Cartwright Final - Sean Linkletter

Angus Cartwright CaseInvestment Analysis

Spring 2014

Sean Linkletter

Executive Summary and Recommendations

ANGUS CARTWRIGHT CASE William Harrison; Faculty

Executive Summary of Investment Analysis & Recommendations

for

John DeRight

April 20, 2014

Investment Suitability:

Key facts known (or reasonably inferred) about the clients financial status which give

guidance as to relative investment suitability among the properties:

1. John is retired and living off of dividends and other small investments of approximately $1 million annually.

2. He is specifically interested in taking advantage of the newly enacted capital gains rate.

3. He believes that real estate would give him the benefits of diversification and protection from

inflation.

4. Having recently sold his company for $18 million, he is looking to invest that capital in real estate to diversify his portfolio.

5. He would like to have a minimum leveraged return on her investments of 12% after tax.

Conclusions as to relative risk tolerance in reaching for incremental return:

John is less flexible with the investment he will make because he has a low tolerance for risk He is looking for an investment that will provide him with tax advantages such as the new capital

gains tax law

Five (5) key risk / return measures chosen to support this recommendation: Return Measures (ranking by priority) Quantification

1.EDR 12.18% 2. Breakdown ATIRR 15.39% 3.Breakeven Occupancy 67.00%

Risk Measures (ranking by priority)

1. Tax Effect on ATIRR (18.45%) 2. Standard Deviation 3.22%

Other Critical Variables (if applicable) :

DCR 2.02

Defense of Variables: Alison Green is best suited for the investment needs of John DeRight due to his high levels of risk aversion. The EDR is the highest of all the available properties at 12.18%. Getting more of the initial equity back sooner mitigates some of the risk of the investment. John has less income coming from other sources so he is in need of as much income as possible and receiving more in the early years helps him with this. Because John is retired and is in need of instant income he needs a property that is less reliant on reversion for its return and receives a higher portion of its return during the holding period. By partitioning the IRR for Alison Green we find that 74.16% of the IRR derives from the operating cash flows, meaning that he will receive more money earlier in the holding period rather than relying on the price appreciation at the sale. Alison Green, having the lowest breakeven occupancy at 67.00% provides for a lower risk investment because it allows the occupancy rate to be lower while still receiving a desirable return. If the market turned out to be in a recession this investment would still be favorable because even if the vacancy rate is higher he will still receive a higher revenue than the other properties. John DeRight explicitly stated that he wants to diversify his portfolio by adding real estate given its relative tax advantages to other asset classes. Because of this, we consider the propertys tax benefits on its internal rate of return of significant importance. Alison Green ranks third among the properties, providing a benefit to the IRR from taxes of 18.45%. If tax laws were to change, 18.45% of the IRR would be affected. In terms of standard deviation, at 3.22% Alison Green is the least risky among all of the potential investments. This indicates that in the event of a weaker economy, the investments value will deviate relatively less from our expected return than the other properties. The greater stability in cash flows is preferential to John who is now retired, primarily living off dividend income, and thus more risk-averse. Also we should consider the DCR for Alison Green, it is the highest among the properties at 2.02. This shows that the NOI is more than double the debt service meaning that the return to John would be higher because he has to pay less of his cash flow out to his lender.

Investment Recommendation for John DeRight:

Alison Green

Other findings or comments: The coefficient of variation is also the lowest of the properties giving Alison Green the best risk-return trade off making it a favorable investment for a risk adverse investor such as John.

ANGUS CARTWRIGHT CASE William Harrison; Faculty

Executive Summary of Investment Analysis & Recommendations

for

Judy DeWright

April 20, 2014

Investment Suitability:

Key facts known (or reasonably inferred) about the clients financial status which give

guidance as to relative investment suitability among the properties:

1. Judys company has earned $1.1 million after taxes in each of the previous 10 years and there is no evidence to indicate that future earnings will drop.

2. She has $16 million currently invested in short-term securities, but does not consider that

necessary for her current operations.

