“� e Newsletter So Good Someone Named A Company After It”

PRG Real Estate Management, Inc.

“� e Newsletter So Good Someone Named A Company After It”

PRG Real Estate Management, Inc.

THE CORNERSTONE

Second Quarter 2008Volume 9, Issue II

South Square Apartments

Palmetto Place Apartments

Investing in the 15-501 Corridor

Given that real estate is all about location, this is one where we have wanted to be for a long time! Th e route 15-501 cor-ridor runs from Durham in the North to Chapel Hill in the

South. For those who follow college basketball, it is an eight mile long road connecting Duke and UNC-Chapel Hill. From an invest-ment perspective, the corridor is punctuated with an ever increasing amount of commercial development. We came within a whisker of consummating a deal not far from here three years ago.So when PRG was confronted with the opportunity to purchase the 230-unit Windsor at South Square from AIMCO for only $40K per unit, we were not slow to react. Renamed “South Square Townhomes,” this is a repositioning opportunity that fi ts perfectly in the PRG strike zone.Beyond an exceptional location, one of the planks to the PRG plat-form is to seek investments that can be cost effi ciently transformed into something that they are not. And the community, which consists of 24 one bedroom apartments and 206 two and three bedroom townhomes, off ers plentiful opportunity for just such a transformation.Our architectural fi rm, GTM out of Bethesda, Md., has a design plan highlighted by gabled screened porches to be built on the fronts of 80 units. Th is will not only provide a distinctly more ap-pealing architectural style, it will add more usable square footage to an otherwise tight fl oorplan. When combined with the usual array of marketing-related capital improvements, we’re confi dent that South Square will become just the latest, winning value-add investment!

Palmetto Day Dreaming

If there are two states that have been fertile investment terri-tory to PRG in the past 18 months, they are South Carolina and Kentucky. Since striking gold in the Blue Grass state

in January, we are equally pleased to announce the acquisition of Palmetto Place, a 180-unit community situated just outside Greenville, S.C.Th is is our second acquisition in the Greenville market, and combined with South Square this increases the PRG portfolio to 39 properties, and 9,451 units. Our initial entry into this market was the Lakecrest Apartments, and given that both properties are located on the same street, there is ample cause for considerable enthusiasm!Palmetto Place is a 180-unit community that was built in 1986. Acquired with the assistance of Johnny Easterling at the Wiley Real Estate Group, the community is in substantially better physical condition than most PRG acquisitions. However, we’re pleased that there is still plenty of room for market driven capital improvements. Our plan is to repaint the faded peach exterior with a more eye-popping yellow base, white trim and black shutter color scheme. Th e paving will all be repaired and resealed, and dated lattice balconies will be replaced with vertical railings. Managed by Courtney Gammon and within a three wood of the offi ce of Regional Vice President Pamela Penny, we’re confi dent that this will become just another successful invest-ment in the 864 area code!

Robert Dominy, President

them in a position where they had the best opportunity for success. Lee realized that his effectiveness would be measured by the success of his subordinates. The bet-ter they performed, and the more success they achieved, the better it reflected upon him as a manager. Conversely, the more his success was dependent upon his own personal performance, the more credit he claimed for himself, the worse it reflected upon his managerial capabilities.Military examples that can be applied to business are thrilling. After all, do you think we have it tough? No matter what your occupancy rate is, no matter what your YTD variance is, no one under your direction is likely to get shot today. I was once asked about my operating philosophy relative to personnel. To be successful, every morning I get up and need 300 employees, many more than 1000 miles away, without ever seeing me, many times without ever hearing from me, to also get up and perform their jobs exactly the way that I want them to. No, I don’t believe in ever driving anyone into

