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Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13
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Sample Redevelopment-Project-ConstLoan-MasterProforma-update-06-30-13

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Sample Project Proforma. The property is a City of Commerce, CA industrial property currently active for sale as of 07/13. …

Sample Project Proforma. The property is a City of Commerce, CA industrial property currently active for sale as of 07/13.

The property meets our buying criteria guidelines.

Current property key characteristics:
90,000 sq ft
50% coverage
16' ceiling clearance
20+ dock high loading
Urban infill location
Market rent analysis compliant

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  • 1. Disclaimer: These spreadsheets are intended to be used as a sample of the projects Contrarian Realty Partners will pursue and complete. We are not seeking funding for this particular sample project. List of Tables - Development Stages Stage 1a: Rent & Sales Summary Stage 1b: Pro Forma NOI Stage 1c: Maximum Debt Calculation Stage 1d: Development Costs Stage 1e: Summary Analysis & Simple Ratios Stage 2a: Analysis Stage 2 Analysis--For-Sale Units Cash Flow Stage 3a--Analysis, Cash Flows During Development Period, Including Initial Lease-Up Activities Stage 3b: Development Cost Summary Stage 3c: Analysis--Combined Annual Before- and After-Tax Cash Flows during Development and Operating Period Stage 5 Analysis - Investor Return
  • 2. Stage 1a - Rental and Sales Revenue Summary Industrial Unit Types No. of Units Rent/Ft 2 Area/Unit (ft 2 ) Total Ft 2 Rent/Month/U nit Total Annual Rent Free Standing Industrial 1 $0.68 90,000 90,000 $61,200 $734,400 0 $0.00 0 0 $0 $0 0 $0.00 0 0 $0 $0 0 $0.00 0 0 $0 $0 0 $0.00 0 0 $0 $0 Total Rental Revenue 1 0.68$ 90,000 90,000 $61,200 $734,400 Total Retail Rental Revenue (see below) 0 -$ 0 0 $0 $0 Other Rental Revenue a $0 Other Miscellaneous Revenue b $0 Total Rental Revenue 1 0.68$ 90,000 90,000 $61,200 $734,400 Retail Tenants No. of Units Rent/Ft 2 Area/Unit (ft 2 ) Total Ft 2 Rent/Month/U nit Total Annual Rent Retail Tenant #1 Retail Tenant #2 Total Rental Revenue 0 -$ 0 0 $0 $0 For Sale No. of Units Sales/Ft 2 Area/Unit (ft 2 ) Total Ft 2 Sales/Unit Total Annual Sales Project Units Total Sales Revenue a Other Rental Revenue includes additional revenue derived from leasing space at the property e.g. leases for parking, rooftop telecommunication devices, storage space, and billboards. b Other Miscellaneous Revenue includes additional revenue as a result of conducting daily business activities e.g. late fees and penalties, forfeiture of deposits, and lost key fees. Revenue from tax increment financing would be included in this line item.
  • 3. Stage 1b - Pro Forma NOI Factor Annual Revenue/Co st Revenue Gross Potential Revenuea $734,400 Less: Vacancy 5.00% ($36,720) Less: Bad Debt 0.00% $0 Effective Gross Revenue $697,680 Expensesb Property Management 3.00% of Effective Gross Revenue $20,930 Controllable Costsc -$ per unit $0 Real Estate Taxes 1.20% of estimated bldg acq cost $64,800 Insurance $13,500 per unit $13,500 Utilities $500 per unit $6,000 Maintenance 2% per unit $14,688 Total Expenses $119,918 Net Operating Income $697,680 = link from another sheet c Controllable costs typically include salary, administrative, marketing, and maintenance expenses. a Gross Potential Revenue is provided by the prior Rental and Sales Revenue Summary (4- 3a-Stage 1a Rents & Sales). Vacancy is a customary charges against gross revenue. bCustomary expense items have been shown. In the pro forma, per-unit expense items are applied against 1 units. For expenses based on project cost, the total project cost is used to estimate expenses.
  • 4. Stage 1c - Maximum Debt Calculation Pro Forma Net Operating Income (NOI) and Value Pro Forma NOI a $697,680 Capitalization Rate 6.00% Value of Income Property Only (NOI / Cap Rate) $11,628,000 Loan Terms Interest Rateb Const Loan 5.25% Amortization (years) 25 Debt Based on Loan to Value (LTV) Maximum Const Loan Percentage Adj for 70% LTCb 52.00% Maximum Loan Based on LTC for Const Loan $6,046,560 Using Debt Coverage Ratio (DCR) Monthly NOI $58,140 Maximum DCR 1.20 Maximum Monthly Payment (NOI/DCR/12) $48,450 Maximum Loan Based on DCR for Income Property $8,085,137 Maximum Loan (Lesser of LTC or DCR Result) Maximum Loan for Development Property c $6,046,560 Add: Loan for For-Sale Property d $0 Total Initial Project Debt $6,046,560 = link from another sheet a The pro forma NOI figure is provided by the prior eponymous exhibit and does not include any revenues from For Sale Units. b Interest rate and loan-to-cost reflect market rate financing at the time of project analysis (06/13) and represents 70% of total project cost not the 52% shown as "Max Const Loan %. c Typically valuation of pure income properties the maximum debt calc ends by selecting the lesser of two loan values, based on LTV or DCR. A modified LTC Const loan is shown line 23. d Line item equal to 70 percent of the For Sale sales revenue to allow for a construction loan on multiple unit sales from a lender. N/A to this proforma.