3. She believes that real estate would give her the benefits of diversification, protection from inflation, and certain tax advantages.

4. She has turned down past offers to sell her business, but has chosen to continue to run the

business herself.

5. She would like to have a minimum leveraged return on her investments of 12% after tax.

Conclusions as to relative risk tolerance in reaching for incremental return:

Judy is less risk averse and has the ability to bear more risk in her investment than John because she is still the owner of a successful business and she has received multiple offers to buy her business.

She is interested in reinvesting the $16 million she has in short-term securities into a long-term investment because she is not in need of short term cash flows.

Five (5) key risk / return measures chosen to support this recommendation: Return Measures (ranking by priority) Quantification

1.ATIRR 16.03% 2.Growth of NOI 4.25% 3.Cap Rate at Sale 8.75

Risk Measures (ranking by priority)

1. Standard Deviation 4.02% 2. Cash on Cash Return 4.06%

Other Critical Variables (if applicable) :

Scenario Analysis

* *

Defense of Variables:

The ATIRR for the Fowler Building is 16.03% making it the second highest for all of the properties and a good fit for Judy given the risk- return relationship. Judy has the ability to bear more risk, therefore this property suits her well because the incremental increase in IRR for the incremental increase in risk is the best being quantified by the coefficient of variation of 0.25. Judy has no need for short term income implying that she is looking for a long term investment. Fowler fits very well to this need due to its high annual increase in NOI. Because she is looking for a return with a long term horizon, a higher increase in NOI will allow her future cash flows to be higher, especially in the later years of the holding period. Fowler's low cap rate at time of sale is key when choosing it as a long term investment. Having a lower cap rate shows that more of the return she is expecting will be attributed to the reversion at sale which we can see from 64.52% of the ATIRR coming from the ATCFS. Relying on price appreciation for the bulk of return is typical in a long term investment making this fit Judy's need well. Fowler's standard deviation of 4.02% is perfect for Judy because she is more willing to take on more risk with the promise of a higher return. This ranks third among the available properties while still offering the second highest return. Given the level of risk, a downside of one standard deviation in return would still be 12.01% which is roughly the same as her required return on investment of 12%. This measure makes Fowler a riskier investment but it also promises of a higher return even in a pessimistic scenario. Fowler's low cash on cash return for year 1 shows that most of its return is due to the increase in NOI and the anticipated price appreciation. Judy would be satisfied with this low EDR for the first couple of years with the promise of an increase in the later years of the holding period, because she is looking for a long term investment. This being said, postponing the majority if the return makes this a riskier investment, but one that Judy would be able to make due to her higher risk tolerance.

Investment Recommendation for Judy DeWright:

Fowler Building Other findings or comments: When evaluating the scenarios for Fowler we see that it ranks the best for vacancy, increase in NOI, and terminal cap rate in the pessimistic scenarios. The pessimistic vacancy of 7.5% is the lowest showing it will provide more revenue on a percentage basis than other properties. The expected NOI increase of 2% allows for the highest NOI increase should the market not behave as was expected. And the terminal cap rate is the lowest at 9.0 giving it the highest likelihood of price appreciation. Due to Judy's tolerance for risk the Fowler Building is the most suitable investment for her because overall it is a risky investment. It starts out with a very low return during initial years of the holding period. But the promise of a high increase in NOI and price appreciation shows that the return would be more reliant on the future flows fitting well with Judy's need for a long term growth investment.

