off the street (plus one in the garage). Counting sidewalks and street tree area, the front of the porch will be a minimum of 18’ off the street. POULSBO LINCOLN COTTAGES 17 02/22/2021

TANAGER HOMES COTTAGES HOMES TYPICAL INTERNAL STREET SECTION POULSBO LINCOLN COTTAGES Inter 02/22/2021 18 grid scap

rnal streets are designed to be “walkPabOleU”LwSBitOh aLmINoCdOifiLeNd COTTAGES 19 shape and 5’ sidewalks separated from the0c2u/r2b2b/y250’2l1and- pe zones on both sides of all streets.

TANAGER HOMES COTTAGE HOMES STANDARD FEATURES INTERIOR FEATURES PEACE OF MIND  8’ Ceilings throughout, vaulted ceilings in single-  2 x 6 exterior construction story homes  Dual paned, energy efficient low “E” vinyl windows with  Quality plush carpeted secondary bedrooms screens  High-quality designer laminate counter-tops  R-49 ceiling insulation, R-23 exterior wall insulation and  Vinyl flooring in hall bathrooms and laundry room  6-panel flat white painted interior doors R-38 insulation in the under floors  White reversible painted baseboard throughout  Energy efficient heat pump  Pre-wired for cable television in master bedroom,  Hardwired smoke detectors throughout  Two weatherproof exterior electrical outlets den and great room  50-gallon electric hot water heater  Phone jacks in the kitchen and master bedroom  1-year Builder Warranty  Satin Nickel lighting fixtures  Surface mounted ceiling lights in secondary bed- EXTERIORS rooms, abundant recessed lighting in kitchen,  Architectural comp shingle roofing hallways and nook  Exposed aggregate walkways and driveways  Rich and warm Benjamin Moore White Dove (OC-  Dent resistant 36” front door with satin nickel door 67) interior wall color standard hardware GOURMET KITCHEN  1-car garage with door openers  Fully landscaped  High quality designer laminate countertops  Two frost free hose bibs  Stainless steel range, microwave and dishwasher  Deep covered porches and decks  Stainless steel kitchen sink with single handle CUSTOMIZATION brushed nickel faucet  Garbage disposal  Extensive option list:  Storage pantries  Flooring  Pre-plumbed water line for ice maker  Countertops  Appliances MASTER SUITE  Light Fixtures  Plumbing Fixtures  Sumptuous master baths with vanity cabinets  Bedroom addition (Plan 1520)  Laminate counter top and vinyl floors  Window coverings  Large walk-in closets with built-in shelving POULSBO LINCOLN COTTAGES 20 02/22/2021

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Poulsbo, Washington, with a population of 11,180, is located in alike. These include several beautiful parks throughout the city, the northern part of Kitsap County and is 4.5 square miles in a boardwalk along Liberty Bay, the Valborg Oyen Public Library, area. Liberty Bay, originally called Dog Fish Bay, and the majes- three marinas, interesting gift shops, delicious bakeries, good tic, snow-peaked Olympic Mountains to the west induced the schools including the Olympic College satellite campus, and pan- Scandinavians to settle in Poulsbo because the area was so simi- oramic views of Liberty Bay and the Olympic Mountains. lar to the fjords of Norway. Prior to Euro-American settlement, Poulsbo was in the heartland HISTORY of the Suquamish People, who have lived in Puget Sound for thousands of years. Suquamish ancestors occupied villages and Founded by Norwegian immigrant Jørgen Eliason in the 1880s, camps on the Liberty Bay shoreline over the past 5,000 years, Poulsbo was settled in its early years by a large number hunted throughout the Poulsbo forests and floodplains, fished in of Norwegian and other Scandinavian immigrants because of its bays and streams, and collected shellfish along the marine similarities to their native countries.[9] In 1886, I.B. Moe, one of shoreline. the early Norwegian settlers, suggested that the community should have a post office. Moe suggested the town be named With the Scandinavians’ arrivals, Poulsbo was founded by Jorgen \"Paulsbo\" (which translates as \"Paul's place\"), after the village Eliason, from Fordefjord, Norway, when the primary method of in Halden, Norway,[10] where Moe spent his early years. The travel was water. Supplies were brought the eighteen-mile trip community's petition for a post office was granted and Moe from Seattle by rowboat and later by steamboat. Over a sixty- became the first postmaster, but authorities in Washington, D.C. year period, the “mosquito fleet”, comprised of more than a misspelled the town's name, likely misreading Moe's hand- dozen steamboats, served Poulsbo and other locations along writing,[citation needed] and the community became known as Liberty Bay and Puget Sound carrying passengers and freight to \"Poulsbo\" thereafter. Poulsbo was incorporated on December and from Poulsbo and delivering farmers’ produce to Pike Place 18, 1907. Market in Seattle. Until World War II, many Poulsbo residents re- Today Poulsbo is a thriving community with many amenities that tained Norwegian as a primary language. However, dur- attract tourists and encourage people to move to this area. With ing World War II, the military constructed about 300 residential its picturesque downtown core of rosemaled storefronts and units to provide housing for workers at the nearby Puget Sound shopping areas at Poulsbo Village, along Viking Avenue, and in Naval Shipyard in Bremerton. The population of Poulsbo almost College Market Place, Poulsbo offers much to citizens and guests tripled over three years, and the diversification of the popula- POULSBO LINCOLN COTTAGES 22 02/22/2021