  • 5. Gross f Total Usable Free Standing Industrial For-Sale Units Number of Units 1 1 1 0 Square Footage (Input Gross) 90,000 90,000 90,000 0 Percentage of Total Square Footage 100% 100% 0% Development Costs a Building Acquisition $60.00 per gross ft 2 5,400,000$ 5,400,000$ 0$ Carry Preferred Return b 0.00% rate 12 months 0 0 0 Approval Fees $0.30 per gross ft 2 27,000 27,000 0 Environmental Reports & Remediation $0.06 per gross ft 2 5,000 5,000 0 Construction Hard Cost $25.00 per gross ft2 2,250,000 2,250,000 0 Lease Up Costs 5.00% 213,580 213,580 0 Soft Costs: Architecture & Engineering 5.00% of hard cost 112,500 112,500 0 Legal & Other Fees $15,000 estimate 15,000 15,000 0 Appraisal & Title $9,000 estimate 9,000 9,000 0 Marketing $5,000 per total units 5,000 5,000 0 Taxes during Construction $129,600 estimate 129,600 129,600 0 Insurance during Construction $27,000 estimate 27,000 27,000 0 Total Soft Costs 298,100 298,100 0 Development Fee 5% hard, soft costs 409,684 409,684 Contingency 3.00% of hard cost 67,500 67,500 0 Total Development Cost before Interest and Operating Reserve 8,670,863$ 8,670,863$ 0$ Estimate of Construction Interest c Construction Loan $6,046,560 Construction Interest 5.25% Construction Period / Lease Up(months) 24 Average Draw 65.00% Estimated Construction Loan Interest 412,678 412,678 0 Total Project Cost before Operating Reserve 9,083,541$ 9,083,541$ 0$ Estimate of Operating Reserve d Gross Potential Rent (monthly) $61,200 Lease-Up Period (months until stabilization) 6.0 Average Occupancy during Lease-Up 65% Estimated Rent during Lease-Up - Estimated Op. Expenses during Lease-Up 59,959 NOI during Lease-Up (59,959) Construction Interest during Lease-Up 158,722 First-Year Operating Reserve Required 0 0 0 Total Project Costs 9,083,541$ 9,083,541$ 0$ Less: Development Cost Subsidies e (162,000) (162,000) Total Project Costs after Subsidies 8,921,541$ 8,921,541$ 0$ = link from another sheet e The development of this project includes a Federal Tax Subsidy through section 179D of "The Emergency Economic Stabilization Act 2008". The present value of this subsidy has been deducted from the total project cost as a means to simplify the analysis. Practically speaking the subsidy will require a qualification process through an independent 3rd party "approved" certification specialist. The subsidy is available as of the time of project analysis 6/13. Due to the varying nature of subsidies, the subsidy is prorated based on the applicable portion of the project, and not by square footage. The subsidy allowance is $1.80 PSF. Stage 1d - Development Costs c This calculation is a preliminary estimate of interest during construction and reflects market rate construction financing.as of 6/13. d Operating Reserve represents the amount that will be required to cover operating costs and debt service before the project reaches break-even occupancy. Operating reserve will be taken from draws against the construction loan on an as needed basis. N/A to this proforma. a The following outline of development costs include customary expenses. b Carry refers to preferred interest paid to the seller or investors that are part of the purchase contract. The interest rate is applied to the negotiated purchase price less any upfront paid capital amounts. N/A to this proforma.
  • 6. Net Operating Income (NOI) 697,680 Total Project Cost 9,083,541 Less: Development Subsidies (162,000) Project Cost after Subsidies 8,921,541 Less: Development Cost of For-Sale Units 0 Total Adjusted Cost for Development Property 8,921,541 Overall Return, Overall Cap Rate (NOI/Total Adjusted Cost) 7.8% Net Operating Income 697,680 Annual Debt Servicea 434,806 Cash Throw-Off (CTO or BTCF) 262,874 Total Adjusted Cost 8,921,541 Construction Loanb 6,046,560 Equity 2,874,981 Cash-on-Cash Return (CTO/Equity) 9.1% Development Profit for Free Standing Industrial Net Operating Income 697,680 Overall Cap Rate at Sale 6.0% Capitalized Value (NOI/Cap Rate) 11,628,000 Less: Total Adjusted Cost (8,921,541) Development Profit 2,706,459 = link from another sheet b Construction Loan excludes financing of the For-Sale Units. Also, if applicable, the loan amount is capped so as to not exceed the Total Project Cost after Subsidies. a Annual Debt Service reflects the total construction loan principal amount of $6,046,560, which excludes financing the For-Sale Units. Stage 1e Summary Analysis & Simple Ratios
