Basic Rental Housing Proforma

Fall 2013 Prof. John Landis CLPN 540-001 Introduction to Property Development Assignment #3

Assignment 3: Proforma Development (Basic Rental Housing)

Thomas MacDonald

Summary

a memo to potential investors

Dear sir or ma’am, I present here an investment opportunity to develop 1701 N 33rd St as medium-density rental housing. At the present time this property can be purchased cheaply and sits at a location that will be highly valuable in the near future. Development is moving towards this site and coming changes to the park across the street will soon transform the neighborhood.

Based on the projected figures of our adjusted proforma, this project will reach a 10% return on investment within five years, 12% in six years, 14% in seven years, 15% in eight years, 16% in nine years, 17% in ten years, 18% in twelve years, 19% in fourteen years, and 20% in twenty years.

The major component source of return is residential rents and the increased value of the project as development trends inflate rents in the area. A small amount of additional income may be generated from leasing the property’s proposed gardening plots to renters.

Because the parcel will require a zoning variance, there is some entitlement risk. However, the parcel is currently being operated as a low-quality commercial use, and so rezoning and permitting for our project will be viewed favorably by both the neighborhood and city. Also, because we are allocating a generous portion of project money to the project’s architect and engineer, the city’s approval of the building design and landscaping should go smoothly.

Vacancy also poses a risk, as there are many vacant lots in the area. Architecture and design will again work to mitigate this risk by creating a building that integrates with the park and offers much-needed new construction in an aging housing landscape.

Philadelphia, PA

Fairmount Park

Brewerytown neighborhood

1701-17 N 33rd St

1701 N 33rd St, Philadelphia PA, 19121 20-unit medium density residential housing development

The project considers the feasibility of developing a parcel at the intersection of two major commuter thoroughfares and across the street from a regional park as rental housing for individuals and small families.

1 Bedroom, 750 sqft $800 / mo.

10 units

2 Bedroom, 850 sq ft $1,100 / mo.

5 units

3 Bedroom, 1000 sqft $1,400 / mo.

5 units

*unit square footage figures are for interior space only

3 bedroom backyard

surface parking

1 bedroom

community garden

common area entry / interior circulation

3 bedroom

veranda / green roof

2 bedroom

Initial Building Concept

layout, unit mix and square footage

The initial building layout for this project was envisioned to provide unique offerings within the East Fairmount Park rental market, particularly in regards to how the units integrate with the park and neighborhood. All ten one-bedroom units look out onto the park, allowing great views and filling the units with light. A private entrance through a community garden allows pleasant access from the street, and the circulation / common space corridor allows access from the tucked-away parking lot. The three-bedroom units on the first floor engage the street and offer small backyards, while the two-bedroom units on the second floor possess verandas that allow social opportunities and views to the park.

A small community garden on the corner will offer additional neighborhood engagement and create a programattic relationship with the Nature Learning Center Building to be constructed across the street. The garden also provides an opportunity to generate additional income by charging renters for gardening plots.

rst floorfirst floor

second floor second floor

small private small yardprivate yard /1 unit (5) 1/1 unit (5) common area common / circulation area / circulation 1.5' x 18' 41.5' x 18'90' x 10' 90' x 10' 19' x 10' 19' x 10' 190 sq ft 190 sq ft 47 sq ft 747 sq ft 900 sq ft 900 sq ft

1/1 unit (5) 1/1 unit (5) common area common / circulation area / circulation 41.5' x 18' 41.5' x90' 18'x 10' 90' x 10' 747 sq ft 747 sq900 ft sq ft 900 sq ft

3/2space unit (5) 3/2 unit (5) parking ommunity community garden / multi garden space / multi surface surface (24)parking (24) 55' x 19' 55' x8'19' 1.5' x 12.5'51.5' x 12.5' x 6' 8' x 6' 1,045 sq ft 1,04548sqsqft ft 44 sq ft 644 sq ft 48 sq ft

Total square footages: one bedroom: 7,470 two bedroom: 4,275 three bedroom: 5,225 building: 17,870 common area: 1,544 yard + veranda: 1,900 parking: 1,056 parcel area: 18,700 building footprint: 11,461 FAR: 61 open space: 7,293

private private veranda 2/1 unit (5) 2/1 unit (5) veranda 45' x 19' 45' x 19' 19' x 10' 19' x 10' 190 855 sq ft 855 sq ft sq ft 190 sq ft

Inputs and Initial Assumptions land cost, construction, and financing

This project consideres a baseline land cost of $350,000 to purchase 1701 N 33rd St from its current owner, Ridge Petroleum LLC. According to tax records the property was purchased in 2012 for a price of $200,000, and so it seems reasonable that the owner might sell it for a 75% profit.

Construction costs for this project began at a baseline of $177 per square foot as estimated through RSMeans, which seemed steep for this location and were lowered significantly in the adjusted proforma.

Quick Reference Guide

Higher Density Residential Districts

Financing figures were initially set at conservative rates to reflect the difficulty a developer might experience in finding money for a project in such a vacancy-challenged area. TheZONING permanent mortgage loan began at a baseline of 6% interest overFORM 30 years with a 1.5 debt coverage ratio.

These figures were based upon a lengthy search of online DISTRICT TYPICAL PLAN/BUILDING TYPICAL BUILDING DIMENSIONAL STANDARDS real estate articles, which generally agreed that an exact median interest rate andFront: debtAllowable service ratio were impossible to calculate, but that 5.5% interest and 1.3 coverage Min. Lot Width 16 ft. were setback range determined by and 8% financing.

Multi-Family: Min. Lot Area 1,440 sq. ft. common. The same was true with construction loan figures, which were set at an 80% coverage RM-1 setback of abutting lots Min. Lot

Side Yard 12’

Detached

Min. Open Area

Semi-Detached

Attached

Attached

Permitted Building Type: Detached; SemiDetached; Attached

Semi-Detached

Intermediate 30%; Corner Lot 20% Min. Front Contextual Based on setback of abutting lots Setback Lot Single or Two-Fam, Uses permitted as of right: Single-Family; TwoLine Min. Side Yard Detached or SemiFamily; Multi-Family*; Passive Recreation; Family Detached: 5 ft. per Width Day Care; Religious Assembly; Safety Services; yard Transit Station; Community Garden; Market or Multi-Fam, Detached: Community-Supported Farm The physical building parameters meet with all RM-2 zoning code regulations.See Astable mentioned, 1701 N 33rd St is currently zoned as lower-density RSA-5 housing, 5however ft. per yardthe or 8 ft. Corner Lot Usesis requiring exceptionfor approval: lot beingspecial operated low-quality commercial use.

Additonally, the property adjacent to 1701 N 33rd on the north side is also zoned as RSA-5 but is currently being operatRear Rear Group Living; Personal Care Home; Single-Room Multi-Fam SemiedResidence; as RM-4 higher density this, it should not be an issue to gain a zoning varience to develop the lot as RM-2. (seeConsidering table) (see table) Active Recreation; Group Dayresidential.

Care; Detached: 12 ft. *Min. of 360 sq.ft. of lot area is required per dwelling Educational Facilities; Fraternal Organization; unit for the first 1,440 sq. ft. of lot area, and 480 sq.

Min. Rear Yard The greater of 9 ft. or Single or Twoft. of lot area per dwelling unit thereafter Hospital; Libraries and Cultural Exhibits; Utilities 20% of Lot Depth Depth Family: and Services, basic; Wireless Service Facility Side Yard 5’ Max. Height 38 ft.

Width 16’

RM-2 Permitted Building Type: Detached; SemiDetached; Attached; Multiple Buildings on a Lot Uses permitted as of right: Single-Family; TwoFamily; Multi-Family; Passive Recreation; Family Day Care; Religious Assembly; Safety Services; Transit Station; Community Garden; Market or Community-Supported Farm Uses requiring special exception approval: Group Living; Personal Care Home; Single-Room Residence; Active Recreation; Group Day Care; Educational Facilities; Fraternal Organization; Hospital; Libraries and Cultural Exhibits; Utilities and Services, basic; Wireless Service Facility

RM-3 Permitted Building Type: Detached; SemiDetached; Multiple Buildings on a Lot

FAR =

Min Wid . Lot th 5 Str 0’ ee tC en ter line

Rear 3/4 H

70 H

Side Yard 3/4 H Front 3/4 H

Min. Lot Width

50 ft.

Min. Lot Area

15,000 sq. ft.

Min. Open Area Min. Front Setback

NA Scaled to building height, measured from St. Centerline

Min. Side Yard Width

Scaled to building height

Min. Rear Yard Depth

Scaled to building height

Max. FAR

70% of Lot area

Min. Lot Width

50 ft.

Min. Lot Area

10,000 sq. ft.

Min. Open Area

50%

*indicates immediate proximity to project site

Inputs and Initial Assumptions market study

1/1 Apartment

2/1 Rowhome

3/1 Rowhome

N 25th St (Strawberry Mansion)

29th & Dauphin St (Strawberry Mansion)

1303 N 29th St (Brewerytown)

source: craigslist

source: craigslist

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

850

$595.00

newly renovated access to yard access to basement porch full kitchen

900

$600.00

cat friendly

1,632

$1,250.00

hardwood floors recently renovated in-unit laundery street parking patio fenced yard

rent/sqft

$0.77

rent/sqft

While average rents and unit square footages of multi-family apartment buildings are difficult to precisely calculate due to the dominance of row houses in East Fairmount Park neighborhoods, a market study did yield a general outlook.

Perhaps most important was the exposure of a sharp contrast in rents and unit size within just a few blocks of 1701 N 33rd St. To the north and east, a vacancy-challenged landscape garners lower rents and tends to offer more one- and two-bedroom units. Just across the rail corridor to the south much higher rents are being claimed, and there exists a higher concentration of three-bedroom units.

