2. Real Estate Development Workshops Fundamental Skills for Real Estate Development Professionals I Financial Analysis 9:00-10:15 Mark J. Eppli Marquette University Center for Real Estate Site Selection and Due Diligence 10:45-12:00 Charles A. Long President, Charles A. Long Properties Fundamental Skills for Real Estate Development Professionals II Structuring the Deal to be Profitable 1:00-2:15 Tennyson Williams Founder/President Tennyson Williams Associates Project Entitlement 2:45-4:00 David Farmer Principal Capital Four Advisors

15. An Apartment Income Proforma

16. Determining the Maximum Loan Amount

17. Determining the Return to the Equity Investor

18. Property Cap Rates and Premium over U.S. Treasury Securities Sources: St. Louis Federal Reserve, Mortgage Bankers Association, and Marquette University.

21. So Let’s Look at Total Investment Return Total Investment Return

28. Lets Look at An Office Property Investment Gateway Business Center -- Unlevered Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 POTENTIAL GROSS REVENUE Base Rental Revenue $601,403 $631,674 $637,083 $650,476 $661,633 $661,651 $675,565 $679,004 $673,158 $643,616 $650,797 Absorption & Turnover Vacancy (12,740) (5,988) (4,998) (10,350) (10,704) (7,207) (70,218) (6,300) (14,609) Base Rent Abatements (4,459) (2,096) (1,749) (3,623) (3,746) (25,976) (2,430) (6,128) Scheduled Base Rental Revenue 601,403 631,674 619,884 642,392 654,886 647,678 661,115 671,797 576,964 634,886 630,060 CPI & Other Adjustment Revenue 191 2,580 6,103 11,178 17,917 14,687 19,382 29,091 Expense Reimbursement Revenue CAM & Utilies 32,055 36,719 36,721 39,061 40,770 41,771 43,855 45,572 46,659 62,719 63,602 Insurance 5,193 5,888 5,889 6,237 6,491 6,642 6,952 7,207 7,231 9,347 9,478 Real Estate Taxes 45,712 54,120 54,123 58,345 61,427 63,232 66,990 70,086 76,072 113,092 114,684 Mang. Fee 17,326 18,905 18,102 19,427 20,227 20,062 21,241 21,963 20,855 32,266 32,340 Total Reimbursement Revenue 100,286 115,632 114,835 123,070 128,915 131,707 139,038 144,828 150,817 217,424 220,104 TOTAL POTENTIAL GROSS REVENUE 701,689 747,306 734,719 765,653 786,381 785,488 811,331 834,542 742,468 871,692 879,255 General Vacancy (52,311) (39,582) (48,027) (50,399) (45,359) (46,838) (51,715) (55,159) (47,961) EFFECTIVE GROSS REVENUE 701,689 694,995 695,137 717,626 735,982 740,129 764,493 782,827 742,468 816,533 831,294 OPERATING EXPENSES CAM & Utilies 48,658 50,118 51,621 53,170 54,765 56,408 58,100 59,843 61,638 63,488 65,392 Insurance 7,251 7,469 7,693 7,923 8,161 8,406 8,658 8,918 9,185 9,461 9,745 Real Estate Taxes 87,737 90,369 93,080 95,873 98,749 101,711 104,763 107,905 111,143 114,477 117,911 Mang. Fee 28,068 27,800 27,805 28,705 29,439 29,605 30,580 31,313 29,699 32,661 33,252 TOTAL OPERATING EXPENSES 171,714 175,756 180,199 185,671 191,114 196,130 202,101 207,979 211,665 220,087 226,300 NET OPERATING INCOME 529,975 519,239 514,938 531,955 544,868 543,999 562,392 574,848 530,803 596,446 604,994 LEASING & CAPITAL COSTS Tenant Improvements 95,460 40,942 19,337 16,220 33,753 23,049 178,145 23,089 Leasing Commissions 11,539 10,199 4,794 4,001 8,286 10,316 69,116 5,559 Capital Reserves 7,251 7,469 7,693 7,923 8,161 8,406 8,658 8,918 9,185 9,461 TOTAL LEASING & CAPITAL COSTS 114,250 7,469 58,834 32,054 28,382 50,445 42,023 8,918 256,446 38,109 CASH FLOW BEFORE DEBT SERVICE $415,725 $511,770 $456,104 $499,901 $516,486 $493,554 $520,369 $565,930 $274,357 $558,337 Return on Equity 6.30% 7.75% 6.91% 7.57% 7.83% 7.48% 7.88% 8.57% 4.16% 8.46% Equity Investment $6,600,000 Property Sale $7,562,425 Sale Transcation Costs $151,249 Net Sale Proceeds $7,411,177 Property Cash Flows ($6,600,000) $415,725 $511,770 $456,104 $499,901 $516,486 $493,554 $520,369 $565,930 $274,357 $7,969,514 Internal Rate of Return 8.12%