  • 7. Stage 2a Analysis Project Costs Total Industrial For Sale Units Total Project Cost $9,083,541 9,083,541 - Operating Reserves - - - Total Project Cost before Operating Reserve 9,083,541 9,083,541 - Total Project Cost after Subsidies 8,921,541 8,921,541 - Total Proj Cost after Subsidies before Op Reserve 8,921,541 8,921,541 - 36,234 Building Cost 5,400,000 5,400,000 - bop int prin eop Financing Assumptions - - - 6,046,560 Equity 2,874,981 2,874,981 - 6,046,560 26,454 9,780 6,036,780 Construction Loan Principal a 6,046,560 6,046,560 - 6,036,780 26,411 9,823 6,026,957 Interest Rate 5.25% 5.25% 6,026,957 26,368 9,866 6,017,091 Amortization 25 N/A 6,017,091 26,325 9,909 6,007,182 Annual Debt Service $434,806 $434,806 $0 6,007,182 26,281 9,952 5,997,229 5,997,229 26,238 9,996 5,987,233 Depreciation Assumptions 5,987,233 26,194 10,040 5,977,194 Building Basis b 3,521,541 3,521,541 $0 5,977,194 26,150 10,084 5,967,110 Life (in years) 27.5 5,967,110 26,106 10,128 5,956,982 Acceleration Factor 1.0 5,956,982 26,062 10,172 5,946,810 Straight Line (calculated) $128,056 $128,056 $0 5,946,810 26,017 10,217 5,936,594 5,936,594 25,973 10,261 5,926,332 Alternate Project Cost Assumptions for Vacancy Override c Total Proj Cost after Subsidies before Op Reserve 8,921,541 8,921,541 - Equity 2,874,981 2,874,981 Building Basis 3,521,541 3,521,541 - Straight Line $128,056 $128,056 $0 MORTGAGE CALCULATION FOR CONSTRUCTION LOAN* Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 1 = I/O; 2 = AMORTIZE 1 1 1 1 1 1 1 1 Beginning Balance 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 Ending Balance 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 6,046,560 Amortization of Principal - - - - - - - - Interest 317,444 317,444 317,444 317,444 317,444 317,444 317,444 317,444 DEPRECIATION CALCULATION FOR INDUSTRIAL DEV Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Beginning Balance 3,521,541 3,521,541 3,393,485 3,265,429 3,137,373 3,009,317 2,881,261 2,753,205 Less: Annual Depreciation - (128,056) (128,056) (128,056) (128,056) (128,056) (128,056) (128,056) Ending Balance 3,521,541 3,393,485 3,265,429 3,137,373 3,009,317 2,881,261 2,753,205 2,625,149 Cumulative Depreciation Taken - 128,056 256,112 384,168 512,224 640,280 768,336 896,392 Cumulative Straight Line 128,056 256,112 384,168 512,224 640,280 768,336 896,392 1,024,448 Remaining Book Value 8,921,541 8,793,485 8,665,429 8,537,373 8,409,317 8,281,261 8,153,205 8,025,149 ANNUAL CASH FLOWS FOR INDUSTRIAL DEV Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 override vacancy rates c 0.0% 0.0% Gross Potential Revenue 2.00% inflation 734,400 734,400 749,088 764,070 779,351 794,938 810,837 827,054 Less: Vacancy 5.00% vacancy - - (37,454) (38,203) (38,968) (39,747) (40,542) (41,353) Less: Vacancy During Lease Up (734,400) (385,560) - - - - - - Effective Gross Revenue - 348,840 711,634 725,866 740,384 755,191 770,295 785,701
  • 8. Total Operating Expenses:(NNN Lease) 2.00% inflation 119,918 122,317 124,763 127,258 129,804 132,400 135,048 137,749 Net Operating Income - 348,840 711,634 725,866 740,384 755,191 770,295 647,952 Annual Debt Service - - 317,444 317,444 317,444 317,444 317,444 Before-Tax Operating Cash Flow - 353,290 1,029,078 1,043,311 1,057,828 1,072,636 1,087,739 Taxes (see below) - (68,443) (82,501) (86,913) (91,414) (96,004) (100,686) After-Tax Operating Cash Flow - 284,847 946,577 956,397 966,414 976,632 987,053 INCOME TAX CALCUATION FOR INDUSTRIAL DEV Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Net Operating Income - 348,840 711,634 725,866 740,384 755,191 770,295 Add: Replacement/Capital Reserve - - - - - - - Deduct: Interest - - (317,444) (317,444) (317,444) (317,444) (317,444) Deduct: Depreciation - (128,056) (128,056) (128,056) (128,056) (128,056) (128,056) Taxable Income/(Loss) - 220,784 266,133 280,366 294,883 309,691 324,795 Passive Loss Offset d - - - - - - - Taxable Income - 220,784 266,133 280,366 294,883 309,691 324,795 Passive Loss Carryforward d - - - - - - - Annual Income Taxes 31.00% rate - 68,443 82,501 86,913 91,414 96,004 100,686 SALE CALCULATION OF INDUSTRIAL DEV (Incl. Tax) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Cash Flow from Sale Normalized NOI - 697,680 711,634 725,866 740,384 755,191 770,295 Sale Price (cap rate applied to following year NOI) 6.0% cap rate - 11,628,000 11,860,560 12,097,771 12,339,727 12,586,521 12,838,252 Less: Commission 2.50% rate - (290,700) (296,514) (302,444) (308,493) (314,663) (320,956) Adjusted Sales Price - 11,337,300 11,564,046 11,795,327 12,031,233 12,271,858 12,517,295 Less: Remaining Mortgage Balance: (Yr 2=100% unamortized) (6,046,560) (6,046,560) (6,046,560) (6,046,560) (6,046,560) (6,046,560) (6,046,560) Before-Tax Cash Flow from Sale (6,046,560) 5,290,740 5,517,486 5,748,767 5,984,673 6,225,298 6,470,735 Total Tax at Sale (recapture & capital gain, see below) (394,378) (460,404) (527,110) (594,510) (662,618) (731,447) After-Tax Cash Flow from Sale 4,896,362 5,057,082 5,221,657 5,390,164 5,562,680 5,739,288 Tax Calculation from Sale Adjusted Sales Price 11,337,300 11,564,046 11,795,327 12,031,233 12,271,858 12,517,295 Remaining Book Value (8,793,485) (8,665,429) (8,537,373) (8,409,317) (8,281,261) (8,153,205) Total Taxable Gain 2,543,815 2,898,617 3,257,954 3,621,917 3,990,597 4,364,091 Passive Loss Carryforward d - - - - - Total Net Taxable Gain 2,543,815 2,898,617 3,257,954 3,621,917 3,990,597 4,364,091 Total Depreciation Taken 128,056 256,112 384,168 512,224 640,280 768,336 Recapture Tax @ 25% 25.00% rate 32,014 64,028 96,042 128,056 160,070 192,084 Capital Gain 2,415,759 2,642,505 2,873,786 3,109,693 3,350,317 3,595,755 Deduct: Capital Reserves e - - - - - Net Capital Gain 2,415,759 2,642,505 2,873,786 3,109,693 3,350,317 3,595,755