It is noteworthy that many of the ads for lower Strawberry Mansion rental units described the area as “up and coming,” a statement echoed on Philadelphia real estate blogs such as NakedPhilly.com. If the development trend continues north towards the project site, rents at 1701 N 33rd will rapidly become more comparable to what currently exist in Brewerytown.

rent/sqft

$0.67

1/1 Rowhome Apartment

2/1 Rowhome Apartment

3/1 Rowhome

3207 Turner St (Strawbery Mansion)*

1730 N 25th St (Strawberry Mansion)

1246N 30th St (Brewerytown)

source: zillow.com

source: zillow.com

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

375

$750.00

newly renovated wood flooring private parking basement storage rear yard across from fairmount park

581

$680.00

small lawn on-street parking forced-air heating hardwood + tile flooring

1,200

$1,200.00

newly renovated stainless steel appliances in-unit laundery basement central air near fairmount park

rent/sqft

$1.00

rent/sqft

$2.00

rent/sqft

$1.17

1/1 Rowhome Apartment

2/1 Rowhome Apartment

3/1.5 Rowhome

3214 W Diamond St (Strawberry Mansion)

1733 N 33rd St. (Strawberry Mansion)*

3036 W Stiles St (Brewerytown)*

source: zillow.com

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

700

$580.00

cat friendly kitchen appliances large bedroom

900

$750.00

granite counters stainless steel appliances wood flooring in-unit washer + dryer across from fairmount park

2,070

$1,280.00

large bedrooms in-unit laundery new kitchen renovated bathroom patio near fairmount park

rent/sqft

$0.62

rent/sqft

$0.83

rent/sqft

$0.83

1/1 Rowhome Apartment

2/1 Rowhome Apartment

3/1 Apartment

1556 N 29th St (Strawberry Mansion)

1749 N 33rd St (Strawberry Mansion)*

2711 W Girard Ave (Brewerytown)

source: zillow.com

source: zillow.com

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

574

$550.00

shared laundery hardwood + tile flooring small lawn

900

$775.00

granite counters stainless steel appliances wood flooring in-unit washer + dryer across from fairmount park

1,000

$1,195.00

in-unit laundery fireplace hardwood flooring

rent/sqft

$1.20

rent/sqft

The unit mix of 10 one-bedrooms, 5 two-bedrooms and 5 three-bedrooms is based the market study’s showing of strong demand for one-bedroom and two-bedroom units in Strawberry Mansion. Lease advertising will target the large cadre of young, single professionals currently seeking to live in the Brewerytown area but who may have difficulty finding new housing at a price they can afford. The three-bedroom units will be renting out to young families attracted to park activities but still wanting to remain within reach of the vibrant Girard commercial corridor and Center City.

$0.70

$0.96

rent/sqft

$0.86

1/1 Rowhome Apartment

2/1 Mixed-use Apartment

3/1 Rowhome

2826 W Girard Ave (Brewerytown)

2711 N Girard Ave (Brewerytown)

2929 W Girard Ave (Brewerytown)

source: zillow.com

source: zillow.com

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

750

$650.00

pet friendly hardwood flooring shared laundery heat included

1,100

$1,245.00

on Girard Ave walk to retail + cafes on trolley + bus line

1,550

$1,200.00

hardwood floors pet friendly in-unit laundery central cooling valuted ceiling

rent/sqft

$1.13

rent/sqft

$0.77

rent/sqft

$0.87

1/1 Rowhome Apartment

2/1 Mixed-use Apartment

3/1 Apartment

939 N 29th St (Brewerytown)

1238 N Girard Ave (Brewerytown)

Thompson & N 29th St (Brewerytown)

source: zillow.com

source: zillow.com

source: zillow.com

sq ft

rent

amenities

sq ft

rent

amenities

sq ft

rent

amenities

?

$975.00

newly renovated pet friendly shared laundery central cooling hardwood flooring

1,000

$1,075.00

fronts Girard Ave on trolley + bus line in-unit laundery central A/C cooling finished basement wood + tile flooring

1,100

$1,250.00

pet friendly hardwood flooring tile flooring vaulted ceiling storage

rent/sqft

$1.08

rent/sqft

$1.14

rent/sqft

avg sq ft avg rent 650 $683.33

avg rent/sq ft $1.05

avg sq ft 897

avg rent $854.17

avg rent/sq ft $0.95

avg sq ft avg rent 1,425 $1,229.17

avg rent $0.86

Inputs and Initial Assumptions area development outlook

The major assumption for this project is that the neighborhoods surrounding the project site will experience a significant improvement in average rents within the next five years, corresponding to an influx of development money that is rapidly moving towards the project site from Girard Avenue and Brewerytown to the south.

active development trajectory BREWERYTOWN -> FAIRMOUNT PARK project site NEW RENTAL HOUSING 1701 N 33RD ST MILLENIUM GLOBAL DEVELOPMENT PARTNERS

EXTRA-WIDE HOME 3039-41 BALTZ M&M PARTNERS

STARTUP INCUBATION (PROPOSED) 33 & OXFORD KESLER+MACDONALD

EXTRA-WIDE HOME 3013-15 BALTZ M&M PARTNERS

SALON -> DUPLEX 871 N 29TH ST UNKNOWN

PUB --> SMALL OFFICE W/ 2 UNIT APT. 1218 N 30 ST M&M PARTERS

8-UNIT APT. 30 & BALZTZ (EXPECTED) M&M PARTERS

CHURCH --> 16 UNIT APT. (EXPECTED) 2701 GIRARD UNKNOWN

4-STORY MIXED USE (EXPECTED) 27 & GIRARD M&M PARTNERS+AMERICAN DEV CO.

NEW BUSINESSES, BUILDINGS, REHABS 2011 - NEAR FUTURE

proposed development residential + mixed use

ELO PME NT TRA JECT ORY

FAIRMOUNT PARK

DEV

commercial + retail

BREWERYTOWN

GIRARD CO

MMERCIAL

CORRIDOR

0

nature center 1703 N 33RD ST AUDUBON SOCIETY

COLTRANE HOUSE 1511 N 33RD UNKNOWN

BOTTOM DOLLAR GROCERY 31 & GIRARD SOLOFF REALTY & DEV.

iMUNCH CAFE 31 & BALTZ STEPH-SIN DEV.

RYEBREW SANDWICHES 2816 W GIRARD UNKNOWN

HIGH POINT CAFE 2831 W GIRARD M&M PARTNERS

SHIFTY’S TACOS 2730 W GIRARD M&M PARTNERS

COLOR WHEEL BIKE SHOP 2711 W GIRARD M&M PARTNERS

GARDEN SUPPLY 2710 W GIRARD M&M PARTNERS

500 ft

Inputs and Initial Assumptions upcomming community changes

Building upon this development trend, the city of Philadelphia has shown interest in overcoming the challenged history of East Fairmount Park neighborhoods by realizing the Park’s potential as a regional draw. A plan is already underway to open one of the park’s reservoirs as a publicly accessible wildlife nature refuge complete with a Learning Center Activity building, located directly across our proposed project site.

The changes to the park and influx of development interest will result in the widespread renovation of poorly upkept housing stock around the project site. Also, many of the vacant lots that that currently dot the landscape around the project site will be developed, leading to an entirely new perception of the East Fairmount Park neighborhood in coming years.

Learning Center Activity Building (concept drawing) activity building

1701 n 33rd st

Proposed Building and Site Plans

fairmount park

Additionally, the 1701 n 33rd st is zoned as RSA-5, lower-density housing, but is currently being operated as an automotive repair facility. Our proposal to develop the parcel as rental housing that meets RM-2 zoning standards is closer to the existing zoning code and in line with the city’s vision for a family-friendly park front. For these reasons it is possible that the city may be willing to help subsidize certain elements of the project, such as land purchase, legal fees, and permits.

Proforma Analysis baseline

Concept, Assumptions, and Baseline Data

Concept, Assumptions, and Baseline Data

Item Concept

Source

Unit

Source #

Mo. Rent

Item

Land

1 bedroom

10

747

Concept Plan

Rents &

1-bedroom Market

10

$680

Market Study

2 bedroom

5

855

Concept Plan

income

2-bedroom Market

5

$850

Market Study

Cons

3 bedroom

5

1045

Concept Plan

3-bedroom Market

5

$1,425

Market Study

Cons

20

16,970

Calculated from above

Retail or Other Income

0

$0.00

Market Study

Cons

Concept Plan

Rent Inflation Factor

3%

Market Study

Perm

15% 5%

Market Study Market Study

►Cash ►Total

5%

Market Study

►Net rentable space(sqft) Common area ►Total Constructed Space Parking spaces Land

Item

Size (sqft)

#

Parcel size (sqft) Cost (per sqft) ►Total Land Cost

1,544 18,514 22

Calculated from above Concept Plan

Addit Vacancy Rates

18,700 $40.00 $350,000

Year 1 Year 2 Thereafter

Landowner Expenses

CA Utilities

$3,785

Exchange reports

Hard

Site Clearance & Remediation

$20,000

Construction Engineer

Property Taxes

$4,690

BRT

Costs

Grading and Site Preparation

$2,000

Construction Engineer

Maintenance

$26,694

Exchange reports

Construction Estimator

Maintenance Reserve

$10,905

5% gross rent

$3,303,828

Sum of Above

Insurance

Per Space parking Cost

$5,000

Similar Project

Management

$21,810

10% gross rent, biggerpockets.com

►Parking Cost (total)

