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

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 StagesStage 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

Stage 1a - Rental and Sales Revenue Summary

Industrial Unit Types No. of Units Rent/Ft2

Area/Unit

(ft2) 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 Revenuea

$0

Other Miscellaneous Revenueb

$0

Total Rental Revenue 1 0.68$ 90,000 90,000 $61,200 $734,400

Retail Tenants No. of Units Rent/Ft2

Area/Unit

(ft2) 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/Ft2

Area/Unit

(ft2) Total Ft

2Sales/Unit

Total

Annual

Sales

Project Units

Total Sales Revenue

aOther Rental Revenue includes additional revenue derived from leasing space at the property e.g. leases for parking, rooftop

telecommunication devices, storage space, and billboards.

bOther 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.

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

cControllable costs typically include salary, administrative, marketing, and maintenance expenses.

aGross 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.

Stage 1c - Maximum Debt Calculation

Pro Forma Net Operating Income (NOI) and Value

Pro Forma NOIa

$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 Propertyc

$6,046,560

Add: Loan for For-Sale Propertyd

$0

Total Initial Project Debt $6,046,560


aThe pro forma NOI figure is provided by the prior eponymous exhibit and does not include any

revenues from For Sale Units.

bInterest 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 %.

cTypically 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.

dLine 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.

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 Costsa

Building Acquisition $60.00 per gross ft2

5,400,000$ 5,400,000$ 0$

Carry Preferred Returnb

0.00% rate 12 months 0 0 0

Approval Fees $0.30 per gross ft2

27,000 27,000 0

Environmental Reports & Remediation $0.06 per gross ft2

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 Interestc

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 Reserved

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 0Total Project Costs 9,083,541$ 9,083,541$ 0$

Less: Development Cost Subsidiese

(162,000) (162,000)

Total Project Costs after Subsidies 8,921,541$ 8,921,541$ 0$


eThe 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

cThis calculation is a preliminary estimate of interest during construction and reflects market rate construction financing.as of 6/13.

dOperating 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.

aThe following outline of development costs include customary expenses.

bCarry 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.

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


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

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 Principala

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 Basisb

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 Overridec

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

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 Offsetd

- - - - - - -

Taxable Income - 220,784 266,133 280,366 294,883 309,691 324,795

Passive Loss Carryforwardd

- - - - - - -

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 Carryforwardd

- - - - -

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 Reservese

- - - - -

Net Capital Gain 2,415,759 2,642,505 2,873,786 3,109,693 3,350,317 3,595,755

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 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 @ 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 Unitsf

-

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%


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%


bCustomarily, 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.

aThe 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".

fCash flows related to the sales and profit of For-Sale Units are not applicable to this development analysis.

dCurrent 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.

gNet 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.

cTo 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.

eCapital reserves are not a part of this specific development analysis model.

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 Paidb

0

Before-Tax Cash Flow 0

Less: Taxes 0

After-Tax Cash Flow 0

aSpecific 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.

bSpecific 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.

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 Revenuec 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 Lossd (385,560) (385,560) (183,600) (183,600) (9,180) (9,180) (9,364) (9,364) (9,364) (9,364) (37,454)

Bad Debtc

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 Balancee

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 Requestg

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 Fundedg

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 Salesh

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—Neti

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


aExpenses related to the selling of For Sale Units are n/a.

bThe 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.

cThe 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.

dVacancy Loss is a product of the Overall Vacancy Rate within the project.

fEquity 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

gConstruction 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.

eThe 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.

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

iAccrued 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.

gConstruction 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.

hConstruction releases are n/a.

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)

Cash Proceeds from Construction Loan Takeout -$


bSpecific 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.

aEquity 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.

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

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)


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


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 - - - - -

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%


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%


dThe operating reserve n/a

fCash flows related to the sales and profit of the For-Sale Units are n/a.

gNet 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.

aThe 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.

cConstruction Interest During Operating represents the amount of interest charged during the operating period that was paid from operating revenues.

bThe 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.

eSpecific to this model, yearly replacement reserves are n/a

Stage 5 Analysis

Investor Return

Initial & Additional Equitya

2,874,981$

Investor Equity Contributionb

95%

Cumulative Preferred Return 8%

Investor Proportionate Payback of Equityb

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 Returnb

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 Accountb

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 Balanceb

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 Recapb

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$

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$

aIn 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.

bIn 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.

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

Real Estate

total rental revenue

total units

total ft

total retail rental

sale sales revenue

noi stage

analysis stage

total project cost