  • 9. Tax on Capital Gain 15.00% rate 362,364 396,376 431,068 466,454 502,548 539,363 Total Tax at Sale 394,378 460,404 527,110 594,510 662,618 731,447 RETURN MEASURES Investment Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 SALE END OF YEAR 2 Unleveraged IRR Project Cost (excluding Interest) (8,508,863)$ For-Sale Revenues f - Net Operating Income - 348,840 - - - - - Adjusted Sales Price 11,337,300 - - - - - Unleveraged Cash Flow (8,508,863)$ 0$ 11,686,140$ 0$ 0$ 0$ 0$ 0$ Unleveraged IRR Ending Year 2 17.19% Net Present Value @ 5.0% g $2,090,810 Before-Tax IRR Equity (2,874,981)$ Before-Tax Cash Flow from Industrial - Before-Tax Operating Cash Flow:Adj for Int Only - 348,840 - - - - - Before-Tax Cash Flow from Sale 5,290,740 - - - - - Total Before-Tax Cash Flow (2,874,981)$ 0$ 5,639,580$ 0$ 0$ 0$ 0$ 0$ Before-Tax IRR Ending Year 2 40.06% Net Present Value @ 6.0% $2,144,225 After-Tax IRR Equity (2,874,981)$ After-Tax Cash Flow from For Sale Units f - After-Tax Operating Cash Flow - 284,847 - - - - - After-Tax Cash Flow:(Adj for Interest Only Loan) - 4,896,362 - - - - - Total After-Tax Cash Flow (2,874,981)$ 0$ 5,181,209$ 0$ 0$ 0$ 0$ 0$ After-Tax IRR Ending Year 2 34.24% Net Present Value @ 2.0% $2,105,036 Simple Return Measures Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 NOI/Adjusted Project Cost Excluding For-Sale Units 0.0% 3.9% 8.0% 8.1% 8.3% 8.5% 8.6% Before-Tax Cash Flow / Equity 0.0% 12.3% 35.8% 36.3% 36.8% 37.3% 37.8% Tax Shelter/Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% = link from another sheet b Customarily, the building basis is the difference between the total project cost and the land value. For this analysis, however, the building basis is the total project cost less the building acquisition cost. a The construction loan reflects an interest-only construction loan through the end of year 2. This proforma is adjusted and based on interest only payments at the 5.25% interest rate during the construction period. Years 3 to 7 should be disregarded in this proforma. For the develoopment phase and refinance for long term property hold please see the presentation section titled "Long Term Lease Investment".
  • 10. f Cash flows related to the sales and profit of For-Sale Units are not applicable to this development analysis. d Current tax regulations treat real estate investments as a passive activity for non real estate investors. As a result, tax losses in real estate are considered passive income losses and can only be taken against other passive income (with minor adjustments for small investors). In the event that an investor does not have any passive income, the passive losses are carried forward until they can be used against future passive income. g Net Present Value equals the present value of future cash flows, less the initial investment. Note that Stage 2 analysis assumes all equity is invested at the beginning of the project. Also note that the unleveraged NPV represents the development profit. c To incorporate vacancy rates during lease-up directly into this spreadsheet, enter the vacancy rates into cells E51 and F51. If these cells are left as zero, then the Total Project Costs and Equity are taken from lines 3 9. If they are not zero, then Total Project Cost, Building Basis, and Equity are taken from lines 24 28. e Capital reserves are not a part of this specific development analysis model.
  • 11. Stage 2b Analysis For-Sale Units Cash Flow Revenue and Expense For Sale Units Sales Revenue 0 Development Costs & Expensesa 0 Profit - Tax Determination of For Sale Units Profit 0 Tax Rate 35.0% Tax Liability 0 Mortgage Calculation of For Sale Unitsb Beginning Balance 0 Borrowings 0 Releases 0 Trial Ending Balance 0 Average Balance 0 Interest Owed 0 Interest Paid 0 Ending Balance 0 Cash Flow Determination for For Sale Units Revenues 0 Less: For Sale Releases to Lender 0 Less: Interest Paid b 0 Before-Tax Cash Flow 0 Less: Taxes 0 After-Tax Cash Flow 0 a Specific to this case and Stage 2 analysis, operational expenses pertaining to the marketing and sales of the condominiums have been accounted for as a development cost. b Specific to this case and Stage 2 analysis, it is assumed that the condominiums are effectively presold such that the construction loan is immediately repaid at the completion of the construction. The interest owed is the amount of interest that accrued while the project was being constructed. Note that this amount had previously been accounted for in determining the total development costs and initial equity required. As a result, the interest owed amount is not shown to affect the ultimate cash flows for the condominiums.