POULSBO, WASHINGTON - SYNOPSIS tion led to the dominance of English as the primary language. age or older. The average household size was 2.30 and the On October 22, 1975, King Olav V of Norway visited Poulsbo average family size was 2.97. as part of the celebration of 150 years of Norwegian immigra- The median age in the city was 40.2 years. 23.8% of residents tion to the United States.[11] His son, Harald, visited 20 years were under the age of 18; 7.8% were between the ages of 18 later and 24; 24.7% were from 25 to 44; 24.5% were from 45 to 64; 2010 census and 19.4% were 65 years of age or older. The gender makeup of the city was 45.3% male and 54.7% female. The median As of the census of 2010, there were 9,200 people, 3,883 income for a household in the city was $38,875 and the medi- households, and 2,310 families residing in the city. Poulsbo an income for a family was $51,353. Males had a median in- had an estimated population of 11,180 in 2020. come of $40,482 versus $27,899 for females. The per capita The population density was 1,970.0 inhabitants per square income for the city was $20,649. 9.1% of the population and mile (760.6/km2). There were 4,115 housing units at an aver- 8.2% of families were below the poverty line. Out of the total age density of 881.2 per square mile (340.2/km2). The racial population, 14.1% of those under the age of 18 and 6.0% of makeup of the city was 82.9% White, 9.2% Hispanic or Latino, those 65 and older were living below the poverty line. A large 5.7% Asian, 1.1% African American, 0.9% Native American, number of employed individuals work on the east side of Pu- 0.3% Pacific Islander, 3.6% from other races, and 5.4% from get Sound, in Seattle or other King County cities, and com- two or more races. There were 3,883 households, of which 30.8% had children under the age of 18 living with them, 61% were married cou- ples living together, 11.4% had a female householder with no husband present, 3.2% had a male householder with no wife present, and 40.5% were non- families. 34.7% of all households were made up of individu- als, and 17.4% had someone living alone who was 65 years of POULSBO LINCOLN COTTAGES 23 02/22/2021