29. We can Analyze the Property with and without Debt Gateway Business Center Investment Analysis using Different Investment Cash Flow and Sale Return Splits I. IRR -- Unleveraged Investment 0 1 2 3 4 5 6 7 8 9 10 Property Purchase 6,600,000 Cash Flow 415,725 511,770 456,104 499,901 516,486 493,554 520,369 565,930 274,357 558,337 Property Sale 7,411,177 Property Cash Flows -6,600,000 415,725 511,770 456,104 499,901 516,486 493,554 520,369 565,930 274,357 7,969,514 Return on Equity 6.30% 7.75% 6.91% 7.57% 7.83% 7.48% 7.88% 8.57% 4.16% Internal Rate of Return 8.12% II. IRR -- Leveraged Investment Loan to Value Ratio 75.76% Loan Amount (calculated) 5,000,000 Interest Rate (interest Only) 6.50% 0 1 2 3 4 5 6 7 8 9 10 Loan Amount 5,000,000 Property Cash Flows -6,600,000 415,725 511,770 456,104 499,901 516,486 493,554 520,369 565,930 274,357 7,969,514 Debt Service -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 Mortgage Balance -5,000,000 Property Cash Flows -1,600,000 90,725 186,770 131,104 174,901 191,486 168,554 195,369 240,930 -50,643 2,644,514 Return on Equity 5.67% 11.67% 8.19% 10.93% 11.97% 10.53% 12.21% 15.06% -3.17% Internal Rate of Return 12.45%

30. Sponsors can Provide Investor Preferred Cash Flow Returns III. IRR -- Leveraged Investment and Equity Investor Required Investment -6,600,000 Equity Investor Preferred Return on Cash flow 8.00% Mortgage Amount 5,000,000 Equity Investor Percent of Cash Flow after Preferred Rtn 60.00% Equity Investor Amount 1,200,000 Equity Investor Percent of Sale Proceeds 50.00% Developer 400,000 0 1 2 3 4 5 6 7 8 9 10 Cash Flows 415,725 511,770 456,104 499,901 516,486 493,554 520,369 565,930 274,357 558,337 Debt Service -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 -325,000 Cash Flow After Debt Service 90,725 186,770 131,104 174,901 191,486 168,554 195,369 240,930 -50,643 233,337 Equity Investor Position Cash Flow Preferred Return 90,725 96,000 96,000 96,000 96,000 96,000 96,000 96,000 0 96,000 Arrears Cash Flow Preferred Return 5,275 0 0 0 0 0 0 0 96,000 Cash Flow Split 0 32,097 1,862 28,141 38,092 24,332 40,421 67,758 0 3,171 Return of Investment 1,200,000 Reversion Split 380,267 Equity Investor Proceeds -1,200,000 90,725 133,372 97,862 124,141 134,092 120,332 136,421 163,758 0 1,775,438 Return on Equity 7.56% 11.11% 8.16% 10.35% 11.17% 10.03% 11.37% 13.65% 0.00% IRR for Equity Investor 11.63% Developer Position Cash Flow Return 0 32,000 32,000 32,000 32,000 32,000 32,000 32,000 -50,643 36,051 Cash Flow Split 0 21,398 1,242 18,760 25,394 16,222 26,948 45,172 0 2,114 Return of Investment 450,643 Reversion Split 380,267 Developer Proceeds -400,000 0 53,398 33,242 50,760 57,394 48,222 58,948 77,172 -50,643 869,076 Return on Equity 0.00% 13.35% 8.31% 12.69% 14.35% 12.06% 14.74% 19.29% -12.66% IRR 14.55%