$110,000

Sum of Above

Other/Contingency

$25,000

common sense estimate

Concept

►Total Expenses

Sum of Above

►per unit

Construction Cost (per sqft) ►Construction Cost (total)

Landscaping ►Total Hard Costs

$177

$25,000 $3,438,828

Soft

Architecture & Engineering Fees

$265,120

8% of Const. Costs

►as share of rent

Costs

Legal Fees

$100,000

Research

Expense Inflation factor

$50,000

City Hall

$0

Estimate

Permits Pre-leasing Contingencies ►Total Soft Costs ►Total Development Costs

$343,883 $759,003 $4,547,831

Tax Info

10% of Hard Costs, above Sum of Above

IRS Deprec. Basis/UL

Land+Hard+Soft

Depreciable Personal Property/unit

6.00%

Lender

30

Lender

►Personal Property Depreciation

Debt-coverage ratio

1.5

Lender

►Financing Amortization

3

Lender

Annual Passive Loss Limit

= PMT(rate,term,-1)

Marginal Tax Rate

►Supportable Mortgage ►Yearly Debt Service Construction

►Fees and Point Costs Hard Costs

Lending

% financed ►Construction Loan Amount Interest rate Term (months) Drawdown Factor ►Construction Interest Fees ►Construction Fees

$1,014,552 $73,706 $30,436.57 $3,438,828 80% $2,751,062.54 8.00% 12 0.55 $121,047 3% $82,532

Calculated from P.3 Market Study TDC-Land

Term

$110,559

3%

27.5 $152,648

Interest Rate

►Stabilized NOI (year 2)

46%

Sum of Above Total Expenses /# of units

$4,197,831

Financing

.072648911

$99,856 $4,992.80

$2,364

20% yearly average unit rent

$47,280 7

Pers.Property/unit * units IRS

$6,754.29 $1,015 $0 0.370

Disco

Exchange reports

Useful Life (years) ►Annual Depreciation Deduc.

Permanent

►Mortgage Constant

$6,972

Depreciable Basis

►Personal Property Amount Personal Property Life

Fees and Points

Soft C

Property/UL Mortg. Points/Term Investor Fed + State - Interaction

from page 3 =NOI/(DCR*MC)

Sale

Sales Cap Rate

= Mortgage * MC

& Reversion

Selling Costs

Points * Mortgage from above

Info

Capital Gains Tax Rate Discount (Hurdle) Rate

0.07 6% 15% 10%

Market Study Industry standard IRS Developer-Investor Requirement

Lender Hard costs * % financed Lender Constr. Schedule Lender Loan*Rate*Term*DDF Lender Constr. Loan * Fees

Sour

Sourc

Perm

Inves

Version 1

Proforma Analysis baseline

Development Accounts Item

Operating Accounts

Year -1

Year 0

Year 1

Year 2

Year 3

Year 4

Year 27

Year

Land Purchase Price

$350,000

Gross Scheduled Rent

$218,100

$224,643

$231,382

$238,324

$470,353

$484,

Study

Soft Costs (incl. Synd.)

$759,003

- Vacancy Adjustment

($32,715)

($11,232)

($11,569)

($11,916)

($23,518)

($24,2

Study

Construction Loan Fees

$82,532

+ Other Income

$0

$0

$0

$0

$0

$0

Study

Construction Loan Cash In

$687,766

Study

Construction Interest Costs

Study

Permanent Loan Points ►Cash In This Year ►Total Cash In

$1,879,300 $1,879,300

Effective Gross Income

$185,385

$213,411

$219,813

$226,408

$446,835

$460,

$121,047

- Expenses

($99,856)

($102,852)

($105,937)

($109,115)

($215,349)

($221

$30,437

Net Operating Income

$85,529

$110,559

$113,876

$117,292

$231,486

$238,

$1,736,510

- Yearly Debt Service

$73,706

$73,706

$73,706

$73,706

$73,706

$73,7

$1,887,994 $3,767,294

BTCF (Cash Throw-off) + Tax Shelter

$11,823 ($50,226)

$36,853 ($40,681)

$40,170 ($39,152)

$43,586 ($37,568)

$157,780 $20,623

$164, $52,7

$62,048

$77,534

$79,322

$81,154

$137,157

$112

Additional Cash-in (Cash-out) at Take-out

Study Study

Cash Accounts

After Tax Cash Flow

Study

Discounted Cash-flow Summary

ge reports

ge reports Accounts

Operating Accounts

s rent Year -1 ge reports $350,000

Year 0

Taxable Income Accounts

for Sale in Year

Cash Accounts

IRR

Year 1

#NUM!

Year 2Year 1-40%

Gross Scheduled Rent

Year 3$218,100 -28%

- Vacancy Adjustment

Year 4($32,715) -21%

n sense$82,532 estimate

+ Other Income

Year 5$0

Above $687,766 xpenses /# of units

Effective Gross Income

Year 6$185,385 -13%

$121,047

- Expenses

Year 7($99,856) -11% Year 8$85,529-9% Year 9$73,706-7%

ss rent, biggerpockets.com $759,003

ted from P.3

$30,437

Net Operating Income

Study

$1,736,510

- Yearly Debt Service

$1,879,300 nd $1,879,300

$1,887,994 $3,767,294

BTCF (Cash Throw-off) + Tax Shelter

Year 11($50,226) -5%

$11,823

$36,853

$40,170

$43,586

$157,780

$164,

+ Principal Amortization

$12,833

$13,603

$14,419

$15,284

$58,382

$61,8

($159,403) Year 28 ($1,015) $484,463

Year($159,403) 29 ($1,015) $498,997

Year($159,403) 30 ($1,015) $513,967

($159,403)

($159,403)

($83,0

($1,015)

($1,015)

($1,01

$0 ($24,950) $0 ($109,961)

$0 ($25,698) $0 ($105,828)

$0

$0

$0

($101,547)

$55,745

$142,

($40,681) $474,047

($39,152) $488,269

($37,568)

$20,623

$52,7

($228,463)

($235,317)

$238,431 $135,761 $73,706 $135,761 $164,725

$245,584 $109,961 $73,706 $245,723 $171,878

$252,951 $105,828 $73,706 $351,551 $179,245

$101,547

($55,745)

($142

$453,098

$1,155,874

$1,01

$0 $84,981 $0 $86,896 $245,723

$0 $89,163 $0 $90,082 $351,551

$0

$0

$0

$0 $453,098

$0 $1,155,874

$0 $1,01

($2,499,477.21) Year 2 ($2,484,268.59) $224,643

Year 3- Depreciation Year 4 - Fees & Points Amortization $231,382 $238,324

Year 27

($2,471,081.37) ($11,232) ($2,459,687.92) $0

- Pre-leasing ($11,916) ($11,569) $0 Taxable Income $0 (Loss)

($23,518) $0

$0($24,223) ($135,761) $0

($2,449,885.06) $213,411 ($2,441,491.50) ($102,852)

Tax Due (Shelter) $219,813 $226,408

$446,835

($50,226) $460,240

($2,433,954.92) $110,559 ($2,427,592.72) $73,706 ($2,422,266.67) $36,853

After Tax Cash Flow

Year 12$62,048 -4% Year 13 -3%

Taxable Income Accounts

Year 14

-2%

($2,409,057.13)

+ Principal Amortization

Year 15$11,823-2% Year 16$12,833-1%

($2,407,315.82) $36,853 ($2,406,048.64) $13,603

($2,499,477.21)

- Depreciation

Year 17($159,403) -1%

($2,484,268.59)

- Fees & Points Amortization

Year 18($1,015)0%

($2,405,194.89) ($159,403) ($2,404,700.73) ($1,015)

($2,471,081.37)

- Pre-leasing

Year 19$0

($2,459,687.92)

Taxable Income (Loss)

Year 20($135,761) 0%

($2,449,885.06)

Tax Due (Shelter)

Year 21($50,226) 1%

operty/unit r IRR * unitsNPV

Cash Throw-off (BTCF)

1 #NUM! 2y/UL -40% 3Points/Term -28%

($2,748,209.08)

4 -21% 5ate - Interaction -17%

6 -13% Study 7 -11% 8standard -9%

Year 10$11,823-6%

Cash Throw-off (BTCF)

($2,748,209.08)

($2,417,853.70) ($40,681) ($2,414,244.26) $77,534 ($2,411,340.95)

. Basis/UL

yrly average unit rent

-17%

NPV

($2,441,491.50) ($2,433,954.92)

Adjustments to Taxable Income

0%

($215,349) ($109,115) ($105,937) Adjustments to $117,292 Taxable Income $231,486 $113,876 Current Period$73,706 Taxable Loss (Income) $73,706 $73,706 $157,780 $20,623

Losses Taken $81,154 This Year $79,322 Total Carryforward

$137,157

$0$52,725 $0$112,000 $135,761

$40,170

$157,780

$164,725

Key Operating $14,419 $15,284 Schedules $58,382 Mortgage Amortization ($159,403) ($159,403) ($159,403)

$171,878

$179,245

$61,885 Year 1 ($83,078)

$65,598 Year 2 ($6,754)

$69,534 Year 3 ($6,754)

Year 4

Year 27

Year

Beginning Balance ($1,015) ($1,015) $0 Yearly Debt Service $0

$1,014,552 ($1,015) $73,706 $0

$1,001,719 ($1,015) $0 $73,706

$988,116 ($1,015) $0 $73,706

$973,697

$255,399

$197,

$73,706

$73,706

$73,7

$60,873 $142,517 $12,833 $52,725

$60,103 $229,707 $13,603 $84,981

$59,287 $241,011 $14,419 $89,163

$58,422

$15,324

$11,8

$15,284

$58,382

$61,8

$958,413

$197,017

$135,

Interest ($105,828) Principle ($39,152)

