We hope this email finds you well. Detailed below is our Quarter 1 2023 update put together by our team. We hope you find it useful and informative.

Portfolio Update

Same-store revenues for the first quarter 2023 increased 28.1% for the same quarter in 2022.

With CRE mortgages in the crosshairs, our loan portfolio is healthy and long dated to ride out this wave of elevated interest rates.

RuCo Loan Portfolio Metrics:

• Average Maturity: February 2027
• Current LTV: 44.18%
• Avg. DSCR: 1.80x
• Average Debt Yield: 14.15%
• Avg. Interest Rate: 4.94%

Our full life-cycle investment thesis is simple: 1) acquire, 2) stabilize, 3) recapitalize, 4) cash flow, and 5) sell. The third item has gotten a lot of attention in the past few weeks as we approach the recapitalization period for some of our assets. The vast majority of our loan portfolio is fixed interest rate financing, which is great for us but not good for lenders and their interest rate exposure. Thus we propose a solution when pursuing refinance during these market conditions, a 2nd mortgage with existing lenders with a floating interest rate (WSJ Prime). This method of refinancing mitigates some of the lenders interest rate risk on our fixed rate loan, while providing us with the ability to create liquidity for our investors. For example; If we have a mortgage with an outstanding balance of $2mm and a fixed rate of 4%, pursuing a refinance via 2nd mortgage for $2mm with a floating rate at WSJ Prime (currently 8%), results in a 6% blended interest rate. This will be even more beneficial when the economy is in a falling interest rate environment. This strategy will only apply to our self storage assets and will be situationally dependent.

Market Update

Credit has continued to tighten as balloon payments on construction term loans approach. Trouble here is that pricing has fallen and developers are facing one of three outcomes: 1) default 2) inject more equity at recapitalization and 3) take a loss. A year ago, borrowers could get 75% LTV (or LTC). Currently, most banks are only willing to finance 50% - 55% of deals with in place cashflow. New loans for development (or other deals with no current cashflow) are mostly non-existent.

Credit conditions mentioned above coupled with the wide spreads in asset pricing has brought transactions to a stand still. Most of the deals on the market are CO deals (certificate of occupancy). This is the result of construction notes held by developers, see comment above. Marketed deals remain priced 20%-30% above sustainable transaction prices. We believe there will be an adjustment down in market prices to a more normal spread but your guess is as good as ours as to when the adjustment will take place.

Some have suggested that the rising rate environment is nearing the tail end of its cycle. We are confident no one truly knows what is to come in the interest rate markets, only time will tell.

Rates, Yield Curve & Forward Curves (via Chatham Financial & WSJ)

• ​Rates & Treasury Yield Curve (WSJ)
• ​Forward Curves (Chatham Financial)

News

We are thrilled to announce that we recently hired Brittney Calametti to be our VP of Finance. Brittney will be taking over all aspects of finances for RuCo, its subsidiaries and managed offerings/investments. She has experience in working for one of the largest CPA firms in Alabama and most recently served as controller for a commercial construction company located in Daphne, AL. Brittney brings a plethora of experience and knowledge to our team. We are extremely lucky to have her and look forward to her aiding in our growth moving forward.