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ATIRR Analyses

EXHIBITS

Group #5 Ryan Matt Raegan Sean Group

Alison Green Stony Walk Ivy Terrace Fowler FestivalNumber of Units or Rentable Sq Ft 100 67000 80 50000 97000

Gross Purchase Price 9600000 11500000 8400000 9400000 19400000Depreciable base 7500000 8000000 8400000 9400000 13400000Depreciable Life 28 39 28 39 39Estimated Sales Price 12835900 14879300 10785000 13665800 34281600Expected Year of sale 10 10 10 10 10Cash flow from operations (YR 1) 870200 1057200 765700 788300 2261000Annual % Increases in CFO (NOI) 3.25% 3.25% 3.25% 4.25% 4.25%Leasehold Payments (on Land) 0 0 30000 70000 0Equity Investment 3600000 3500000 2900000 2400000 5432000Amount of 1st Mortgage 6000000 8000000 5500000 7000000 13968000Interest Rate 6.00% 6.50% 6.00% 7.50% 6.00%Term (Balloon Term) 10 10 10 10 10Amoritization Term 30 20 30 25 10Loan Balance EOY 10 5021143 5252921 4602715 5580226 0Constant loan Payments (aka Loan Constants*) 431676 715750 395703 620753 1860881

Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalGross Rents (GPI) 1440000$ 1742000$ 1296000$ 1275000$ 3580000$ - Vacancy 72000$ 87100$ 90720$ 89250$ 358000$ Effective Gross Income (EGI) 1368000$ 1654900$ 1205280$ 1185750$ 3222000$ - Real Estate Taxes 172800$ 209040$ 129600$ 127500$ 286400$ - Other OPEX 300000$ 368560$ 289980$ 254950$ 655200$ - Cap reserve (CAPX) 25000$ 20100$ 20000$ 15000$ 19400$ Cash Flow From Operations (NOI) 870200$ 1057200$ 765700$ 788300$ 2261000$ - Finance Payments (ADS) 431676$ 715750$ 395703$ 620753$ 1860881$ - Ground Lease Payments -$ -$ 30000$ 70000$ -$ Before Tax Cash Flow (BTCF) 438524$ 341450$ 339997$ 97547$ 400119$

Alison Green 900 Stony Walk Ivy Terrace Fowler Festival

Price / Unit or Price / Rentable SF 96000$ 172$ 105000$ 188$ 200$ Real Estate Taxes/ Gross Rev 13% 13% 11% 11% 9%Other OPEX / Unit orOther OPEX / RSF 3000.00$ 5.50$ 3624.75$ 5.10$ 6.75$

Other OPEX / Gross Revenue 21.9% 22.3% 24.1% 21.5% 20.3%RE Tax + Other OPEX / unit or RSF 1758.00$ 3.12$ 1665.31$ 2.55$ 2.95$ Average Monthy Rent for Apts. or Yearly dollars / RSF for Office 1200$ 26.00$ 1350$ 25.50$ 36.91$ Current or Projected Occupancy 95% 95% 93% 93% 90%

Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalCurrent or Projected Occupancy 95.00% 95.00% 93.00% 93.00% 90.00%Added Margin 39.19% 32.75% 40.09% 24.32% 19.72%Break-even Occupancy Rate (%) 67.94% 79.37% 69.30% 85.87% 87.58%Loan to Value Ratio (%) 62.50% 69.57% 65.48% 74.47% 72.00%Debt Coverage Ratio w/ Ground Lease 2.02 1.48 1.80 1.14 1.22Debt Coverage Ratio w/o Ground Lease 2.02 1.48 1.94 1.27 1.22

Group #5 Ryan Matt Raegan Sean Group

Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalEquity Required 3600000$ 3500000$ 2900000$ 2400000$ 5432000$

Simple Return MeasuresCap Rate - Purchase 9.06% 9.19% 9.12% 8.39% 11.65%Cap Rate - Sale 9.33% 9.78% 9.78% 8.75% 10.00%Cash on Cash Return (year 1 aka EDR) 12.18% 9.76% 11.72% 4.06% 7.37%

Discounted Return MeasuresInternal rate of Return (ATIRR) 15.39% 15.11% 15.64% 16.03% 20.11%NPV @12% (of AT flows) 872004$ 877971$ 738409$ 842278$ 5518579$

( ranking responsibility of Alison Green member ) Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalExample of Color Coding / Rating # 1 (best) 2 3 4 5 (worst)