$43,586

($101,547)

Year 22

1%

Year 23

1%

($2,406,130.85) ($2,406,962.45) $109,961 ($2,407,915.01) $245,723 ($2,408,968.43) $0

Building Depreciation $105,828 $101,547 Beginning Basis $351,551 $453,098

($2,410,105.01) $0 ($2,412,927.39) $245,723 ($2,417,127.71) ($2,421,102.56)

$0 Ending Balance $351,551 $453,098

Current Period Taxable Loss (Income) Cummulative Taxable Loss

Year 24$135,761 1% Year 25$135,761 1%

1

-5%

($2,417,853.70)

Annual Passive Loss Limit

Year 26$0

2%

2 3

-4% -3%

($2,414,244.26) ($2,411,340.95)

Losses Taken This Year Total Carryforward

Year 27$0

2%

4

-2%

($2,409,057.13)

5 6

-2% -1%

($2,407,315.82) ($2,406,048.64)

Key Operating Schedules

7

-1%

($2,405,194.89)

Mortgage Amortization

8

0%

($2,404,700.73)

9

0%

($2,404,518.39)

0%

($2,404,605.58)

Sources Yearly Debt Service Permanent Mortgage Interest

$73,706

0

1

1%

($2,404,924.83)

Investor's Equity Principle

$12,833

Year 28$135,761 2% Year 29 Year 30

2% 2%

($37,568) Ending Balance

$0

($1,015) $0 $55,745 $20,623

$1,001,719 ($55,745) $1,155,874

Current Depreciation Claimed $0 $0 Cummulative$0 Depreciation Claimed $0 $1,155,874

Year 2

$1,014,552

$1,001,719

$60,873

$73,706 $1,014,552.20 $60,103 $3,767,293.99 $13,603

($142,517) $4,197,831 $1,013,357 $152,648 $0 $152,648 $0 $4,045,183 $1,013,357

$988,116

$973,697

($229,707) $4,045,183 $783,650

($241,011) $3,892,534 $542,640

$3,739,886

$228,973

$76,3

$0 $152,648 $0 $305,297

$0 $152,648 $0 $457,945

$152,648

$152,648

$76,3

$610,594

$4,121,507

$4,19

$3,892,534 $783,650

$3,739,886 $542,640

$3,587,237

$76,324

$0

Personal Property Beginning Basis

Year 1

($221,809)

Cummulative$43,586 Taxable Loss $40,170 Annual Passive Loss Limit ($37,568) ($39,152)

($2,404,924.83) ($40,681) ($2,405,443.02)

9 -7% ($2,427,592.72) 0er-Investor -6%Requirement ($2,422,266.67)

Sources and Uses Beginning Balance

($2,404,518.39) $0 ($2,404,605.58) ($109,961)

$470,353

$40,526

$33,771

$27,017

$0

$0

Depreciation Year Current 3 Year 4 Claimed Year 27 Cummulative$973,697 Depreciation Claimed $988,116 $255,399

$47,280 $6,754 Year 28 $6,754 $197,017

Year$6,754 29 $13,509 $135,132

Year$6,754 30 $20,263 $69,534

$6,754 $27,017

$6,754 $47,280

$6,75 $47,2

Ending Balance $73,706 $73,706

$73,706

$40,526 $73,706

$33,771 $73,706

$27,017 $73,706

$20,263

$0

$0

$59,287 $58,422 Fees and Points$15,284 Amortization $14,419

$15,324

$11,821

$8,108

$4,172

$58,382

$61,885

$65,598

$69,534

8 9 9 0

-9% -7% -7% -6%

($2,433,954.92) ($2,427,592.72) ($2,427,592.72) ($2,422,266.67)

0 1 1 2 2 3 3 4

-6% -5% -5% -4%

($2,422,266.67) ($2,417,853.70) ($2,417,853.70) ($2,414,244.26)

($2,414,244.26) ($2,411,340.95) ($2,411,340.95) ($2,409,057.13) ($2,409,057.13) ($2,407,315.82)

-4% -3% -3% -2% -2%

4 5 6 5 6 7

-1% -2% -1% -1%

7 8 8 9

-1% 0% 0%

9 0 0 1

0% 0% 1%

1 2 2 3 3 4

Adjustments to Taxable Current Period TaxableIncome Loss (Income) Current PeriodTaxable TaxableLoss Loss (Income) Cummulative

$135,761 $135,761

$109,961 $109,961 $245,723

$105,828 $105,828 $351,551

$101,547 $101,547 $453,098

($55,745) ($55,745) $1,155,874

($142,517) ($142,517) $1,013,357

($229,707) ($229,707) $783,650

($241,011) ($241,011) $542,640

Cummulative Loss Annual PassiveTaxable Loss Limit Annual Passive Loss Limit Losses Taken This Year

$135,761 $0 $0

$245,723 $0 $0

$351,551 $0 $0

$453,098 $0 $0

$1,155,874 $0 $0

$1,013,357 $0 $0

$783,650 $0 $0

$542,640 $0 $0

Losses Taken This Year Total Carryforward Total Carryforward

$0 $135,761 $135,761

$0 $245,723 $245,723

$0 $351,551 $351,551

$0 $453,098 $453,098

$0 $1,155,874 $1,155,874

$0 $1,013,357 $1,013,357

$0 $783,650 $783,650

$0 $542,640 $542,640

Year 1 Year 1 $1,014,552 $1,014,552 $73,706

Year 2 Year 2 $1,001,719 $1,001,719 $73,706

Year 3 Year 3 $988,116 $988,116 $73,706

Year 4 Year 4 $973,697 $973,697 $73,706

Year 27 Year 27 $255,399 $255,399 $73,706

Year 28 Year 28 $197,017 $197,017 $73,706

Year 29 Year 29 $135,132 $135,132 $73,706

Year 30 Year 30 $69,534 $69,534 $73,706

$73,706 $60,873 $60,873 $12,833

$73,706 $60,103 $60,103 $13,603

$73,706 $59,287 $59,287 $14,419

$73,706 $58,422 $58,422 $15,284

$73,706 $15,324 $15,324 $58,382

$73,706 $11,821 $11,821 $61,885

$73,706 $8,108 $8,108 $65,598

$73,706 $4,172 $4,172 $69,534

$12,833 $1,001,719 $1,001,719

$13,603 $988,116 $988,116

$14,419 $973,697 $973,697

$15,284 $958,413 $958,413

$58,382 $197,017 $197,017

$61,885 $135,132 $135,132

$65,598 $69,534 $69,534

$69,534 ($0) ($0)

$4,197,831 $4,197,831 $152,648 $152,648

$4,045,183 $4,045,183 $152,648 $152,648 $305,297

$3,892,534 $3,892,534 $152,648 $152,648 $457,945

$3,739,886 $3,739,886 $152,648 $152,648 $610,594

$228,973 $228,973 $152,648 $152,648 $4,121,507

$76,324 $76,324 $76,324 $76,324 $4,197,831

$0 $0 $0 $0 $4,197,831

$0 $0 $0 $0 $4,197,831

$152,648 $4,045,183 $4,045,183

$305,297 $3,892,534 $3,892,534

$457,945 $3,739,886 $3,739,886

$610,594 $3,587,237 $3,587,237

$4,121,507 $76,324 $76,324

$4,197,831 $0 $0

$4,197,831 $0 $0

$4,197,831 $0 $0

Cummulative Depreciation Claimed Current Depreciation Claimed Cummulative Depreciation Claimed Ending Balance

$47,280 $47,280 $6,754 $6,754 $6,754 $40,526

$40,526 $40,526 $6,754 $13,509 $6,754 $13,509 $33,771

$33,771 $33,771 $6,754 $20,263 $6,754 $20,263 $27,017

$27,017 $27,017 $6,754 $27,017 $6,754 $27,017 $20,263

$0 $0 $6,754 $47,280 $6,754 $47,280 $0

$0 $0 $6,754 $47,280 $6,754 $47,280 $0

$0 $0 $6,754 $47,280 $6,754 $47,280 $0

$0 $0 $6,754 $47,280 $6,754 $47,280 $0

Ending Balance

$40,526

$33,771

$27,017

$20,263

$0

$0

$0

$0

$30,437 $30,437 $1,015

$29,422 $29,422 $1,015

$28,407 $28,407 $1,015

$27,393 $27,393 $1,015

$4,058 $4,058 $1,015

$3,044 $3,044 $1,015

$2,029 $2,029 $1,015

$1,015 $1,015

$1,015 $1,015 $29,422

$1,015 $2,029 $2,029 $28,407

$1,015 $3,044 $3,044 $27,393

$1,015 $4,058 $4,058 $26,378

$1,015 $27,393 $27,393 $3,044

$1,015 $28,407 $28,407 $2,029

$1,015 $29,422 $29,422 $1,015

$1,015 $30,437 $30,437 $0

$29,422

$28,407

$27,393

$26,378

$3,044

$2,029

$1,015

$0

Year 2 Year 2 $110,559

Year 3 Year 3 $113,876

Year 4 Year 4 $117,292

Year 27 Year 27 $231,486

Year 28 Year 28 $238,431

Year 29 Year 29 $245,584

Year 30 Year 30 $252,951

$1,221,843 ($73,311) ($73,311) ($1,001,719)

$110,559 $1,579,417 $1,579,417 ($94,765) ($94,765) ($988,116)

$113,876 $1,626,799 $1,626,799 ($97,608) ($97,608) ($973,697)

$117,292 $1,675,603 $1,675,603 ($100,536) ($100,536) ($958,413)

$231,486 $3,306,948 $3,306,948 ($198,417) ($198,417) ($197,017)