  • 12. Stage 3a Analysis Cash Flows during Development Period, Including Initial Lease-Up Activities – Development – – Lease-Up – – First Stabilized Year – Data Total Time Zero Year 1 Total Year 2 Total Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 Quarter 11 Quarter 12 Year 3 Total Development Costs Building Acquisition $5,400,000 5,400,000 5,400,000 0 0 0 Building Carry Preferred Return - 0 $0 0 0 0 Approval Fees 27,000 27,000 $27,000 0 0 0 Environmental Reports & Remediation 5,000 5,000 5,000 - - 0 Construction Hard Cost 2,250,000 2,250,000 2,250,000 - 562,500 562,500 562,500 562,500 0 Lease Up Costs 213,580 213,580 - 213,580 - - - - - - 213,580 - - - - - 0 Soft Costs: 0 Architecture & Engineering 112,500 112,500 112,500 - 112,500 0 Legal 15,000 15,000 15,000 - - 0 Appraisal & Title 9,000 9,000 9,000 - - 0 Marketing 5,000 5,000 - 5,000 1,250 1,250 1,250 1,250 0 Taxes during Construction 129,600 129,600 64,800 64,800 16,200 16,200 16,200 16,200 16,200 16,200 16,200 16,200 0 Insurance during Construction 27,000 27,000 13,500 13,500 3,375 3,375 3,375 3,375 3,375 3,375 3,375 3,375 0 Contingency 67,500 67,500 67,500 - 16,875 16,875 16,875 16,875 - - - - 0 Development Subsidies (162,000) (162,000) (162,000) - (40,500) (40,500) (40,500) (40,500) Development Fee 409,684 409,684 409,684 102,421 102,421 102,421 102,421 $8,508,863 8,508,863 $5,456,000 $2,755,984 $296,880 $773,371 $660,871 $660,871 $660,871 $20,825 $20,825 $234,405 $20,825 $0 $0 $0 $0 $0 For Sale Units Sales Schedule Units Sold 0 0 0 0 Cumulative Units Sold 0 0 0 0 0 0 0 0 0 0 0 0 Revenue per Unit 0 0 0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 For Sale Units Sales Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 Expensesa 0 0 0 0 0 0 0 0 0 0 0 0 0 For Sale Units Net Revenues 0 0 0 0 0 0 0 0 0 0 0 0 0 Operating Income/ (Loss) during Lease-Up Initial Occupancy upon Opening 0% Quarter to Stabilize 7.00 Units Leased per Quarter 0 1 0 0.0 0.0 1.0 0.0 0 0 0 0 0 Cumulative Number of Leased Units 0 1 0 0.0 0.0 1.0 1.0 1 1 1 1 1 Vacancy Due to Lease-Up (% of Gross Potential) b 100% 0% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0% Stabilized Vacancy (% of Gross Potential) 5% 0% 5% 0.00% 0.00% 0.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5% Overall Vacancy Rate 100% 53% 100.00% 100.00% 100.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5% Gross Potential Revenue c 2% 183,600 734,400 734,400 183,600 183,600 183,600 183,600 187,272 187,272 187,272 187,272 749,088 Vacancy Loss d (385,560) (385,560) (183,600) (183,600) (9,180) (9,180) (9,364) (9,364) (9,364) (9,364) (37,454) Bad Debt c 0.00% 0 0 0 0 0 0 0 0 0 0 0 Effective Gross Revenue 348,840 348,840 0 0 174,420 174,420 177,908 177,908 177,908 177,908 711,634 Operating Expensesc 2% (119,918) (119,918) (29,980) (29,980) (29,980) (29,980) (30,579) (30,579) (30,579) (30,579) (122,317) Net Operating Income 348,840 348,840 ($29,980) ($29,980) $144,440 $144,440 $147,329 $147,329 $147,329 $147,329 $589,317 Net Cash Flow before Debt during First Three Years (8,279,941) (5,456,000) (2,755,984) (67,958) (773,371) (660,871) (660,871) (660,871) (50,805) (50,805) (89,964) 123,615 147,329 147,329 147,329 147,329 $589,317 Equity Contribution Account Total Development Costse 8,921,541 Maximum Loan Balance e 6,046,560 Equity Required 2,874,981 2,874,981 2,874,981 0 0 0 0 0 0 0 0 0 0 Equity Account Ending Balancef 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 2,874,981 Construction Loan Account and Interest Calculation Beginning Balance 2,581,019 5,532,186 2,581,019 3,388,266 4,093,608 4,808,207 5,532,186 5,655,600 5,780,635 6,015,039 Loan Draw & Releases Construction Draw—Initial Request g 5,633,882 2,581,019 2,755,984 296,880 773,371 660,871 660,871 660,871 20,825 20,825 234,405 20,825 Construction Releasesh 70% 0 0 0 0 0 0 0 0 0 0 0 0 Operating Deficit 59,959 0 0 59,959 0 0 0 0 29,980 29,980 0 0 Trial Balance 6,035,864 2,581,019 5,469,078 6,035,864 3,354,390 4,049,137 4,754,479 5,469,078 5,582,990 5,706,405 6,015,039 6,035,864 Additional Equity Required 0 0 0 0 0 0 0 0 0 0 0 0 Construction Draw—Net Funded g 5,753,801 2,581,019 2,755,984 416,798 773,371 660,871 660,871 660,871 80,784 80,784 234,405 20,825 Ending Balance before Interest 2,581,019 5,469,078 6,035,864 3,354,390 4,049,137 4,754,479 5,469,078 5,582,990 5,706,405 6,015,039 6,035,864 Average Loan Balance Before Interest 1,290,509 4,025,048 5,784,025 2,967,704 3,718,701 4,424,043 5,138,643 5,557,588 5,681,003 5,897,837 6,025,452 Total Construction Loan Interest 5.25% 496,841 0 195,183 301,658 33,876 44,471 53,729 63,108 72,610 74,230 75,871 78,947 Interest Accrued during Construction Period 195,183 0 195,183 0 33,876 44,471 53,729 63,108 0 0 0 0 Interest Accrued during Operating Period 301,658 0 0 301,658 0 0 0 0 72,610 74,230 75,871 78,947 Interest Paid from Operations (154,818) 0 0 (154,818) 0 0 0 0 0 0 (75,871) (78,947) Interest Paid from For Sale Unit Sales h 0 0 0 0 0 0 0 0 0 0 0 0 Trial Ending Balance 6,035,864 2,581,019 5,532,186 6,035,864 3,388,266 4,093,608 4,808,207 5,532,186 5,655,600 5,780,635 6,015,039 6,035,864 Additional Equity Required 0 0 0 0 0 0 0 0 0 0 0 0 Interest Accrued—Net i 342,023 0 195,183 146,840 33,876 44,471 53,729 63,108 72,610 74,230 0 0 Ending Balance 6,035,864 2,581,019 5,532,186 6,035,864 3,388,266 4,093,608 4,808,207 5,532,186 5,655,600 5,780,635 6,015,039 6,035,864 Total Additional Equity Required 0 0 0 0 0 0 0 0 0 0 0 0 Net Cash Flow after Debt 74,103 $0 0 74,103 $0 $0 $0 $0 ($29,980) ($29,980) $68,570 $65,493 = link from another sheet a Expenses related to the selling of For Sale Units are n/a. b The vacancy calculation assumes that the units leased in the present quarter are economically realized in the middle of the quarter. Hence, the Vacancy for the quarter is an average of the vacancy from the prior quarter and present quarter. c The estimates for revenue and expenses are taken from the pro forma. Gross potential revenue and operating expenses are inflated 2 percent in the second year. d Vacancy Loss is a product of the Overall Vacancy Rate within the project. f Equity is committed first, before draws from the construction loan. Construction draws cover any remaining shortfall in funding. Total Development Cost, Excluding Construction Loan Interest & Operating Reserves g Construction Draws are provided by the lender as construction progresses. The net construction draw amount is the amount borrowed after additional equity is contributed, if any. Also note that any operating deficits that need to be funded by the lender are requested and included as part of the draw. e The Total Development Costs after Subsidies was previously provided in the Development Costs worksheet, and includes interest and operating reserves. The Maximum Loan Balance was previously provided by the Maximum Debt Calculation worksheet, and is capped so as to not exceed the Development Costs.
