Seven years has passed since the formation of Menlo Gate Group Three Holding, LLC. This holding group was formed in April of 2009. The property located at 1227 Ebener St., Redwood City, CA was acquired for $1,575,000. Full participant contributions were $57,500 for a 14.28% share of Menlo Gate Group Three Holding, LLC.

At present, we conservatively estimate the building value to be approximately $3,425,000. Based on the foregoing, we estimate each participant’s full share to have the approximate value:

Building Acquisition Price: $1,575,000

Building Sale Price: $3,425,000

Building Equity: $1,850,000

Less Commission (5%): $171,250

Building Proceeds: $1,678,750

Full Share (14.28%) Value: $239,725

Menlo Gate Group Three Holding, LLC Participant IRC 1031 Option:

As part of our commitment to our member participants, Menlo Gate, LLC has identified an ideal up leg replacement property for this group. Thus, in lieu of paying capital gains taxes, as outlined further below, member participants may elect to participate in the proposed Menlo Gate Group Three, LLC IRC 1031 exchange. We also anticipate that a reduction in capital gains taxes as well as ancillary related real estate sales taxes may be forthcoming. For this reason and the additional incentives overviewed herein, we recommend participation in the contemplated IRC 1031 exchange. The exchange will be handled exclusively by Menlo Gate, LLC. No participant involvement is required, other than approval. There will be no additional contributions from Menlo Gate Group Three, LLC participants. Each participant’s forecasted future share value will escalate dramatically based on the Leveraged Rate of Return. Participant annual cash flows will effectively double.”

The property is located at 3618 Alameda de las Pulgas, Menlo Park, CA. The property has been extremely well maintained throughout its period of ownership. This is an off-market transaction that has come to us through our network. The seller is engaged in a trade up IRC 1031 transaction and wants to ensure that the timeline is controlled. Accordingly, the seller brought this offer to Menlo Gate at a very attractive sales price in order to ensure that the deal would go through without any issues. At the close of negotiations, we were able to enter into contract with the seller for a contract price of $9,000,000. The current owner is in the process of “downsizing” her portfolio and approached our broker for a reliable buyer to ensure the completion of her own series of IRC 1031 exchanges for smaller properties.

As demonstrated by the Pro Forma calculations below, this property is a rare find for three very specific reasons. First, the property will be purchased with assumable fixed rate financing at 3%. Second, the building comes with two cell towers, one Sprint and the other AT&T. The cell tower contracts are for $2,500 and $5,000, respectively. Third, the effective per door price per unit is $500,000 which is approximately $100,000 under market for Menlo Park based upon comparable unit sales.

The acquisition of this building is made possible by the appreciation and equity accrued by Menlo Gate Group Three Holding, LLC. The building at 1227 Ebener St., Redwood City, CA appreciated at a rate in excess of 12% annually. By engaging in the proposed IRC 1031, member participants will recast their leverage positions from $3.5M to $9.0M. Assuming a rate of appreciation less than one half of prior performance (i.e. 5%), member participants will see an increase in building value in excess of $450,000 per year. Accordingly, at the end of the hold period, each member will have a conservatively estimated equity position in excess of $689,725. This will nearly triple each participant member’s equity position at the time of distribution.

The following constitutes a summary of benefits to the proposed IRC 1031 transaction (we

have yet to find any detriments):

1. Conservative appreciation, per member after 7 year hold, an additional $450,000. This is in addition to each member’s present equity position of $239,725. Accordingly, at the end of the hold period, each member would have a conservatively estimated equity position of $689,725, plus return of original Capital Contribution, minus fees. 2

2. Annual cash flow distribution, per member, doubles from $5,000 to $10,000, due in part to the presence of two operational cell towers on the property;

3. Location, location, location….Westside Menlo Park, CA, close to 280, Stanford University, Stanford Hospital, and Stanford Shopping Center;

4. Availability of fixed rate 3% financing for 10 years;

Based on the foregoing summary of benefits, Menlo Gate, LLC, highly recommends that members of Menlo Gate Group Three Holding, LLC participate in the proposed IRC 1031 acquisition.

You can read more about the present state of the Bay Area/Mid-Peninsula rental market, historically low vacancy rates, and the present state of the escalating real estate market at http://www.facebook.com/menlogate or at http://www.menlogate.com under the “News” and Articles” tabs.

Pro Forma Financials and Assumptions:

The attached pro forma financials necessarily incorporate certain assumptions that are typical in the context of forecasting valuations for real estate investments. These assumptions are overviewed below and should be kept in mind in the course of reviewing the attached pro forma financials.

Comparable Sales And Captured Equity

The average market rent for a one-bedroom apartment in San Mateo County is $2,959 per month, up from $2,572 in 2016, according to new rental data released by the San Mateo County Department of Housing — https://www.rentjungle.com/averagerent-in-san-mateo-rent-trends. This reflects a 15 percent increase from last year. Escalating rents have translated into rising per door prices for multi family acquisitions as net operating incomes have risen due to higher rental values. The company believes that it has acquired the subject property significantly under market due to seller’s 1031 transaction and desire to control the replacement property transaction. This translates into captured equity for the investors. The company conservatively estimates a captured equity range of approximately $500,000.