TANAGER HOMES DEAL POINT DETAILS DETAILS INVESTMENT STRUCTURE This investment will feature 4 entities: 1 Investor 2 Tanager Homes, LLC (\"Tanager\") 3 Poulsbo Lincoln Land, LLC a to-be-formed LLC owned 100% by the Investor 4 Poulsbo Lincoln Cottages, LLC a to-be-formed LLC owned 50% by Poulsbo Lincoln Land, LLC and 50% by Tanager Homes INVESTMENT ROLES Poulsbo Lincoln Land, LLC acquires the land and develops the 15 lots. The lots are owned 100% by 1 Poulsbo Lincoln Land, LLC. Upon completion, Poulsbo Lincoln Land, LLC contributes the finished lots into Poulsbo Lincoln Cottages, LLC one phase at a time - typically about 3 per phase. Presale requirements will be established which must be met prior to contributing subsequent phases. All lots not yet contributed remain the property of Poulsbo Lincoln Land, LLC. 2 Tanager Homes will provide any necessary personal guarantees for the $810,000 Development Loan and for the construction loans. No equity or profit distributions will be made on any lot or home on which a personal guaranty obligation exists. 3 Poulsbo Lincoln Cottages, LLC will use the contributed lots as equity to drive construction loans to build the homes. 4 Poulsbo Lincoln Cottages, LLC will hire Tanager Homes to act as developer for the project. Tanager will build and sell the 15 homes. At home closing, Tanager will pay off the lots and distribute profits. 5 The principals of Tanager Homes will provide any necessary construction loan guarantees. INVESTMENT FLOW Tanager identifies a land parcel and completes preliminary analysis 1 Zoning / Land Use Study Market Study Product Determination Preliminary Site Plan Preliminary Home Plans Marketing Strategy Initial Pro-Forma 2 Tanager locates an investor partner. 3 Tanager places the land in escrow under Tanager's name 4 Tanager prepares a \"Pre-Development\" schedule and budget showing cost and timing of items needed to analyze the investment prior to money going hard, prior to closing of land escrow, prior to start of construction. POULSBO LINCOLN COTTAGES 24 02/22/2021

Among other items, this list would probably include: a Survey b Title Report c Preliminary Development Conference with City d Meeting with Land Use attorney e Preliminary Engineering Report f GeoTechnical Report g Environmental Report h House Plans i Structural Drawings j Meetings with key subcontractors 5 Pursuant to the Pre-Development schedule, Tanager will begin the work on the list prior to close of escrow on the land parcels. 6 Prior to closing, Tanager will assign its interest in the escrow to Poulsbo Lincoln Land, LLC. 7 Upon closing, Tanager will be reimbursed by Poulsbo Lincoln Land, LLC for monies paid to this point. 8 Tanager will enter into Development Agreement with Poulsbo Lincoln Land, LLC. Under this Agreement, Tanager will receive a 5.0% of total land development cost Developer fee which comes to $38,573. This fee will be divided up over the 10 month pre-development period - defined as the period from the land closing to the start of physical land development work (i.e., grading, utilities, etc.) 9 Tanager will also serve as Poulsbo Lincoln Land, LLC's General Contractor. Tanager will enter into a General Contracting Agreement with Poulsbo Lincoln Land, LLC and will receive a 0.0% of total land development hard costs contractor fee which comes to $0. This fee will be paid monthly, over 4 months. Tanager will provide jobsite supervision and will be reimbursed by Poulsbo Lincoln Land, LLC on a monthly basis. The supervision charge is estimated to be $26,000. 10 When the lot development is complete, Poulsbo Lincoln Land, LLC will contribute the lots one phase at a time into ,Poulsbo Lincoln Cottages, LLC who will take out construction financing and build, then . sell the homes. Each lot will be contributed with a value of $89,506 . 11 Tanager will enter into a Development Agreement with Poulsbo Lincoln Cottages, LLC to provide developent, construction, and marketing services to the LLC. Tanager will be paid a Developer Fee of 4.0% of total housing revenue which comes to $264,794. This fee will be divided up over 12 months starting with the date the first lots are contributed and ending on the date when the final home is sold and closed. Tanager Homes will also be reimbursed for jobsite overhead costs including superintendent. 12 Upon the sale of the home, Poulsbo Lincoln Land, LLC will be paid the sum of $89,506 (on average) for the contributed lot. In addition, once the project is in stable cash position (no further projected negative cash requirements), then Poulsbo Lincoln Land, LLC will receive profit distributions in the approximate amount of $27,428 per lot, or $411,417 for the entire project. 13 With the equity contribution shown above, and a total investment period of 24 months, the overall profit of $411,417 should result in an IRR of 27.1% POULSBO LINCOLN COTTAGES 25 02/22/2021

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