  • 13. Stage 3a Analysis Cash Flows during Development Period, Including Initial Lease-Up Activities – Development – – Lease-Up – – First Stabilized Year – Data Total Time Zero Year 1 Total Year 2 Total Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 Quarter 11 Quarter 12 Year 3 Total i Accrued interest is added to the overall balance of the construction loan. In the event that the accrued interest, together with the carried balance of the construction loan, exceeds the maximum draw limit, then additional equity is required to maintain the construction loan balance at the maximum draw limit. The net accrued interest amount is the amount accrued after additional equity is contributed, if any. g Construction Draws are provided by the lender as construction progresses. The net construction draw amount is the amount borrowed after additional equity is contributed, if any. Also note that any operating deficits that need to be funded by the lender are requested and included as part of the draw. h Construction releases are n/a.
  • 14. Stage 3b Analysis Development Cost Summary USES Total 0 1 2 Total Development Costs $8,508,863 $5,456,000 $2,755,984 $296,880 Construction Loan: Capitalized Interest $195,183 0 195,183 0 Total Capital Costs $8,704,046 $5,456,000 $2,951,167 $296,880 Cash Flow from Operations Net Sales Revenue of For Sale Units 0 0 0 0 Net Operating Income From Lease 348,840 0 0 348,840 Less: Construction Loan Interest during Operations (301,658) 0 0 (301,658) Less: Construction Loan Releases 0 0 0 0 Cash Flow from Operations after Interest 47,182 0 0 47,182 Construction Loan Balance to Be Refinanced 0 0 TOTAL USES $8,656,865 $5,456,000 $2,951,167 $249,698 SOURCES Construction Loan Funding Construction Loan: Net Draws 5,753,801 2,581,019 2,755,984 416,798 Construction Loan: Net Accrued Interest 342,023 - 195,183 146,840 Net Construction Loan Funding 6,095,824 2,581,019 2,951,167 563,638 Equity Sources 2,874,981 2,874,981 - - Additional Equity Required - - - - Permanent Mortgage Refinancing - - Less: Positive Cash Flow after Interest —Distributed (74,103) - - (74,103) Less: Cash Proceeds from Construction Loan Takeout - - TOTAL SOURCES 8,896,701 5,456,000 2,951,167 489,534 Check 2,848,059 2,874,981 - (26,922) 2,608,223 2,874,981 - (266,758) Capital Costs Total Development Cost Excluding Interest 8,508,863$ Interest Accrued during Construction 195,183$ Total Capital Costs 8,704,046$ Depreciable Basis Annual Depreciation Estimate Total Capital Costs 8,704,046$ 27.5 Life Years Land Cost 5,400,000$ 1.0 Accel. Factor Depreciable Basis (Capital Cost, minus Land) 3,304,046$ $120,147 Annual Deprec. Operating Reserve Operating Loss during Lease-Up 0$ Interest Accrued during Operating Period 301,658$ Interest Paid during Operating Period (154,818)$ Total Operating Reserve funded by Construction Loan 146,840$ Total Net Project Costs Total Project Cost (Capital Costs plus Operating Reserve) 8,850,886$ Positive Cash Flow after Interest (74,103) Interest Paid from For Sale Units Sold - Total Project Cost after First-Year Operations (Year 2) 8,776,783$ Construction Loan Takeout at Stabilization Permanent Mortgage Amount for Income Propertyb 6,035,864$ Construction Loan Ending Balance for Income Property 6,035,864$ YEAR Equity for cap. Inv (equity sources+cash flow from ops—positive cash flow after int)a Equity for Capital Investment (Total Capital Costs—Loan Sources)
  • 15. Cash Proceeds from Construction Loan Takeout -$ = link from another sheet b Specific to this underwriting, the Permanent Mortgage amount is assumed to be the lesser of the maximum loan amount for the income property only (as calculated in Figure 4-3c) or the balance of the construction loan. However, under certain conditions, this assumption can be conservative and cash proceeds can be generated at the time of refinancing. a Equity for Capital Investment provides a helpful check for Stage 3. One must be careful not to double-count this equity since it comes not only from new equity but also from positive operating cash flows during lease-up. Line 37 and Line 38 should be equal for each year.
