Underwriting Methodology:

1. Investment Basis
   • Focused on ensuring that its investment basis is extremely low in each transaction
   • Typically sponsor equity is subordinate to JCR
2. Underwriting Assumptions and Stress Tests
   • Proprietary models and conservative assumptions in assessing the value
   • Stress-test assumptions on proprietary models to ensure recovery of principal in most plausible downside scenarios
3. Structure
   • Structure tailored to the risk profile of the particular investment
   • Seek to “structure risk out of the transaction” by using debt and unlevered preferred equity structures, providing both the debt and equity in the same transaction
   • Seeks to be the “first money out” in its transactions and uses performance tests throughout the investment term to ensure that its position is protected at all times (e.g. NOI tests, occupancy tests and sales velocity tests)
   • Focus on key asset level events and making the success of these events a part of the investment performance criteria
4. Alignment of Interest
   • Seek to ensure that a sponsor has an appropriate amount of capital at risk, which JCR believes serves to align interests
5. Hold-to-Maturity Mentality
   • "Hold-to-maturity" investors
   • Asset Management process and experience to effectively monitor and be proactive on an investment if necessary
6. Underwriting Multiple Exit Strategies
   • When assessing the merits of a transaction, JCR seeks multiple strategies for exiting an investment, thereby increasing its flexibility for managing the investment post-close
7. Repeat Clients
   • Many of JCR’s transactions to date have been alongside sponsors with whom JCR has established a proven track record of success
8. One-Stop Shop
   • Principals were early initiators of the "one-stop shop" approach while working at GMAC
   • Fund II may offer the entire capital stack (debt plus preferred equity or equity) so that JCR is able to have more control over the asset

JCR Capital Key Underwriting Metrics

1. Investment basis: Investment basis will typically be measured on a per foot or per door basis. JCR will seek to make investments at or below replacement cost.
2. Cash flow to investment basis on income based investments (income properties): JCR will seek transactions that can provide current or near term cash flow of at least 8% return.
3. Stabilized cash flow to investment basis (income properties): JCR will seek investments that can provide pro forma “stabilized” cash flow to investment basis of at least 12%.
4. Net operating income analysis: JCR will thoroughly analyze each potential investment and perform due diligence on the historical, current and future project net operating income.
5. Quick sale value: For each investment, JCR shall determine the asset’s “quick sale value.” JCR will seek to make all of its investments below the asset’s quick sale value.
6. Market recovery investments: In some cases, especially with non-income producing assets, JCR will be relying on a sale at market recovery for investment realization. In these cases, JCR will underwrite submarket supply and demand, asset quality, and location. JCR will also pro forma conservative exit values, which will typically be less than 80% of prior peak values.
7. Sponsorship: JCR will also endeavor to make loan investments with credit worthy sponsors and will underwrite approved sponsor's ability to manage and operate the underlying assets.

General Guidelines for Capital Appreciation Products

• Investment objective: Capital appreciation assets

Underwriting Criteria

1. Security: Participating debt, preferred equity, equity, asset ownership
2. Co-investment: JCR requires sponsor co-investment
3. Term: 1-3 years
4. Asset classes: Income properties, finished lots, condominiums
5. Exit strategy:
   • Sale: JCR will focus on transactions that have low investment basis to replacement cost, allowing JCR the ability to attract below market leases and/or hold the asset until recovery.
   • Refinance: In some cases, performing properties will need a recapitalization (more equity) to qualify for a new loan. In other cases, JCR will underwrite “stressed market lease up” and “ stressed rent” scenarios, that will either qualify for new financing or provide the double digit unleveraged returns to JCR investors. JCR will seek to have a mix of income producing properties and for sale properties with a low basis and substantial resale upside.