Simple Return MeasuresCap Rate - Purchase (best is highest) 9.06% 9.19% 9.12% 8.39% 11.65%Cap Rate - Sale (best is lowest) 9.33% 9.78% 9.78% 8.75% 10.00%Cash on Cash Return (year 1) 12.18% 9.76% 11.72% 4.06% 7.37%

Discounted Return MeasuresInternal rate of Return 15.39% 15.11% 15.64% 16.03% 20.11%Net Present Value @12% ( Wealth ) 872004$ 877971$ 738409$ 842278$ 5518579$

( per methodology from case study ) Alison Green 900 Stony Walk Ivy Terrace Fowler Festival1102009 ATIRR = 15.39% 15.11% 15.64% 16.03% 20.11%

BTCFO 74.16% 66.48% 72.46% 44.19% 54.35%Tax Benefits or (Tax Effect) on IRR -18.45% -26.76% -13.45% -8.70% -44.13%Future (reversion) ATCFs 44.29% 60.28% 40.99% 64.52% 89.78%

Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalReturn of Initial Cash (Equity) 3600000$ 3500000$ 2900000$ 2400000$ 5432000$ plus Recovery of Mtg. Amoritization 978857$ 2747079$ 897285$ 1419774$ 13968000$ plus Increase in Sales Price 3235900$ 3379300$ 2385000$ 4265800$ 14881600$ less 25% tax on Deprec. Recapture 681818$ 512821$ 763636$ 602564$ 858974$ less Cap Gains tax on Appreciation 447885$ 476745$ 327750$ 617370$ 2203140$ ATCFS (total of above) 6685054$ 8636813$ 5090899$ 6865640$ 31219486$ (enter ATCFs on template) 6685053$ 8636814$ 5090899$ 6865640$ 31219486$

Alison Green 900 Stony Walk Ivy Terrace Fowler FestivalBTIRR ( leveraged per template ) 19.44% 19.82% 19.15% 18.66% 20.11%BTIRRp ( un-leveraged but incl. ground lease) 12.11% 12.02% 11.57% 11.69% 16.88%ATIRRp ( un-leveraged but incl. ground lease) 9.00% 8.70% 8.68% 8.90% 12.47%Breakeven Interest Rate (careful) 13.85% 13.38% 13.35% 13.69% 19.18%Effective Tax Rate (leveraged) 20.83% 23.74% 18.36% 14.07% 25.56%

Exhibit 1 Basic Information

Exhibit 3 Purchase and Operating Comparables

Exhibit 4 Break Even Analysis

Exhibit 6 Financial Analysis

Exhibits 8 & 9 Breakdown of ATIRR

Exhibit 7 Investment Ranking

Exhibit 10 Breakdown of Futures

Exhibit 11 Supplementary Measures

Exhibit 2 First Year Setups

Risk Analysis: Scenarios Analysis & Risk Measures

ANGUS CARTWRIGHT CASESCENARIO ANALYSIS

Rev. 10/31/13 MASTERAlison Green Stony Walk

Pessimistic Most Likely Optimistic Pessimistic Most Likely OptimisticVacancy Rate 7.50% 5.00% 4.00% 8.50% 5.00% 4.00%Annual Increase in NOI 1.00% 3.25% 4.00% 1.00% 3.25% 5.00%Terminal Cap Rate 0.09750 0.0933 0.09000 0.10000 0.0978 0.09500

Ivy Terrace FowlerPessimistic Most Likely Optimistic Pessimistic Most Likely Optimistic

Vacancy Rate 9.00% 7.00% 4.00% 7.50% 7.00% 3.50%Annual Increase in NOI 1.00% 3.25% 4.00% 2.00% 4.25% 5.40%Terminal Cap Rate 0.10250 0.0978 0.09500 0.09000 0.0875 0.08250

Festival ProbabilitiesPessimistic Most Likely Optimistic Pessimistic Most Likely Optimistic

Vacancy Rate 17.50% 10.00% 5.00%Annual Increase in NOI 1.00% 3.25% 5.40% 40.00% 40.00% 20.00%Terminal Cap Rate 0.11650 0.0100 0.09250Alison Green - ATIRRScenario Return Probability (Return * Probability) (R - Expected R) P * (R - Expected R)