$238,431 $3,406,156 $3,406,156 ($204,369) ($204,369) ($135,132)

$245,584 $3,508,341 $3,508,341 ($210,500) ($210,500) ($69,534)

$252,951 $3,613,591 $3,613,591 ($216,815) ($216,815) $0

($1,001,719) $146,813 $146,813 $513,440.61

($988,116) $496,535 $496,535 ($455,606)

($973,697) $555,494 $555,494 ($440,889)

($958,413) $616,654 $616,654 ($425,330)

($197,017) $2,911,514 $2,911,514 $228,950

($135,132) $3,066,655 $3,066,655 $275,764

($69,534) $3,228,306 $3,228,306 $324,629

$0 $3,396,776 $3,396,776 $375,620

$513,440.61 ($29,422.01) ($29,422.01) $630,832

($455,606) ($28,407) ($28,407) $980,549

($440,889) ($27,393) ($27,393) $1,023,776

($425,330) ($26,378) ($26,378) $1,068,362

$228,950 ($3,044) ($3,044) $2,685,607

$275,764 ($2,029) ($2,029) $2,792,919

$324,629 ($1,015) ($1,015) $2,904,692

$375,620 ($0) ($0) $3,021,155

$630,832

$980,549

$1,023,776

$1,068,362

$2,685,607

$2,792,919

$2,904,692

$3,021,155

$1,221,843 $1,221,843 ($73,311)

$1,579,417 $1,579,417 ($94,765)

$1,626,799 $1,626,799 ($97,608)

$1,675,603 $1,675,603 ($100,536)

$3,306,948 $3,306,948 ($198,417)

$3,406,156 $3,406,156 ($204,369)

$3,508,341 $3,508,341 ($210,500)

$3,613,591 $3,613,591 ($216,815)

($73,311) ($350,000) ($350,000) ($4,045,183)

($94,765) ($350,000) ($350,000) ($3,892,534)

($97,608) ($350,000) ($350,000) ($3,739,886)

($100,536) ($350,000) ($350,000) ($3,587,237)

($198,417) ($350,000) ($350,000) ($76,324)

($204,369) ($350,000) ($350,000) $0

($210,500) ($350,000) ($350,000) $0

($216,815) ($350,000) ($350,000) $0

- Loss Remaining Personal Property Carryforward - Loss Carryforward Taxable Gain

($4,045,183) ($40,526) ($40,526) ($135,761) ($135,761) ($3,422,937)

($3,892,534) ($33,771) ($33,771) ($245,723) ($245,723) ($3,037,377)

($3,739,886) ($27,017) ($27,017) ($351,551) ($351,551) ($2,939,263)

($3,587,237) ($20,263) ($20,263) ($453,098) ($453,098) ($2,835,531)

($76,324) $0 $0 ($1,155,874) ($1,155,874) $1,526,333

$0 $0 ($1,013,357) ($1,013,357) $1,838,430

$0 $0 ($783,650) ($783,650) $2,164,190

$0 $0 ($542,640) ($542,640) $2,504,136

Taxable Gainon Gain Tax (Shelter) Tax (Shelter) on Gain

($3,422,937) ($513,441) ($513,441)

($3,037,377) ($455,606) ($455,606)

($2,939,263) ($440,889) ($440,889)

($2,835,531) ($425,330) ($425,330)

$1,526,333 $228,950 $228,950

$1,838,430 $275,764 $275,764

$2,164,190 $324,629 $324,629

$2,504,136 $375,620 $375,620

Proforma Analysis baseline

($2,406,048.64) ($2,407,315.82) ($2,406,048.64) ($2,405,194.89) ($2,405,194.89) ($2,404,700.73)

Key Operating Schedules

Key Operating Mortgage AmortizationSchedules Mortgage Amortization Beginning Balance

($2,404,700.73) ($2,404,518.39) ($2,404,518.39) ($2,404,605.58)

Beginning Yearly DebtBalance Service Yearly InterestDebt Service

1% 1% 1%

($2,404,605.58) ($2,404,924.83) ($2,404,924.83) ($2,405,443.02)

Interest Principle Principle Ending Balance

($2,405,443.02) ($2,406,130.85) ($2,406,130.85) ($2,406,962.45)

Ending Balance

4 5 5 6

1% 1% 2%

($2,406,962.45) ($2,407,915.01) ($2,407,915.01) ($2,408,968.43)

6 7 7 8

2% 2%

($2,408,968.43) ($2,410,105.01) ($2,410,105.01) ($2,412,927.39)

Current Depreciation Claimed Cummulative Depreciation Claimed Cummulative Depreciation Claimed Ending Balance

8 9 9 0 0

2% 2% 2%

($2,412,927.39) ($2,417,127.71) ($2,417,127.71) ($2,421,102.56) ($2,421,102.56)

Ending Balance

$1,014,552.20 $1,014,552.20 $3,767,293.99 $3,767,293.99 $4,781,846.19

Building Depreciation Building Depreciation Beginning Basis Beginning Basis Current Depreciation Claimed

Personal Property Personal Property Beginning Basis Beginning Basis Current Depreciation Claimed

Fees and Points Amortization Fees and Points Amortization Beginning Basis

$4,781,846.19

Beginning Basis Current Amortization Current Amortization Cummulative Amortization

$350,000.00 $350,000.00 $759,002.82

Cummulative Amortization Ending Balance Ending Balance

$759,002.82 $3,438,828.18 $3,438,828.18 $82,531.88 $82,531.88 $121,046.75 $121,046.75 $30,436.57 $30,436.57 $0.00 $0.00 $0.00 $4,781,846.19 $4,781,846.19

Reversion (Termination) Accounts Accounts Year 1

Reversion (Termination) Cash at Sale (using Cap Rates) Cash NOIat Sale (using Cap Rates) NOI Estimated Sales Price Estimated Sales Price - Selling Costs - Mortgage Selling Costs Balance - Mortgage Balance Before Tax Cash on Sale Before TaxGains Cash Tax on Sale - Capital on Sale Gains Tax on Sale Fees - Capital Write-off of Unamortized - Write-off of Unamortized Fees After Tax Cash on Sale After Tax Cash on Sale Calculation of Taxable Gain Calculation of Price Taxable Gain Project Sale Project Price - SellingSale Costs Selling Costs - Land - Remaining Land Depreciable Basis Depreciable Basis - Remaining Personal Property

Other Adjustments at Sale Other Adjustments at SaleFees Unamortized Financing Unamortized Financing FeesFees Write-off Value of Financing Write-off Value of Financing Fees

Year 1 $85,529 $85,529 $1,221,843

- Remaining Depreciable Basis

($4,045,183)

($3,892,534)

($3,739,886)

($3,587,237)

($76,324)

$0

$0

- Remaining Personal Property

($40,526)

($33,771)

($27,017)

($20,263)

$0

$0

$0

$0

- Loss Carryforward

($135,761)

($245,723)

($351,551)

($453,098)

($1,155,874)

($1,013,357)

($783,650)

($542,640)

Taxable Gain

($3,422,937)

($3,037,377)

($2,939,263)

($2,835,531)

$1,526,333

$1,838,430

$2,164,190

$2,504,136

Tax (Shelter) on Gain

($513,441)

($455,606)

($440,889)

($425,330)

$228,950

$275,764

$324,629

$375,620

Year -1

Year 0

Year 1

Year 2

Year 25

Year 26

Year 27

($1,879,300)

($1,887,994)

ATCF from Operations

$62,048

$77,534

$131,161

$134,132

$137,157

$112,000

$86,896

$90,082

ATCF at Sale

$630,832

$980,549

$2,483,512

$2,582,540

$2,685,607

$2,792,919

$2,904,692

$3,021,155

Total AT Proceeds

$692,880

$1,058,083

$2,614,673

$2,716,672

$2,822,764

$2,904,919

$2,991,589

$3,111,238

Year 2

Year 25

Year 26

Year 27

Proforma Analysis

$0

baseline Other Adjustments at Sale

Unamortized Financing Fees Write-off Value of Financing Fees

Page 5: Profitability Summary Cash Flow Summary Initial Cash-in

Year 28

Year 29

Year 30

'AT Return (Operations) on Cash-in IRR and NPV Pyramid

Year 0

Year 1

Year 1 ($1,879,300)

Year -1

($1,887,994)

$692,880

Year 2 ($1,879,300)

($1,887,994)

$62,048

Year 3 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 4 ($1,879,300)

($1,887,994)

$62,048

$77,534 $77,534

Year 28

Year 29

$1,058,083

Year 5 ($1,879,300)

($1,887,994)

$62,048

Year 6 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 7 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 8 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 9 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 10 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 11 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 12 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 13 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 14 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 15 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 16 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 17 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 18 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 19 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 20 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 21 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 22 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 23 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 24 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 25 ($1,879,300)

($1,887,994)

$62,048

$77,534

Year 26 ($1,879,300)

($1,887,994)

$62,048

$77,534

$131,161

$2,716,672

Year 27 ($1,879,300)

($1,887,994)

$62,048

$77,534

$131,161

$134,132

$2,822,764

Year 28 ($1,879,300)

($1,887,994)

$62,048

$77,534

$131,161

$134,132

$137,157

$2,904,919

Year 29 ($1,879,300)

($1,887,994)

$62,048

$77,534

$131,161

$134,132

$137,157

$112,000

$2,614,673

$2,991,589

Year 30

me

0 5

orme

0

or

$0.00 $1,425 3% $0.00

Market Study Market Study

3% 15% 5% 15%

Market Study Market Study Market Study Study Market

Additional Cash-in (Cash-out) at Take-out Permanent Loan Points ►Cash In This Year (Cash-out) at Take-out Additional Cash-in ►Total In Cash ►Cash ThisInYear