  • 16. Stage 3c Analysis Combined Annual Before- and After-Tax Cash Flows during Development and Operating Period – Development Period – – Investment Period – Mortgage Calculation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Beginning Balancea 6,035,864 6,035,864 5,950,755 5,861,069 5,766,560 5,666,967 5,562,018 Ending Balance 5,950,755 5,861,069 5,766,560 5,666,967 5,562,018 5,451,425 Amortization of Principal 85,109 89,686 94,510 99,593 104,949 110,593 Interest/Annual Payment 5.25% 399,963 314,854 310,277 305,454 300,371 295,014 289,370 DEPRECIATION CALCULATION Beginning Balanceb 3,304,046 3,183,899 3,063,752 2,943,605 2,823,458 2,703,311 2,583,163 Less: Annual Depreciation 120,147 120,147 120,147 120,147 120,147 120,147 120,147 Ending Balance 3,183,899 3,063,752 2,943,605 2,823,458 2,703,311 2,583,163 2,463,016 Cumulative Depreciation Taken 120,147 240,294 360,441 480,589 600,736 720,883 841,030 Cumulative Straight Line 120,147 240,294 360,441 480,589 600,736 720,883 841,030 Recapture 120,147 240,294 360,441 480,589 600,736 720,883 841,030 Remaining Book Value 8,583,899 8,463,752 8,343,605 8,223,458 8,103,311 7,983,163 7,863,016 ANNUAL CASH FLOWS Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Gross Rent 2% 0 734,400 749,088 794,938 810,837 827,054 843,595 860,467 Vacancy Rate 5% 100.00% 52.50% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Vacancy ($) 0 (385,560) (37,454) (39,747) (40,542) (41,353) (42,180) (43,023) Bad Debt 0.00% 0 0 0 0 0 0 0 0 Effective Gross Revenue 0 348,840 711,634 755,191 770,295 785,701 801,415 817,443 Net Lease Expense Recovery 119,918 123,516 127,221 131,038 134,969 139,018 143,189 Operating Expenses 2.00% 0 (119,918) (122,317) (124,763) (127,258) (129,804) (132,400) (135,048) Net Operating Income 0 348,840 712,833 757,649 774,075 790,866 808,033 825,585 - Construction Loan Interest During Operatingc 0 0 - Annual Debt Service (399,963) (399,963) (399,963) (399,963) (399,963) (399,963) + Operating Reserve Funded by Construction Loand 0 59,959 Before-Tax Cash Flow 408,799 312,870 357,686 374,112 390,903 408,070 425,622 Taxes (see below) 68,147 81,988 95,902 101,937 108,149 114,545 121,130 After-Tax Cash Flow 340,652 230,882 261,784 272,174 282,754 293,525 304,491 INCOME TAX CALCUATION FOR APARTMENTS & RETAIL Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Net Operating Income - 348,840 712,833 757,649 774,075 790,866 808,033 825,585 Add: Replacement/ Capital Reserve 14,688 14,982 15,281 15,587 15,899 16,217 16,541 Deduct: Interest - - (314,854) (310,277) (305,454) (300,371) (295,014) (289,370) Deduct: Depreciation - (120,147) (120,147) (120,147) (120,147) (120,147) (120,147) (120,147) Taxable Income/(Loss) - 243,380 292,813 342,506 364,061 386,247 409,089 432,609 Passive Loss Offset - - - - - - - - Taxable Income - 243,380 292,813 342,506 364,061 386,247 409,089 432,609 Passive Loss Carryforward - - - - - - - - Annual Income Taxes 28.00% rate - 68,147 81,988 95,902 101,937 108,149 114,545 121,130
  • 17. SALE CALCULATION OF APARTMENTS & RETAIL (Incl. Tax) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Cash Flow from Sale Sale Price (cap rate applied to next year NOI) 6.0% cap rate 11,628,000 12,627,486 12,901,245 13,181,108 13,467,224 13,759,745 Less: Commission 2.50% rate (290,700) (315,687) (322,531) (329,528) (336,681) (343,994) Adjusted Sales Price 11,337,300 12,311,799 12,578,714 12,851,580 13,130,543 13,415,752 Less: Remaining Mortgage Balance (6,035,864) (5,950,755) (5,861,069) (5,766,560) (5,666,967) (5,562,018) Before-Tax Cash Flow from Sale 5,301,436 6,361,043 6,717,645 7,085,020 7,463,576 7,853,734 Total Tax at Sale (recapture & capital gain, see below) (574,710) (775,690) (856,054) (937,546) (1,020,196) (1,104,031) After-Tax Cash Flow from Sale 4,726,726 5,585,353 5,861,591 6,147,474 6,443,380 6,749,703 Tax Calculation at Sale Adjusted Sales Price 11,337,300 12,311,799 12,578,714 12,851,580 13,130,543 13,415,752 Remaining Book Value (8,583,899) (8,463,752) (8,343,605) (8,223,458) (8,103,311) (7,983,163) Total Taxable Gain 2,753,401 3,848,047 4,235,110 4,628,122 5,027,232 5,432,588 Passive Loss Carryforward - - - - - - Total Net Taxable Gain 2,753,401 3,848,047 4,235,110 4,628,122 5,027,232 5,432,588 Total Depreciation Taken 120,147 240,294 360,441 480,589 600,736 720,883 Recapture Tax @ 25% 25.00% rate 30,037 60,074 90,110 120,147 150,184 180,221 Capital Gain 2,723,364 3,607,753 3,874,668 4,147,534 4,426,497 4,711,705 Deduct: Capital Reservese (29,670) (44,951) (60,538) (76,437) (92,654) Net Capital Gain 2,723,364 3,578,083 3,829,717 4,086,996 4,350,060 4,619,052 Tax on Capital Gain 20.00% rate 544,673 715,617 765,943 817,399 870,012 923,810 Total Tax at Sale 574,710 775,690 856,054 937,546 1,020,196 1,104,031 RETURN MEASURES Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 SALE END OF YEAR 2 Unleveraged IRR Project Cost (8,508,863)$ For-Sale Revenuesf - Net Operating Income - 348,840 - - - - - Adjusted Sales Price 11,337,300 - - - - - Unleveraged Cash Flow (8,508,863)$ 0$ 11,686,140$ 0$ 0$ 0$ 0$ 0$ Unleveraged IRR Ending Year 2 17.19% Net Present Value @ 6.0% g $1,891,760 Before-Tax IRR Initial & Additional Equity Required (2,874,981)$ 0$ 0$ Before-Tax Cash Flow from Condominiumsf - Before-Tax Operating Cash Flow - 408,799 - - - - -