Pessimistic 9.68% 40% 0.03872 -3.84% 0.05886%Most Likely 15.39% 40% 0.06156 1.87% 0.01405%Optimistic 17.44% 20% 0.03488 3.92% 0.03080%

Expected Return 13.52% HVariance 0.104%

Standard Deviation 3.22% H

Stony Walk - ATIRRScenario Return Probability (Return * Probability) (R - Expected R) P * (R - Expected R)




Ivy Terrace - ATIRRScenario Return Probability (Return * Probability) (R - Expected R) P * (R - Expected R)




Fowler Building - ATIRRScenario Return Probability (Return * Probability) (R - Expected R) P * (R - Expected R)




Festival - ATIRRScenario Return Probability (Return * Probability) (R - Expected R) P * (R - Expected R)




RISK MEASURES

Group # 5 Ryan Matt Raegan Sean Team

Alison Green Stony Walk Ivy Terrace Fowler FestivalProperty Type Apartment Office Apartment Office Retail

Loan to Value Ratio 62.50% 69.57% 65.48% 74.47% 72.00%Debt Coverage Ratio w/o Lease 2.02 1.48 1.94 1.27 1.22Debt Coverage Ratio w/ Lease 2.02 1.48 1.80 1.14 1.22EDR (1st year) 12.18% 9.76% 11.72% 4.06% 7.37%Breakeven Occupancy % 67.94% 79.37% 69.30% 85.87% 87.58%Std. Partition of BTIRR % from Reversion 55.18% 53.61% 53.68% 33.36% 71.42%Std. Partition of BTIRR % from Operations 44.82% 46.39% 47.32% 66.64% 28.58%Breakdown of ATIRR % from BTCFO 74.16% 66.48% 72.46% 44.19% 54.35%Breakdown of ATIRR % from ATCFS 44.29% 60.28% 40.99% 64.52% 89.78%Breakdown of ATIRR % from Tax Effects * -18.45% -26.76% -13.45% -8.70% -44.13%Expected Return (ATIRR) (no color code) 13.52% 13.29% 13.83% 14.66% 17.02%Standard Deviation 3.22% 4.03% 3.60% 4.02% 5.90%16% Downside (1 std. dev. downside) 10.30% 9.26% 10.23% 10.64% 11.12%Coefficient of Variation ( / %) 0.24 0.30 0.26 0.27 0.35

Color Coding / Rating (least risk) (most risk)

Risk Quantification

Supporting Exhibits

Purchase price 9600000 Tax Considerations:Building Value 7500000 Depreciation (in years) 27.5

Capital gains tax rate 15%Loan-to-Value 63% Depreciation recapture rate 25%Loan Interest Rate 6.00% Ordinary income tax rate 35%Loan Amortization Term 30 years Building Square Footage & Misc. Inputs:Payments per year 12 Office (or Retail) Gross SF NATerminal Cap Rate (%) 9.33% Office (or Retail) Rentable SF NAHolding Period 10 years # Apartment Units 100Selling costs 0% of sale price Property Tax (% gross Rent) 12%Equity discount rate (after Tax) 12% CAPX per apartment / yr. $250.00Reinvestment rate 6% CAPX per RSF office or retail/ yr. NANOI Annual Appreciation Rate 3.25% Projected Vacancy Rate 5%

Equity 3600000Loan 6000000Annualized Loan Payments 431676Mortgage Balance at Sale (EOY) 5021143 year 10

End of Year 1 2 3 4 5 6 7 8 9 10 11Payment 431676 431676 431676 431676 431676 431676 431676 431676 431676 431676 431676Mortgage Balance 5926319 5848094 5765044 5676872 5583261 5483877 5378363 5266341 5147410 5021143 4887089Interest 357996 353451 348626 343504 338066 332292 326162 319654 312745 305410 297622Principal 73681 78225 83050 88172 93611 99384 105514 112022 118931 126267 134054