The date was August 30, 1862. The place was Manassas, Vir-ginia. Robert E. Lee was the

commanding general on the field for Southern forces. He had already distin-guished himself as one of the greatest military leader in our history. After a day and a half of intense fighting, he finally released Longstreet’s corps that had been hiding in the brush opposite General Pope’s Army of the Potomac left flank. In doing so, he trapped the Northern army in a vice, causing the flank to crumble and chaos to ensue. As he watched his triumphant troops stream over Henry Hill in hot pursuit, with tears streaming down his cheeks he remarked joyously to an aide, “Who could not win battles with boys like these!”Far more than a brilliant military mind, Lee was a tremendous manager of people, and that day he had 55,000 men under his command. He was fully cognizant that, as a manager, it was his responsibility to select the best people, develop them professionally, and put

the ground! My success depends upon them! Do you really want to go places in life? Hire the best. Train the best. Promote from within. And then give credit to those upon whom your success de-pends. The mark of a really great man-ager is that he or she recognizes the performance of others. The mark of an ineffective leader is someone who claims the credit for him or herself.

Teamwork: A Rock Solid Foundation

“Who Could Not Win Battles With Boys Like These?”

Linda Hart, CFO

At PRG, our goal is to purchase well located, under-performing properties and create value by managing the property ef-ficiently while improving the physical condition of the real estate. Achieving this goal and improving the property’s cash flow allows us to place additional financing on the asset and re-turn the equity to the investors. In the case of Tiffany Square and Woodcreek, PRG not only quali-fied for the race, we delivered gold and silver medal perfor-mance and set a new record!

In August 2008, PRG placed a $1,850,000 supplemental mortgage on Tiffany Square, allowing us to return 100% of the original equity to the investors in just over twenty months from the acquisition date; a new PRG record! At the same time, PRG placed a $2,300,000 supplemental mort-gage on Woodcreek. This loan also allowed us to return 100% if the original equity to the investors in just over three years

from the June 30, 2005 acquisition date. Although not record breaking, the timing of this return of equity exceeded our initial expectations. In both cases, PRG was able to lock in additional financing and return the investor equity well in advance of expectations because, once again, we were successful in executing our turn-around strategy. Our consistent track record, combined with the financial strength of the organization, continues to allow access to debt capital at favorable terms even in the existing market, which for many of our competitors, is challenging. We will continue looking for opportunities that improve the financial returns for our investors. The loans on both Country Club in Williamsburg, VA and Alcoma in Pittsburgh, PA mature at the end of the year and will be refinanced. As we expect to keep Country Club in the PRG portfolio long term, we will refinance with long term debt. As a mature investment, Alcoma is one we will probably not hold long term. So, we are looking at a shorter term loan with prepayment flexibility. We expect to close both loans by the end of October. It takes a strong team to deliver gold and silver medal perfor-mance. We are extremely proud of the PRG team; property management, construction management and finance.

In Durham, a $1.5M program is underway that will completely reposition South Square Townhomes. Currently in the design phase, we plan to add screened porches to 80 units at the 230-unit South Square community. Th is project will not only add

an attractive marketing feature, it will also add substantial usable square footage.In Lexington, Kentucky, we have completed most of the exterior improvements at the 205-unit Tates Creek Village, which was purchased in January of this year. While the property is already performing beyond expectations, we’re confi dent that this perfor-mance will further improve once the kitchen renovation program is complete.Finally, at Altamonte Villas out-side Orlando, we have only the finishing touches of additional landscaping and dumpster gates

to conclude a $1.2M improvement program that has transformed that community into what it is today. With countless kitchen programs on-going at other communities, PRG is one company which is not about to lose their competitive edge!

There may be a slow down across the country in hous-ing construction, but the Case-Schiller Housing index aside, no such affl iction aff ects PRG. For under our

roof, as a value-add investor, the construction team has never been busier, with 21 major capital improvement programs going on simultaneously.Th e programs with the most dra-matic impact are at our two latest acquisitions. At Glendare Park, in Winston-Salem, a $3M program is currently underway. Most roofs have been replaced with a far more appealing three dimensional shingle. All road surfaces have been repaved. But we are still in the bid process for the exterior redesign that will give the property a completely diff erent look. We are also bidding out changes to the leasing center that will enable our marketing staff to use the veranda overlooking the pool as a guest card and closing area. When complete, we are sure that this community will outperform by an even greater margin than it is already.