  • 18. Before-Tax Cash Flow from Refinancings - Before-Tax Cash Flow from Sale 5,301,436 - - - - - Total Before-Tax Cash Flow (2,874,981)$ 0$ 5,710,234$ 0$ 0$ 0$ 0$ 0$ Before-Tax IRR Ending Year 2 40.93% Net Present Value @ 8.0% $2,020,625 After-Tax IRR Initial & Additional Equity Required (2,874,981)$ 0$ 0$ After-Tax Cash Flow from Condominiumsf - After-Tax Operating Cash Flow - 340,652 - - - - - After-Tax Cash Flow from Refinancings - After-Tax Cash Flow from Sale 4,726,726 - - - - - Total After-Tax Cash Flow (2,874,981)$ 0$ 5,067,378$ 0$ 0$ 0$ 0$ 0$ After-Tax IRR 32.76% Net Present Value @ 10.0% $1,312,935 d The operating reserve n/a f Cash flows related to the sales and profit of the For-Sale Units are n/a. g Net Present Value equals the present value of future cash flows, less the initial investment. Note that the analysis assumes all equity is invested at the beginning of the project. Also note that the unleveraged NPV represents the development profit. a The permanent mortgage balance was determined based on value and cash flow from the industrial building of the project. The permanent mortgage would replace the outstanding construction loan upon stabilization of the project. Note that the construction loan is interest only, whereas the permanent mortgage is amortizing. c Construction Interest During Operating represents the amount of interest charged during the operating period that was paid from operating revenues. b The depreciable basis is the total project cost after subsidies and before Op Expenses, excluding building acquisition cost and operating losses during the lease-up period. The remaining book value includes the building cost. e Specific to this model, yearly replacement reserves are n/a
  • 19. Stage 5 Analysis Investor Return Initial & Additional Equity a 2,874,981$ Investor Equity Contribution b 95% Cumulative Preferred Return 8% Investor Proportionate Payback of Equity b 95% Investor Share of Remaining Cash Flow 65% – Development Period – – Operating Period – Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Before-Tax Cash Flow (2,874,981)$ 0$ 5,710,234$ 0$ 0$ 0$ 0$ 0$ Preferred Return b Beginning Equity Account Balance 2,874,981 2,874,981 0 0 0 0 0 Preferred Return Earned 229,998 229,998 0 0 0 0 0 Preferred Return Paid Currently 0 229,998 0 0 0 0 0 Unpaid Return Account b Beginning Balance 0 229,998 0 0 0 0 0 Deferred Preferred Return 229,998 0 0 0 0 0 0 Deferred Preferred Return Paid 0 229,998 0 0 0 0 0 Ending Balance 229,998 0 0 0 0 0 0 Equity Account Balance b Beginning Equity Account Balance 2,874,981 2,874,981 0 0 0 0 0 Equity Payback 0 2,874,981 0 0 0 0 0 Ending Balance 2,874,981 0 0 0 0 0 0 Equity Payments Recap b Preferred Return Paid Currently 0 229,998 0 0 0 0 0 Deferred Preferred Return Paid 0 229,998 0 0 0 0 0 Equity Payback 0 2,874,981 0 0 0 0 0 Total Payments on Equity 0 3,334,978 0 0 0 0 0 Remaining Cash Flow Before-Tax Cash Flow 0 5,710,234 0 0 0 0 0 Total Payments on Equity 0 3,334,978 0 0 0 0 0 Remaining Cash Flow 0 2,375,257 0 0 0 0 0 Investor Share of Equity & Remaining Cash Flow (based on terms above) Investor Share of Equity Payments 0 3,168,229 0 0 0 0 0 Investor Share of Remaining Cash Flow 0 1,543,917 0 0 0 0 0 Total Share to Investor 0 4,712,146 0 0 0 0 0 Developer Share of Equity & Remaining Cash Flow Developer Share of Equity Payments 0 166,749 0 0 0 0 0 Developer Share of Remaining Cash Flow 0 831,340 0 0 0 0 0 Total Share to Investor 0 998,089 0 0 0 0 0 Investor Cash Flows Before-Tax Cash Flow to Investor (2,731,232)$ 0$ 4,712,146$ 0$ 0$ 0$ 0$ 0$
  • 20. 2 Year Investor Before-Tax IRR 31.35% Net Present Value, at 15.0% 831,827 Developer Cash Flows Before-Tax Cash Flow to Developer (143,749)$ 0$ 998,089$ 0$ 0$ 0$ 0$ 0$ 2 Year Developer Before-Tax IRR 0.00% Net Present Value, at 15.0% 610,949$ a In this simplified investor return analysis, it is assumed that all equity, or committed capital by the investors, is invested in the initial year into an escrow account. b In this analysis, it is assumed that the investor and the developer have equal priority to the preferred return and that the payback of their respective equity is proportional to their contributed amount. Hence, the preferred return and equity balance calculations are performed for both the investor and the developer and later individually proportioned according to their proportionate share.

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