$1,879,300 $1,879,300 $1,879,300

$1,887,994 $1,736,510 $3,767,294 $1,887,994

5%

Market Study

►Total Cash In

$1,879,300

$3,767,294

Proforma Analysis baseline

5% $3,785

Market Study Exchange reports

$3,785 $4,690

Exchange reports BRT

$26,694 $4,690 $10,905 $26,694

Exchange reports BRT 5% gross rent Exchange reports

$6,972 $10,905 $21,810 $6,972

Exchange reports 5% gross rent 10% grossreports rent, biggerpockets.com Exchange

$25,000 $21,810 $99,856 $25,000 $4,992.80 $99,856

Construction Loan Interest Costs Cash In Permanent Loan Points Construction Interest Costs

$121,047

$687,766

$30,437 $121,047 $1,736,510 $30,437

Discounted Cash-flow Summary Discounted Cash-flowfor Summary Sale in Year

IRR

NPV

- Expenses Effective Gross Income Net Operating Income - Expenses

($99,856) $185,385 $85,529 ($99,856)

($102,852) $213,411 $110,559 ($102,852)

($1 $21 $11 ($1

- Yearly Debt Service Net Operating Income BTCF (Cash Throw-off) - Yearly Debt Service + Tax(Cash Shelter BTCF Throw-off)

$73,706 $85,529 $11,823 $73,706 ($50,226) $11,823

$73,706 $110,559 $36,853 $73,706 ($40,681) $36,853

$73 $11 $40 $73 ($3 $40

After TaxShelter Cash Flow + Tax

$62,048 ($50,226)

$77,534 ($40,681)

$7 ($3

After Tax Cash Flow Taxable Income Accounts

$62,048

$77,534

$7

Taxable Income Accounts Cash Throw-off (BTCF)

$11,823

$36,853

$40

#NUM! IRR -40% #NUM!

($2,748,209.08) NPV ($2,499,477.21) ($2,748,209.08)

+ Principal Amortization Cash Throw-off (BTCF) - Depreciation + Principal Amortization

$12,833 $11,823 ($159,403) $12,833

$13,603 $36,853 ($159,403) $13,603

$14 $40 ($1 $14

Year 23 Year 34

-28% -40% -21% -28%

($2,484,268.59) ($2,499,477.21) ($2,471,081.37) ($2,484,268.59)

- Depreciation Fees & Points Amortization - Pre-leasing Fees & Points Amortization

($1,015) ($159,403) $0 ($1,015)

($1,015) ($159,403) $0 ($1,015)

($1 $0 ($1

common 10% grosssense rent, estimate biggerpockets.com Sum of Above common sense estimate Total Expenses Sum of Above /# of units

Year 5 4 Year 56 Year 67

-17% -21% -13% -17% -11% -13%

($2,459,687.92) ($2,471,081.37) ($2,449,885.06) ($2,459,687.92) ($2,441,491.50) ($2,449,885.06)

Taxable Income (Loss) - Pre-leasing Tax Due Income (Shelter)(Loss) Taxable

($135,761) $0 ($50,226) ($135,761)

($109,961) $0 ($40,681) ($109,961)

($1 $0 ($3 ($1

($50,226)

($40,681)

($3

46% $4,992.80 3% 46%

Calculated from/#P.3 Total Expenses of units Market Studyfrom P.3 Calculated

Year 78 Year 89

-9% -11% -7% -9%

($2,433,954.92) ($2,441,491.50) ($2,427,592.72) ($2,433,954.92)

3% $4,197,831

Market Study TDC-Land

Year Year10 9 11 Year 10

-6% -7% -5% -6%

($2,422,266.67) ($2,427,592.72) ($2,417,853.70) ($2,422,266.67)

ation Deduc.

27.5 $4,197,831 $152,648 27.5

IRS TDC-Land Deprec. Basis/UL IRS

12 Year 11 Year 12 13 Year

-4% -5% -3% -4%

($2,414,244.26) ($2,417,853.70) ($2,411,340.95) ($2,414,244.26)

Annual PassiveTaxable Loss Limit Cummulative Loss Losses Taken This Year Annual Passive Loss Limit Total Carryforward Losses Taken This Year Total Carryforward

ve

ve

y

y

actor

actor

1 for Sale inYear Year Year 12

Tax Due (Shelter) Adjustments to Taxable Income Current Period TaxableIncome Loss (Income) Adjustments to Taxable Cummulative Current PeriodTaxable TaxableLoss Loss (Income)

$135,761

$109,961

$10

$135,761 $0 $135,761

$245,723 $109,961 $0 $245,723

$35 $10 $0 $35

$0 $135,761 $0 $135,761

$0 $245,723 $0 $245,723

$0 $35 $0 $35

ation Deduc. nal Property/unit

$152,648 $2,364

Deprec.

Basis/UL 20% yearly average unit rent

13 Year 14

-3% -2%

($2,411,340.95) ($2,409,057.13)

rtyProperty/unit Amount nal ife Amount rty

$47,280 $2,364 7 $47,280

Pers.Property/unit * units 20% yearly average unit rent IRS Pers.Property/unit * units

15 Year 14 Year 15 16 Year

-2% -1% -2%

($2,407,315.82) ($2,409,057.13) ($2,406,048.64) ($2,407,315.82)

ife Depreciation rty

7 $6,754.29

IRS Property/UL

16 Year 17

-1%

($2,406,048.64) ($2,405,194.89)

Key Operating Mortgage AmortizationSchedules

Year 1

Year 2

Ye

tization rty Depreciation stization Limit

$1,015 $6,754.29 $0 $1,015

Mortg. Points/Term Property/UL InvestorPoints/Term Mortg.

Year 17 18 19 Year 18

0% -1% 0%

($2,404,700.73) ($2,405,194.89) ($2,404,518.39) ($2,404,700.73)

Beginning Balance Mortgage Amortization Yearly DebtBalance Service Beginning

$1,014,552 Year 1 $73,706 $1,014,552

$1,001,719 Year 2 $73,706 $1,001,719

$98 Ye $73 $98

0.370 $0

Fed + State - Interaction Investor

0.370 0.07

Fed + State - Interaction Market Study

Year 19 20 21 Year 20

0% 1% 0%

($2,404,605.58) ($2,404,518.39) ($2,404,924.83) ($2,404,605.58)

InterestDebt Service Yearly Principle Interest

$60,873 $73,706 $12,833 $60,873

$60,103 $73,706 $13,603 $60,103

$59 $73 $14 $59

Ending Balance Principle

s Limit

Key Operating Schedules

ate ate ate

6% 0.07 15% 6% 10% 15%

Industry standard Market Study IRS Industry standard Developer-Investor Requirement IRS

Year 21 22 Year 23 22 24 Year 23 Year Year 25 24

1% 1% 1% 1% 1%

($2,405,443.02) ($2,404,924.83) ($2,406,130.85) ($2,405,443.02) ($2,406,962.45) ($2,406,130.85) ($2,407,915.01) ($2,406,962.45)

$4,197,831

$4,045,183

$3,

ate

10%

Developer-Investor Requirement

26 Year 25

2% 1%

($2,408,968.43) ($2,407,915.01)

Current Depreciation Claimed Beginning Basis

$152,648 $4,197,831

$152,648 $4,045,183

$15 $3,

27 Year 26 28 Year 27

2% 2%

($2,410,105.01) ($2,408,968.43) ($2,412,927.39) ($2,410,105.01)

Cummulative Depreciation Claimed Current Depreciation Claimed Ending Balance Cummulative Depreciation Claimed

$152,648 $4,045,183 $152,648

$305,297 $152,648 $3,892,534 $305,297

$45 $15 $3, $45

29 Year 28 Year Year 30 29

2% 2% 2%

($2,417,127.71) ($2,412,927.39) ($2,421,102.56) ($2,417,127.71)

Ending Balance Personal Property

$4,045,183

$3,892,534

$3,

Year 30

2%

($2,421,102.56)

Beginning Basis Personal Property

Sources and Uses Sources Sources and Uses Permanent Mortgage Sources Investor's PermanentEquity Mortgage Total Sources Investor's Equity

$1,014,552.20 $3,767,293.99 $1,014,552.20 $4,781,846.19 $3,767,293.99

Ending Balance Building Depreciation Beginning Basis Building Depreciation

$1,001,719 $12,833

$988,116 $13,603

$97 $14

$1,001,719

$988,116

$97

$47,280

$40,526

$33

Current Depreciation Claimed Beginning Basis Cummulative Depreciation Claimed Current Depreciation Claimed

$6,754 $47,280 $6,754 $6,754

$6,754 $40,526 $13,509 $6,754

$6, $33 $20 $6,

Cummulative Depreciation Claimed Ending Balance

$6,754 $40,526

$13,509 $33,771

$20 $27

$40,526

$33,771

$27

Ending Balance Fees and Points Amortization Beginning Basis Fees and Points Amortization Current Amortization Beginning Basis

Total Sources Uses

$4,781,846.19

Land Acquisition Uses

$350,000.00

Cummulative Amortization Current Amortization Ending Balance Cummulative Amortization

Land Acquisition Soft costs

$350,000.00 $759,002.82

Ending Balance

Hardcosts costs Soft

$3,438,828.18 $759,002.82

$30,437

$29,422

$28

$1,015 $30,437 $1,015

$1,015 $29,422 $2,029 $1,015

$1, $28 $3, $1,

$29,422 $1,015

$28,407 $2,029

$27 $3,

$29,422

$28,407

$27

Hard costs loan fees Construction

$3,438,828.18 $82,531.88

loan fees Construction interest

$82,531.88 $121,046.75

Reversion (Termination) Cash at Sale (using Cap Rates)