Gross Rentals 1440000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.less Vacancy 72000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.plus Misc. Income 0 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Effective Gross Income 1368000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.OPEX (excl prop tax) 300000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Property Taxes 172800 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.CAPX Reserve (above the line) 25000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Net Operating Income 870200 898482 927682 957832 988961 1021103 1054288 1088553 1123931 1160459 1198173Less Ground Lease (if applic.) 0 0 0 0 0 0 0 0 0 0 0Subtotal 870200 898482 927682 957832 988961 1021103 1054288 1088553 1123931 1160459 1198173Less: Interest 357996 353451 348626 343504 338066 332292 326162 319654 312745 305410 297622Depreciation 272727 272727 272727 272727 272727 272727 272727 272727 272727 272727 272727Add back CAPX reserv 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000Preliminary Taxable Income (Loss) 264477 297303 331328 366600 403168 441083 480399 521171 563458 607321 652824PALL Suspended Loss Effect 0 0 0 0 0 0 0 0 0 0 0Net Taxable Income (loss) 264477 297303 331328 366600 403168 441083 480399 521171 563458 607321 652824Tax or ( Tax Savings) 92567 104056 115965 128310 141109 154379 168140 182410 197210 212563 228488

Cumul. EOY Suspended Loss 0 0 0 0 0 0 0 0 0 0 0

Net Operating Income (NOI) $870200 $898482 $927682 $957832 $988961 $1021103 $1054288 $1088553 $1123931 $1160459 $1198173Less Debt Service (DS) 431676 431676 431676 431676 431676 431676 431676 431676 431676 431676 431676Less Ground Lease (if applic.) 0 0 0 0 0 0 0 0 0 0 0Before Tax Cash Flow $438524 $466805 $496006 $526155 $557285 $589426 $622612 $656876 $692254 $728782 $766497Less Tax 92567 104056 115965 128310 141109 154379 168140 182410 197210 212563 228488

After-tax Cash Flow $345957 $362749 $380041 $397845 $416176 $435047 $454472 $474467 $495044 $516220 $538009

Sales Price 12835900Sales costs 0Mortgage Balance 5021143Before-tax cash flow 7814757

Original Cost Basis 9600000plus Capital Expenditures 250000less Accumulated Depreciation 2727273Adjusted Basis 7122727

Sales Price 12835900less Sales Costs 0less Adjusted Basis 7122727

Capital Gain 5713173less Depreciation recapture 2727273Gain from price appreciation 2985900less Suspended Loss (balance) 0Taxable Gain from price apprec. 2985900

Tax on price appreciation 447885Tax on depreciation recapture 681818Total capital gain tax 1129703After-Tax Cash Flow from Sale 6685053

Year 0 1 2 3 4 5 6 7 8 9 10Before-Tax Cash Flow ($3600000) $438524 $466805 $496006 $526155 $557285 $589426 $622612 $656876 $692254 $8543539After-Tax Cash Flow ($3600000) $345957 $362749 $380041 $397845 $416176 $435047 $454472 $474467 $495044 $7201273

Before-Tax IRR (BTIRRe) 19.44%After-Tax IRR (ATIRRe) 15.39%

Effective Tax Rate 20.83%

PV of ATCFo (at equity disc. rate per assumptions) $2319909PV of ATCFs (at equity disc. rate per assumptions) 2152408Total AT Present Value 4472317Less Original Equity Investment -3600000After-Tax Net Present Value 872017

Price/Gross Square Foot (or per unit for apartments) $96000Price/Net Square Foot (or per unit) $96000Capitalization Rate (Going-in) 9.06%First Year Debt Coverage Ratio (DCR) 2.02

12.18%Net Reinvestment Margin 1102009

Alison Green

AFTER-TAX NET PRESENT VALUE (NPV)

AFTER-TAX CASH FLOW FROM SALE IN YR 10

Data Input Boxes:

SUMMARY LOAN INFORMATION:

TAXABLE INCOME & AFTER-TAX CASH FLOW FROM OPERATIONS:

