Forum's Annual Investment Newsletter

Annual InvestmentNewsletter | JANUARY 17, 2017

Annual InvestmentNewsletter JANUARY 17, 2017

Talo -Minneapolis,MN

Dear Investor: We are pleased to provide you with our Annual Investment Newsletter, containing our assessment of 2016’s real estatemarket; a summary of pertinent economic data; our outlook for new investment opportunities; and, an update on Forum’s real estate portfolio. We hope that this color-commentated overview provides you with insight into themarket, a bit of our thought process, what we think tomorrow’s investment opportunities are, and why Forum is well positioned to take advantage of them. We remain committed to our core principals of buying and building real estate with conservative leverage in stablemarkets, whilemaximizing current cash flow and reducing risk.

WELL, HE DID IT. HE IS HIRED. THE TRUMP PRESIDENCY

10 YEAR TREASURY - THE ELECTION RESULTS

1.82% (ASOFNOVEMBER8, 2016)

2.57% (ASOFDECEMBER27, 2016)

We typically wouldn’t begin this letter with politics, but this was such an unconventional election we felt it necessary to start with the Trump Effect and possible implications for real estate; not our political views… It was 2:29amon November 9, 2016, the announcement that Donald Trump would be the 45th president of the United States surprised the world. The immediate reaction of the global markets toMr. Trump’s election resulted in sharply falling stock futures, lower bond yields, higher gold prices and other indicators of negative sentiment. But by the end of the first day of trading, it was business as usual and themood on November 11th changed fromuncertainty to optimism, at least for the US stockmarket and the price of oil. Since then, market optimismand the prospect of stronger economic growth have led to a substantial (75 basis point) increase in the 10-year treasury. This is by

nomeans unprecedented, but was largely unanticipated. Numerous factors play into the increase in rates. In no particular order: an expected increase in U.S. economic growth driven by tax cuts, decreased regulation, support for increased domestic energy production, and fiscal stimulus – all based on campaign promises by the incoming administration. Also, globally, the yield curve has been steepening, suggesting higher growth. The labor market is already tight (U.S. national unemployment is at 4.7%), with significant inflation in particular areas like the construction trades. Many of Trump’s campaign promises could produce more inflation. Sowhat does thismean for those of us in real estate?

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