31. Sponsors can Also Provide Preferred Total Rates of Return IV. IRR -- Leveraged Investment and Equity Investor with an IRR Lookback Rate of: 12.00% Equity Investor Position 0 1 2 3 4 5 6 7 8 9 10 Cash Flow Preferred Return 90,725 101,275 96,000 96,000 96,000 96,000 96,000 96,000 0 192,000 Cash Flow Split 0 32,097 1,862 28,141 38,092 24,332 40,421 67,758 0 3,171 Return of Investment 0 0 0 0 0 0 0 0 0 1,200,000 Reversion Split 0 0 0 0 0 0 0 0 0 465,000 Equity Investor Proceeds -- with Lookback -1,200,000 90,725 133,372 97,862 124,141 134,092 120,332 136,421 163,758 0 1,860,171 Equity Investor IRR Look back to: 12.00% Reversion Split after 12% IRR lookback 73,767 Equity Investor Proceeds -1,200,000 90,725 133,372 97,862 124,141 134,092 120,332 136,421 163,758 0 1,933,938 Equity Investor IRR 12.30% Developer Position Cash Flow Return 0 32,000 32,000 32,000 32,000 32,000 32,000 32,000 -50,643 36,051 Cash Flow Split 0 21,398 1,242 18,760 25,394 16,222 26,948 45,172 0 2,114 Return of Investment 0 0 0 0 0 0 0 0 0 450,643 Reversion Split 0 0 0 0 0 0 0 0 0 148,000 Developer Proceeds -400,000 0 53,398 33,242 50,760 57,394 48,222 58,948 77,172 -50,643 636,809 Developer IRR 12.00% Reversion Split after 12% IRR lookback 73,767 Developer Proceeds -400,000 0 53,398 33,242 50,760 57,394 48,222 58,948 77,172 -50,643 710,576 Developer IRR 12.88%

34. Investor Target Returns: Each use is different *Unleveraged Internal Rate of Return. Higher leverage increases return on equity. Anchor Tenant Timing of sale or lease Target IRR* Sector Occasional Lease up after construction 7-12% Industrial Desirable Pre-leasing usually req’d 7-12% Retail Desirable Pre-leasing desirable 7-12% Office None Lease-up after construction 7.5-11% Multi-family None Pre-sales for each phase 8-20% For-sale residential Depends on phase With phasing 20-30% Land Development

36. What is Our Incremental Cost of Debt? Incremental Cost of Funds Assumptions Loan Amortization Term 30 30 30 Prepayment Year 10 10 10 Property Value $30,000 $30,000 $30,000 LTVR 70.00% 75.00% 80.00% Loan Fees 0.50% 0.75% 1.25% Incremental Closing Costs 0 100 250 UST 10 2.25% 2.25% 2.25% Spread 1.80% 2.20% 2.60% Mortgage Interest Rate 4.05% 4.45% 4.85% Loan and Borrower Cost Information Loan Amount 21,000 22,500 24,000 Points and Increment Costs 105 269 550 Funds Disbursed 20,895 22,231 23,450 Debt Service 101 113 127 Outstanding Loan Balance 16,573 17,991 19,433 Borrower Cost of Funds 4.12% 4.61% 5.17% Incremental Cost of Funds Incremental New Funds 1,336 1,219 Incremental Debt Service 12 13 Incremental Outstanding Loan Balance 1,419 1,442 Incremental Cost of Funds 11.53% 13.96%