After Tax Investment Analysis

CASH FLOW SUMMARY

EDR ("cash on cash" yield)

BEFORE-TAX INVESTMENT ANALYSIS MEASURES

Purchase price 11500000 Tax Considerations:Building Value 8000000 Depreciation (in years) 39

Capital gains tax rate 15%Loan-to-Value 70% Depreciation recapture rate 25%Loan Interest Rate 6.50% Ordinary income tax rate 35%Loan Amortization Term 20 years Building Square Footage & Misc. Inputs:Payments per year 12 Office (or Retail) Gross SF 75000Terminal Cap Rate (%) 9.78% Office (or Retail) Rentable SF 67000Holding Period 10 years # Apartment Units NASelling costs 0% of sale price Property Tax (% gross Rent) 12%Equity discount rate (after Tax) 12% CAPX per apartment / yr. NAReinvestment rate 6% CAPX per RSF office or retail/ yr. 0.3NOI Annual Appreciation Rate 3.25% Projected Vacancy Rate 5%



















900 Stony Walk




CASH FLOW SUMMARY

Data Input Boxes:




Purchase price 8400000 Tax Considerations:Building Value 8400000 Depreciation (in years) 27.5

Capital gains tax rate 15%Loan-to-Value 65% Depreciation recapture rate 25%Loan Interest Rate 6.00% Ordinary income tax rate 35%Loan Amortization Term 30 years Building Square Footage & Misc. Inputs:Payments per year 12 Office (or Retail) Gross SF NATerminal Cap Rate (%) 9.78% Office (or Retail) Rentable SF NAHolding Period 10 years # Apartment Units 80Selling costs 0% of sale price Property Tax (% gross Rent) 10%Equity discount rate (after Tax) 12% CAPX per apartment / yr. $250.00 1054288Reinvestment rate 6% CAPX per RSF office or retail/ yr. NANOI Annual Appreciation Rate 3.25% Projected Vacancy Rate 7%



















Ivy Terrace




CASH FLOW SUMMARY

Data Input Boxes:








Gross Rentals 1275000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.less Vacancy 89250 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.plus Misc. Income 0 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Effective Gross Income 1185750 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.OPEX (excl prop tax) 254950 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Property Taxes 127500 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.CAPX Reserve (above the line) 15000 Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl. Incl.Net Operating Income 788300 821803 856729 893140 931099 970671 1011924 1054931 1099765 1146505 1195232Less Ground Lease (if applic.) 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000Subtotal 718300 751803 786729 823140 861099 900671 941924 984931 1029765 1076505 1125232Less: Interest 521639 513945 505653 496717 487088 476711 465529 453479 440493 426499 411418Depreciation 241026 241026 241026 241026 241026 241026 241026 241026 241026 241026 241026Add back CAPX reserv 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000Preliminary Taxable Income (Loss) -29365 11833 55051 100398 147985 197934 250369 305427 363247 423981 487788PALL Suspended Loss Effect 0 0 0 0 0 0 0 0 0 0 0Net Taxable Income (loss) -29365 11833 55051 100398 147985 197934 250369 305427 363247 423981 487788Tax or ( Tax Savings) -10278 4141 19268 35139 51795 69277 87629 106899 127136 148393 170726


Net Operating Income (NOI) $788300 $821803 $856729 $893140 $931099 $970671 $1011924 $1054931 $1099765 $1146505 $1195232Less Debt Service (DS) 620753 620753 620753 620753 620753 620753 620753 620753 620753 620753 620753Less Ground Lease (if applic.) 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000Before Tax Cash Flow $97547 $131050 $165977 $202388 $240346 $279918 $321171 $364178 $409013 $455753 $504479Less Tax -10278 4141 19268 35139 51795 69277 87629 106899 127136 148393 170726














Fowler Building




CASH FLOW SUMMARY

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CASH FLOW SUMMARY


Festival Old Town


Data Input Boxes:






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Cartwright Final - Sean Linkletter

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