Rental Value

The property consists of fifteen units with two cell towers in West Menlo Park, CA adjacent to the Stanford University campus. The units are primarily rented to Stanford University and Stanford Medical School students and residents. In total, there are 5, one bedroom units, and 10 studio units. All units are permitted as part of the original construction, there are no unwarranted units. Based on similarly situated buildings in this location, Menlo Gate estimates a fair market rental rate for each one bedroom unit of $2,500 and $2,200 for the studio units. These rents are estimated at present market. The Company owns and manages units in these areas and is currently receiving these rents. Based on the rental estimates above, and the combined $7,500 monthly revenue from the Sprint and AT&T cell towers, we have run the attached pro forma financials at a combined annual rent of $515,400. We conservatively estimate a conservative annual rental increase of 5%. The financials also reflect an equivalent vacancy rate for a one bedroom unit going vacant for three months ($7,500). For the record, we generally do not see units go vacant for more than a month, even in the worst of times.

Further, there is a coin-operated laundry facility in a separate laundry room at the property. The laundry room has a pair of machines set at fair market rates for laundry. We have estimated a conservative monthly income of $200 per month, or $2400 annual, from the coin-operated laundry. Moreover, we have added an income line of $50 per unit/per month ($750 monthly/$9,000 annual) for the recovery of utility costs from tenants through Ratio Utility Billing Systems (“RUBS”). RUBS allows the company to recover pro-rated utility (i.e. water and sewer charges) from the tenants based upon occupancy and use.

Financing

The property is being acquired subject to the existing loans on the property in order to avoid financing costs. The first position loan of $5,400,000 is fixed for 10 years at 3%, the remainder second position of $1,548,000 is fixed at 6.2%. The pro forma financials reflect these financing rates and terms for the seven year hold term.

Repairs

Pursuant to our walk through inspection, the building is in excellent condition. All units are standardized in their modernization. There is limited deferred maintenance. Any foreseen repairs would be to units during turnovers to modernize the units. These property improvements, however, will be paid for using either tenant deposit withholdings or the cash flow from the property that is discussed further below. The repairs will be performed during tenant turnovers or at the discretion of the management. The pro forma financials also incorporate an annual repair expenditure of $10,000 per year for maintenance of the property. Although we do not expect to require this amount in annual maintenance for the property, this amount is incorporated in order to insure that the pro forma financials reflect a conservative approach for the participant.

Expected Sales Price

We have calculated the appreciation for the property at 5% over the next seven years. For those of us that follow the Bay Area market closely, this is a conservative number based upon the timing of the acquisition and the proximity of the building to the Stanford Campus. Based on this calculation, the property has a resale value of over $12,663,903.80 after seven years at 5% appreciation. Accordingly, the estimated appreciation for this property is estimated at $3,663,903.80. The appreciation for the property over seven years may exceed or fall short of this number. The estimated appreciation rate, however, represents a conservative number for the appreciation of Bay Area real estate. The expected sales price based upon appreciation is also calculated using the contracted for purchase price of $9,000,000 which we believe to be an “under market” value for these properties. The figures represented in the pro forma financials are dependent upon risk factors overviewed in the private placement memorandum located at Menlo Gate’s website.

Cash Flow

Based upon the pro forma financials, the property has an estimated cash flow of approximately $107,637.80 per year (see Cash Flow After Tax), or $753,464.46 over the seven year holding period. This is due, in part, to the down payment of $2,052,000 for the property from the Menlo Gate Group Three capital pool and the ability to capitalize on the substantially below market 3% subject to financing for this transaction. Accordingly, it is anticipated that there will be distributions to the each member over the period of ownership of approximately $107,637.80 per member (this calculation includes the company’s carried interest distribution and property management fees). As a result, each participant’s present cash flow from Menlo Gate Group Three Holding, LLC will effectively double. This number does not incorporate rent escalation which will necessarily increase the projected distribution per investor over time as rents increase. This provides the investor with an approximate 5.25% return on investment without appreciation at a 3.57% capitalization rate. These figures do not account for asset appreciation attributable to the investment. The annual return on investment with appreciation with these assumptions is 27.18% per participant. These figures represent estimated returns based upon the pro forma financials and are dependent upon the risk factors overviewed in the private placement memorandum located at Menlo Gate’s website.

Summary

As always, we are here to help and are available to answer any questions you may have following your review of the attached pro forma financials. We also encourage all potential members to seek the independent advice of their tax consultant, attorney, or accountant regarding this or any significant investment. It is our goal to provide each investor with a conservative investment vehicle that takes advantage of the leveraged rates of return of real estate.

This offering is limited to the six members of Menlo Gate Group Three Holding, LLC.

Subsequent to Menlo Gate, LLC’s receipt of confirmation of full member participation, the financing contingency will be removed and the up leg 1031 transaction process will begin.

Absent any questions and pending your approval, please execute the attached, Consent to Sale and Purchase, and remit to Menlo Gate, LLC.

We estimate sale of the present property and closing on the up leg replacement property within 60 days.

We look forward to hearing from you and thank you very much for your continued support of Menlo Gate, LLC!