Reversion (Termination) Accounts Accounts Year 1

Year 2

Ye

Permanent loan fees and points Construction interest Developer'sloan fee fees and points Permanent

$30,436.57 $121,046.75 $0.00 $30,436.57

NOIat Sale (using Cap Rates) Cash Estimated Sales Price NOI

$85,529 Year 1 $1,221,843 $85,529

$110,559 Year 2 $1,579,417 $110,559

$11 Ye $1, $11

Syndication Developer's costs fee Total Uses costs Syndication

$0.00 $4,781,846.19 $0.00

- Selling Costs Estimated Sales Price - Mortgage Balance Selling Costs

($73,311) $1,221,843 ($1,001,719) ($73,311)

($94,765) $1,579,417 ($988,116) ($94,765)

($9 $1, ($9

Total Uses

$4,781,846.19

Before Tax Cash on Sale - Mortgage Balance

$146,813 ($1,001,719)

$496,535 ($988,116)

$55 ($9

- Capital on Sale Before TaxGains Cash Tax on Sale - Capital Write-off of Unamortized Gains Tax on Sale Fees

$513,440.61 $146,813 ($29,422.01) $513,440.61

($455,606) $496,535 ($28,407) ($455,606)

($4 $55 ($2 ($4

Proforma Analysis tweaking the baseline

The initial proforma reveals that the baseline figures will not hit a hurdle rate of 10% until year 18. In order to acheive the same hurdle rate by year 5 the following inputs were “tweaked�:

input

baseline

tweaked

Reasoning

Unit type 1 bedroom 2 bedroom 3 bedroom

area in sq ft; # of units 747; 10 855; 5 1045; 5

700; 11 800; 6 1050; 5

Slight modifications to the unit square footage were necessary to meet the financial hurdle but should not be a deal breaker for potential renters. The dip in square footage of the one- and two-bedroom units will be offset by offerings of private yards, verandas and community garden.

Rents 1 bedroom 2 bedroom 3 bedroom

$680 $850 $1,425

$875 $1,125 $1,400

Other Income

$0

$200 / mo

Rent Inflation Factor

3%

4%

Vacancy rate in year 1

15%

10%

Management fees

10% gross rent

8% gross rent

Arch. + engineering fees

8% construction costs

10% construction costs

The rents are raised significantly from the baseline but should remain competitive for new construction in the area. The rent figures dileneated in the market study were almost entirely for old structures; our rents should be higher. An additional $200 / month comes from leasing out the community garden plots.

The increase in rent inflation reflects the idea that this is an up-and-coming neighborhood as shown in the development research. Rents around the project site will increase at a much more rapid pace that the city average within the next 5-10 years.

Vacancy was originally estimated at 15%, as the area has been historically challenged with vacancy. With a smart advertising campaign, the expected vacancy in the first year can be lowered to 10%.

Decreasing management fees by 2% is reasonable, especially considering that this still allows $22,632 per month for the management of our project.

Architectural and engineering fees were actually increased, adding $43,000 to the budget for design. The bottom line is that this project will not work unless a smart designer finds a way to get an additional one-bedroom and two-bedroom unit out of the floor plan without adding to construction costs. For $43,000, I’m confident we can find one.

Proforma Analysis tweaking the baseline

input

baseline

tweaked

Reasoning

Land cost

$350,000

$200,000

Site clearance + remediation

$20,000

$10,000

Construction cost

$177 / sq ft

$120 / sq ft

Legal fees

$100,000

$50,000

Perhaps city would help subsidize the permits, legal fees, site clearance, remediation and purchase of property from it existing owners after being convinced that the new rental housing is better aligned with both the existing zoning code and the city’s vision for the park. A strong argument could be made that the site’s current operation as an environmentally-destructive automotive repair facility is at odds with the goals of a wildlife refuge or nature learning center.

Permits

$50,000

$25,000

Mortgage interest rate

6.0%

5.5%

Debt coverage ratio

1.6

1.3

% of loan Covered by lender

80%

90%

Construction costs estimated through RS Means seemed high, especially for this low-density area of the city. It is foreseeable that by shopping around the construction costs could be lowered significantly.

The initial mortgage interest rate, debt coverage ratio and % covered by lender were initally set on the high side to reflect the idea that this might a “first project” by the developer. In the tweaked senario the figures are moved to a slightly lower but still reasonable level.

Result After making changes to the baseline figures the proforma successfully hit a 10% hurdle at the five year mark. The tweaked version seems realistic, although a better understanding of the city’s subsidization process for these types of projects would add better perspective.

Proforma Analysis “tweaked”

Concept, Assumptions, and Baseline Data

Concept, Assumptions, and Baseline Data

Item Concept

Source Size (sqft)

#

Unit

Source #

Mo. Rent

Item

Land

1 bedroom

10

700

Concept Plan

Rents &

1-bedroom Market

11

$875

Market Study

2 bedroom

5

800

Concept Plan

income

2-bedroom Market

6

$1,125

Market Study

Cons

3 bedroom

5

1050

Concept Plan

3-bedroom Market

5

$1,400

Market Study

Cons

20

16,250

Calculated from above

Retail or Other Income

0

$200.00

Market Study

Cons

Concept Plan

Rent Inflation Factor

4%

Market Study

Perm

12% 5%

Market Study Market Study

►Cash ►Total

5%

Market Study

►Net rentable space(sqft) Common area ►Total Constructed Space Parking spaces Land

Conc

Item

Parcel size (sqft) Cost (per sqft) ►Total Land Cost

1,544 17,794 22

Calculated from above Concept Plan

Addit Vacancy Rates

18,700 $40.00 $200,000

Year 1 Year 2 Thereafter

Landowner Expenses

CA Utilities

$3,785

Exchange reports

Hard

Site Clearance & Remediation

$10,000

Construction Engineer

Property Taxes

$4,690

BRT

Costs

Grading and Site Preparation

$2,000

Construction Engineer

Maintenance

$26,694

Exchange reports

Construction Estimator

Maintenance Reserve

$14,145

5% gross rent

$2,145,280

Sum of Above

Insurance

Per Space parking Cost

$5,000

Similar Project

Management

$22,632

8% gross rent, biggerpockets.com

►Parking Cost (total)

$110,000

Sum of Above

Other/Contingency

$25,000

common sense estimate

Concept

►Total Expenses

$103,918

Sum of Above

Sum of Above

►per unit

$5,195.90

Total Expenses /# of units

Construction Cost (per sqft) ►Construction Cost (total)

Landscaping ►Total Hard Costs

$120

$25,000 $2,280,280

Soft

Architecture & Engineering Fees

8% of Const. Costs

►as share of rent

Costs

Legal Fees

$50,000

Research

Expense Inflation factor

Permits

$25,000

City Hall

$0

Estimate

Pre-leasing Contingencies ►Total Soft Costs ►Total Development Costs

$214,528

$228,028 $517,556 $2,997,836

Tax Info

10% of Hard Costs, above Sum of Above

IRS Deprec. Basis/UL

Land+Hard+Soft

Depreciable Personal Property/unit

5.50%

Lender

30

Lender

►Personal Property Depreciation

Debt-coverage ratio

1.3

Lender

►Financing Amortization

3

Lender

Annual Passive Loss Limit

= PMT(rate,term,-1)

Marginal Tax Rate

►Supportable Mortgage ►Yearly Debt Service Construction

►Fees and Point Costs Hard Costs

Lending

% financed ►Construction Loan Amount Interest rate Term (months) Drawdown Factor

$1,956,082 $134,589 $58,682.45 $2,280,280 90% $2,052,252.00 7.50% 12 0.55

Market Study TDC-Land

Term

$174,966

Calculated from P.3

27.5 $101,739

Interest Rate

►Stabilized NOI (year 2)

3% $2,797,836

Financing

.068805390

37%

$2,720

20% yearly average unit rent

$54,400 7

Pers.Property/unit * units IRS

$7,771.43 $1,956 $0 0.370

Disco

Exchange reports

Useful Life (years) ►Annual Depreciation Deduc.

Permanent

►Mortgage Constant

$6,972

Depreciable Basis

►Personal Property Amount Personal Property Life

Fees and Points

Soft C

Property/UL Mortg. Points/Term Investor Fed + State - Interaction

from page 3 =NOI/(DCR*MC)

Sale

Sales Cap Rate

= Mortgage * MC

& Reversion

Selling Costs

Points * Mortgage from above

Info

Capital Gains Tax Rate Discount (Hurdle) Rate

0.07 6% 15% 10%

Market Study Industry standard IRS Developer-Investor Requirement

Lender Hard costs * % financed Lender Constr. Schedule Lender

►Construction Interest

$84,655

Loan*Rate*Term*DDF

Fees ►Construction Fees

3% $61,568

Lender Constr. Loan * Fees

Sour

Sources

Perm

Inves

Version 1

Proforma Analysis “tweaked”

Concept, Assumptions, and Baseline Data Item

Operating Accounts

Year -1

Year 1

Year 2

Year 3

Year 4

Year 27

Year

Land Purchase Price

$200,000

Gross Scheduled Rent

$282,900

$294,216

$305,985

$318,224

$784,332

$815,

Study

Soft Costs (incl. Synd.)