Glendare Park Apartments

The Snazzy Shoes, standing: Chris Hirth, Marilyn Fields, David Outlaw, Alison McKnight, Jamie Newton, and Amy Cain. Seated: Chris Keeling, Zach Lantelme, Tony Leanillo, and Jay Rawls

Building Boom Grips PRG Nation

Puttin’ On The Old Razzle Dazzle

Richard Gere in Chicago had nothing on this group! In July, sixty of the “best and brightest” from Th e Nation (no, not Red Sox Nation) gathered at the Tidewater

Hotel in Easton, Maryland for our annual marketing confer-ence. Th e conference was directed by Pamela Penny, Regional Vice President, with considerable assistance from Pamela Williams, Lindsay Savage, Chris Keeling, Summer Davis and Jeremy Devlin.Set up as a fi ve team competition designed to teach killer closing techniques, the seminar was centered on our in-house board game appropriately named “PRGopoly.” Th ere was no backing down by anyone in this group! Right from the opening gun, the fur began to fl y as colleagues who were once friends became adversaries. Th e game was eventually won by Th e Snazzy Shoes, with Chris Keeling as team captain. Th e criti-cal point in the game occurred late on Friday when the Shoes succeeded in pulling off a trade enabling them to place hotels on two prime assets, Glendare Park and Linkhorn Bay.Some time was set aside for frivolity however. On Th ursday night, competing team members set aside their rivalries and enjoyed a spectacular dinner at the Tidewater, followed by a variety of activities up and down Harrison Street. Suffi ce to say that a spectacular time was had by one and all!

Over the weekend of July 19th, PRG continued its re-lationship with the Allegheny Valley School and the Autism Society of Pittsburgh through its participation

in the 26th Pittsburgh Vintage Grand Prix.The Autism Society of Pittsburgh offers a comprehensive array of counseling and referral services, addressing the needs in the Pittsburgh area by working with those who have a commitment to children with autism, and those who wish to learn more about autism. The Allegheny School provides care for more than 800 children, adults and senior citizens with mental retardation.The Pittsburgh Vintage Grand Prix Organization strives to produce a quality event for both the race participants and the viewing public to raise vitally important awareness and fund-ing for its charities. Over the years, the event has evolved into an entire week of activities, including the PVGP

golf tournament, a vintage car show, a “Black Tie and Tail-pipes” dinner, and the Vintage Grand Prix race itself. The Schenley Park course, considered one of the most challenging layouts in the world, covers a 2.33 mile track with 23 turns.Several years ago Jon Goodman invested in a 1958 Alfa Romeo, modified for racing purposes, in order to combine his passion for racing with this important charity event. With his con-

siderable racing experience, Jon qualified to drive in the race. And PRG became a silver sponsor of the event.In addition to the community ser-vice aspect of the Vintage Grand Prix, this event is always a popular event for many employees from our Pittsburgh communities. Among those in attendance this year were Jackie Johnson, Garrett Wood, Brandy Schultheis, April Thompson and Rachael Papa. Our staff at the race were able to take advantage of the hospitality tent, and we are assured that a great time was had by all!

With the recent acquisitions of South Square in Dur-ham and Palmetto Place in Greenville, the PRG portfolio increased to 39 properties, and 9,451

units. Having grown from only nine communities in 1998, we’re as proud of the achievement as we are that this portfolio has been developed gradually, sensibly, and is built to last!

Never wanting to rest on its lau-rels, our acquisitions department, under the direction of recently promoted director Sam Foster, has never been more aggressive. The changes in debt, equity and real estate in general over the past twelve months have generated the best buying environment since the early nineties.

