The Sponsor will operate the property as well as
previous ownership in terms of managing revenues and expenses, especially during the renovation program

Potential Risk The Sponsor's in-house property management team, Trinity Residential, was brought in-house last year. The pro forma assumes the property management team will manage the Property at least as well from a revenue and expense perspective as previous ownership, even during the renovation program, which is underwritten to complete over a 3-year period.

Potential Risk If the market softens, the Property may not achieve projected rent premiums, market rent increases, or exit cap rate assumptions needed to achieve projected outcomes.

Our Assessment Underwritten rent premiums are already being achieved at the Property with previous ownership's renovated units. Additionally, in comparison with newer builds in the area, Lakeside's rents on a post-renovation basis are demonstrably lower than newer vintages by approximately $990 on average for its 1- and 2-bedroom units, reflecting a possible value proposition for tenants looking for updated interiors and a full suite of amenities. Pegasus is underwriting yearly market rent increases of 2.5% in year 1 and 3% thereafter, in comparison with 30 comparable sales across Houston within the past 2.5 years with an average 5.28% exit cap rate, Lakeside is projected to exit at a discount at a 5.5% exit cap rate. Please see Offering Memorandum for further details.

Our Assessment Trinity Residential includes experienced Property Management professionals from local competitors who have successfully executed similar renovation programs at other properties. Pegasus has selected a reputable general contractor for the renovation program, who has worked with Pegasus on at least one similar prior value-add project within its portfolio. The general contractor has executed similar scopes of work for Pegasus, including interior unit upgrades, common area improvements, and exterior enhancements within TX. A standing relationships like this one allows Pegasus to work with contractors already familiar with Pegasus' standards, project management processes, and schedule expectations, potentially reducing execution risk and supporting cost/timeline reliability.

Potential Risk The business plan also contemplates adding 30 pet yards across Buildings 9, 10, and 11, which are expected to cost $75,000 to construct. The planned pet yards are individually fenced outdoor spaces attached to select ground-floor apartment patios in buildings that Pegasus has identified. Additionally, Pegasus intends to roll out a bulk internet program with AT&T, which is projected to generate an estimated $65 of revenue per unit per month. The actual achieved bulk internet revenues will be market dependent and subject to change annually.

Our Assessment The penetration rate and monthly charge for the pet yard assumptions are based on a combination of market research and Pegasus's experience at similar properties. Planned locations were chosen for their functional patio layouts and contiguous green space, allowing for efficient construction and optimal usability for residents. By targeting specific units in specific buildings, Pegasus seeks to ensure these yards integrate seamlessly into the property design with the goal of capturing the strongest demand from pet-owning residents who may place a premium on private outdoor space.