With many more sellers, fewer second tier market buyers, and more distressed owners, PRG has in recent days been approached with multiple portfolio opportunities requiring our expertise with little money

down. These are presented by lenders who have taken back communities in multi-state portfolios, and who are then looking to move assets off their balance sheets. In recent

days, Principals Steve Berger and Jon Goodman, accompanied by Sam, chartered a plane to visit assets in Newport News, Durham and Atlanta. Bob Dominy toured properties in Chicago, Orlando and Atlanta. We feel extremely close to pushing a portfolio buy over the goal line.

Of course, the effort to acquire single assets continues as well. In recent days, Sam has visited properties in the Louisville and in Tampa, while Bob Dominy has toured communities in Winston-Salem and in Jacksonville, Flori-da. These times may not be for the

faint of heart, but does anyone else remember the America’s Cup boat named Intrepid?

Coquina Bay in Jacksonville

Jon Goodman and his 1958 Alfa Romeo

The Hunt For Growth Becomes Bolder

Tearing Up The Track For A Worthy Cause

THE PRG HONOR ROLLSECOND QUARTER 2008

“Who Are Those Guys?!”

1. Isaac Williamson Magnolia 0.001. Jose Alvelo Lancaster Arms 0.002. Jim Gantz Lancaster Green 0.202. John Brooks Ambassador 0.20

Looks like this one’s a lot like the last one? You got it! If GE could make a name for themselves with consis-tent, predictable performance quarter after quarter, why not PRG? In the second quarter Issac Williamson from Magnolia and Jose Alvelo from Lancaster Arms tied for top honors with a perfect 0.00 work order performance for the second consecutive quarter!. But it took a perfect performance to outpoint cross town rival Jim Gantz at Lancaster Green, who scored 0.20 for the quarter. John Brooks at Th e Ambassador in Pittsburgh also matched that number. Whether gar-den apartment, high rise, or town home, PRG prides itself in outstanding work order performance, putting smiles on faces of residents who in turn renew leasing at an increasing clip.Th e name for the award, of course, for those who are new readers of our Cornerstone publication, comes from the timeless movie, “Butch Cassidy and the Sundance Kid.”

Top Gun Collections A

Hollie Robinson defi ed all logic in April, with the lowest delinquency despite having 864 units to collect from!

1. Hollie Robinson Linkhorn $0.392. Jena Paulenich Tates Creek $1.533. Katie Eagle Chanticleer $2.34

MKatie Eagle improved her standing from third to fi rst to capture Top Gun laurels in May!

1. Katie Eagle Chanticleer $0.762. Hollie Robinson Linkhorn $0.893. Jackie Yeschenko Governor’s Ridge $0.96

JIn June Katie made it two in a row, while Nikki Lowry took her new acquisition into second place.

1. Katie Eagle Chanticleer $0.882. Nikki Lowry River Oak $1.413. Hollie Robinson Linkhorn $1.50

Show Me the Money!

1. Jamie Newton Glendare Park $ 152,2632. Nikki Lowry River Oak $ 67,8253. Meschelle Roten Lancaster Green $ 30,100

What better way to get a new investment off to a strong start than by blowing the budget into the nearest weed patch! Jamie Newton, after a successful stint at Woodcreek, took over the 600-unit Glendare Park and catapulted into 1st place for our most coveted award, Show Me the Money! Jamie attributes solid market-ing and the brisk pace of renovations for her strong showing. Meanwhile, out in Louisville, Nikki Lowry continues to excel. After running Tiff any Square in Rocky Mount at or above 98% occupied for gosh who knows how long, Nikki was promoted to River Oak and quickly increased occupancy from 83% at closing to 98%. At Lancaster Green, PRG’s oldest investment dating back to 1986, Meschelle Roten beat her budget by more than $30K and continued to add to the value of her community. A similar note was sounded in Raleigh at Tree Top, where Ashley Wilson, topped her budget by $1K.

Razzle Dazzle Leasing

AIn April, Julie Logan returned to a position she occupied so many times in 2007, namely the top of the heap.

1. Julie Logan Hyde Park 382. Brandon Rucker Carolina Woods 243. Matt Sugg Hyde Park 22

MIn May, Julie Logan made it two straight while Jessica, Matt and Ashley kept the heat on!

1. Julie Logan Hyde Park 252. Matt Sugg Hyde Park 202. Ashley Stevens Tates Creek 202. Jessica Davis Hampton Chase 20

JAfter two months fi nishing in the top three, Matt Sugg took home the hardware in the month of June!

1. Matt Sugg Hyde Park 282. Julie Logan Hyde Park 263. Allison McKnight River Oak 20

THE CORNERSTONEVolume 9, Issue II

There was a common thread connecting our winners of the highly desired President’s Excellence Award in Q2. Th at quality was commitment above and beyond

dedication to the job, the company and the career.In April, Ashley Wilson was named our winner for packing up lock, stock and barrel and relocating from Raleigh to Virginia Beach to assume the reins of the 864-unit Linkhorn Bay on an interim basis, while we awaited the arrival of our new regional director. In this capacity, Ashley was also responsible for supervising the neighboring Chanticleer Apartments. After excelling over the fi rst quarter at Tree Top, Ashley did not disappoint as a Vir-ginian, eventually leaving the asset in much stronger marketing position than when she ar-rived.In May, we needn’t have looked any further than the 804 area code and to a not her Vi r-ginian for our top performance. At Staples Mill Town-homes, Sr. Prop-erty Manager Kami Poole captured top honors for her per-formance supervising Country Club Apartments in Williams-burg and Hilton Village Townhomes on an interim basis. Both properties showed marked improvement under her capable direction.And in June, our winner was Tony Famoralo, maintenance supervisor at Flagler Pointe in St. Petersburg. Lush green lawns have always been a problem at this irrigation-challenged com-munity. Enter Tony, with a work ethic that involves early morn-ings and weekends, as well as an attention to detail to make broken sprinkler heads shudder. And voila - green grass!

It is not often so blatantly obvious that an investment will be successful upon initial viewing. But fi nding the asset is only half of the equation. Managing it is another

matter, that is unless you have the very capable leadership of one Sr. Property Manager, Mr. Chris Keeling. Chris is a graduate of Appalachian College, renowned for having de-feated Michigan, and also a product of our MIT program.Since becoming the fastest refi nance and return of all equity in PRG history, we have taken another page out of the PRG playbook and continue to improve this asset. Currently, an $800K kitchen and bath renovation program is underway, and in a market with substantial room to increase rents, we are confi dent that another sharp rise in NOI is on the way. Th en the cycle begins, where a refi nance leads to more property improve-ments, followed by another rise in NOI and then by another refi nance and so on… Even-tually, long after al l equity is re-turned, we have a d r a m at ic a l ly improved asset resulting exclu-sively from refi-nance proceeds and an exception-ally profi table in-vestment!

PRG Versus the REITsMichaels Phelps could only hope to have a run like this! But if he took home the gold in seven events and then lost in the

eighth, should it really be considered defeat?! After many years of drubbing our competition, we fi nally lost one!

But stay tuned for Q3! Year over year compariusons can be exciting! We have a sneaking suspicion we’ll be taking

home the gold in the very near future.

PRG Real Estate Management2701 East Luzerne Street Philadelphia, PA 19137

Phone . 215 . 744 . 1200 Fax . 215 . 744 . 4042www.prgrealestate.com

Steven Berger, PrincipalJon Goodman, Principal

Robert Dominy, PresidentLinda Hart, Senior VP and CFO

layout/design, Kathryn A. Simon

Chris Keeling

Ashley Wilson

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2008 2nd Quarter Same Store Growth

AIMCO

BRE Properties

Colonial Properties

Home Properties

MAAC

Post Properties

Camden Property Trust

PRG Real Estate Mgmt.

The Investment That Keeps on Giving

President’s Excellence