$517,556

- Vacancy Adjustment

($33,948)

($14,711)

($15,299)

($15,911)

($39,217)

($40,7

Study

Construction Loan Fees

$61,568

+ Other Income

$2,400

$2,496

$2,596

$2,700

$6,654

$6,92

Study

Construction Loan Cash In

$228,028

Effective Gross Income

$251,352

$282,001

$293,281

$305,012

$751,769

$781,

Study

Construction Interest Costs

$84,655

- Expenses

($103,918)

($107,036)

($110,247)

($113,554)

($224,109)

($230

Study

Permanent Loan Points

$58,682

Net Operating Income

$147,434

$174,966

$183,035

$191,458

$527,660

$551,

Additional Cash-in (Cash-out) at Take-out

$96,170

- Yearly Debt Service

$134,589

$134,589

$134,589

$134,589

$134,589

$134,

$239,508 $1,246,660

BTCF (Cash Throw-off) + Tax Shelter

$12,845 ($26,498)

$40,377 ($15,762)

$48,446 ($12,197)

$56,870 ($8,468)

$393,071 $144,391

$416, $174,

$39,344

$56,139

$60,643

$65,338

$248,680

$242

►Cash In This Year ►Total Cash In

Study Study

$1,007,152 $1,007,152

Year 0

Cash Accounts

After Tax Cash Flow

Study

Discounted Cash-flow Summary

ge reports

ge reports Data seline

Operating Accounts

s rent Year -1 ge reports $200,000

Year 0

Taxable Income Accounts

for Sale in Year

Cash Accounts

IRR

Year 1

-67%

Year 2Year 1-19%

Gross Scheduled Rent

Year 3$282,900 -10%

- Vacancy Adjustment

Year 4($33,948) -4%

n sense$61,568 estimate

+ Other Income

Year 5$2,400 0%

Above $228,028 xpenses /# of units

Effective Gross Income

Year 6$251,352 2%

$84,655

- Expenses

Year 7($103,918) 4%

ted from P.3

$58,682

Net Operating Income

Year 8$147,434 5%

Study

$96,170

- Yearly Debt Service

Year 9$134,589 6%

$239,508 $1,246,660

BTCF (Cash Throw-off) + Tax Shelter

Year 10$12,8457%

s rent,$517,556 biggerpockets.com

$1,007,152 nd $1,007,152

Cash Throw-off (BTCF)

$12,845

$40,377

$48,446

$56,870

$393,071

$416,

($971,876.22)

+ Principal Amortization

$27,004

$28,490

$30,057

$31,710

$108,642

$114,

($109,511) Year 28 ($1,956) $815,705

Year($109,511) 29 ($1,956) $848,333

Year($109,511) 30 ($1,956) $882,266

($109,511)

($109,511)

($58,6

($1,956)

($1,956)

($1,95

$0 ($42,417) ($42,601) $7,197

$0 ($44,113) ($32,965) $7,485

$0

$0

$0

($22,888)

$390,247

$470,

($15,762) $813,113

($12,197) $845,638

($8,468)

$144,391

$174,

($237,757)

($244,890)

$551,008 $71,617 $134,589 $71,617 $416,419

$575,357 $42,601 $134,589 $114,218 $440,768

$600,748 $32,965 $134,589 $147,183 $466,159

$22,888

($390,247)

($470

$170,070

($390,247)

($470

$0 $204,226 $0 $236,542 $114,218

$0 $216,082 $0 $250,078 $147,183

$0

$0

$0

$0 $170,070

($390,247) $0

($470 $0

($640,325.90) Year 2 ($572,010.68) $294,216

Year 3- Depreciation Year 4 - Fees & Points Amortization $305,985 $318,224

Year 27

($511,026.14) ($14,711) ($456,616.80) $2,496

- Pre-leasing ($15,911) ($15,299) Taxable Income (Loss) $2,596 $2,700

($39,217) $6,654

$0($40,785) ($71,617) $6,920

($408,103.87) $282,001 ($364,877.49) ($107,036)

Tax Due (Shelter) $293,281 $305,012

$751,769

($26,498) $781,840

($325,940.37) $174,966 ($291,331.59) $134,589

After Tax Cash Flow

Year 12$39,344 8% Year 13 8%

($260,598.04) $40,377 ($233,333.09) ($15,762) ($206,425.58) $56,139 ($182,013.43)

Taxable Income Accounts

Year 14

($160,142.85)

. Basis/UL

yrly average unit rent

NPV

operty/unit r IRR * unitsNPV

Cash Throw-off (BTCF)

1 -67% 2y/UL -19% 3Points/Term -10%

($971,876.22)

4 -4% 5ate - Interaction 0%

Year 11($26,498) 7%

9%

+ Principal Amortization

Year 15$12,8459% Year 16$27,0049%

($140,590.07) $40,377 ($123,149.55) $28,490

($640,325.90)

- Depreciation

Year 17($109,511) 9%

($572,010.68)

- Fees & Points Amortization

Year 18($1,956)9%

($107,632.55) ($109,511) ($93,865.83) ($1,956)

($511,026.14)

- Pre-leasing

Year 19$0

($456,616.80)

Taxable Income (Loss)

Year 20($71,617) 10%

2%

($408,103.87)

Tax Due (Shelter)

Year 21($26,498) 10%

4% 8standard5%

($364,877.49)

6 Study 7

($325,940.37)

Adjustments to Taxable Income

9%

($81,690.47) $0 ($70,960.73) ($42,601)

Year 22

10%

($61,543.01) ($15,762) ($53,314.91)

Year 23

10%

($46,164.34)

($110,247) ($113,554) ($224,109) Adjustments to $191,458 Taxable Income $527,660 $183,035 Current Period$134,589 Taxable Loss (Income) $134,589 $134,589 $393,071 $144,391

Losses Taken $65,338 This Year $60,643 Total Carryforward

$248,680

$0$174,063 $0$242,356 $71,617

$48,446

$393,071

$416,419

Key Operating $30,057 $31,710 Schedules $108,642 Mortgage Amortization ($109,511) ($109,511) ($109,511)

$440,768

$466,159

$114,618 Year 1 ($58,641)

$120,922 Year 2 ($7,771)

$127,572 Year 3 ($7,771)

Year 4

Year 27

Year

Beginning Balance ($1,956) ($1,956) $0 Yearly Debt Service $0

$1,956,082 ($1,956) $134,589 $0

$1,929,077 ($1,956) $0 $134,589

$1,900,588 ($1,956) $0 $134,589

$1,870,531

$471,755

$363,

$134,589

$134,589

$134,

$107,584 $470,439 $27,004 $174,063

$106,099 $551,962 $28,490 $204,226

$104,532 $584,004 $30,057 $216,082

$102,879

$25,946

$19,9

$31,710

$108,642

$114,

Interest ($32,965) Principle ($12,197)

$56,870

($22,888)

($8,468) Ending Balance

Cummulative Taxable Loss

($39,988.70) $42,601 ($34,694.10) $114,218

Building Depreciation $32,965 $22,888 Beginning Basis $147,183 $170,070

($233,333.09)

Annual Passive Loss Limit

Year 26$0

10%

$0

8% 8%

($206,425.58) ($182,013.43)

Losses Taken This Year Total Carryforward

Year 27$0

10%

($30,194.70) $0 ($26,412.05) $0

4

9%

($160,142.85)

5 6

9% 9%

($140,590.07) ($123,149.55)

Key Operating Schedules

7

9%

($107,632.55)

Mortgage Amortization

8

9%

($93,865.83)

9

9%

($81,690.47)

0

10%

($70,960.73)

1

10%

($61,543.01)

Current Period Taxable Loss (Income)

1

7%

2 3

Sources and Uses Beginning Balance

Sources Yearly Debt Service Permanent Mortgage Interest Investor's Equity Principle

Year 28$71,617 10% Year 29 Year 30

10% 10%

($23,915.85) $114,218 ($22,563.80) ($21,694.36)

($1,956) $0 $390,247 $144,391

$1,929,077 ($390,247) ($390,247)

Current Depreciation Claimed $0 $0 Cummulative$0 Depreciation Claimed ($390,247)

$0 Ending Balance $147,183 $170,070

$0

Year 2

$1,956,082

$1,929,077

$134,589 $107,584 $27,004

$134,589 $1,956,082 $106,099 $1,246,660 $28,490

($470,439) $2,797,836 ($470,439) $101,739 $0 $101,739 ($470,439) $2,696,097 $0

$1,900,588

$1,870,531

$1,838,821

$363,112

$248,

($551,962) $2,696,097 ($551,962)

($584,004) $2,594,357 ($584,004)

$2,492,618

$152,609

$50,8

$0 $101,739 $203,479 ($551,962)

$0 $101,739 $305,218 ($584,004)

$101,739

$101,739

$50,8

$406,958

$2,746,966

$2,79

$0 $2,594,357

$0 $2,492,618

$2,390,878

$50,870

$0

Personal Property Beginning Basis

Year 1

($230,832)

Cummulative$56,870 Taxable Loss $48,446 Annual Passive Loss Limit ($8,468) ($12,197)

Year 24$71,617 10% Year 25$71,617 10%

9 6% ($291,331.59) 0er-Investor 7%Requirement ($260,598.04)

$784,332

$46,629

$38,857

$31,086

$0

$0

Depreciation Year Current 3 Year 4 Claimed Year 27 Cummulative$1,870,531 Depreciation Claimed $1,900,588 $471,755

$54,400 $7,771 Year 28 $7,771 $363,112

Year$7,771 29 $15,543 $248,494

Year$7,771 30 $23,314 $127,572

$7,771 $31,086

$7,771 $54,400

$7,77 $54,4

Ending Balance $134,589 $134,589

$134,589

$46,629 $134,589

$38,857 $134,589

$31,086 $134,589

$23,314

$0

$0

$104,532 $102,879 Fees and Points$31,710 Amortization $30,057

$25,946

$19,971

$13,667

$7,016

$108,642

$114,618

$120,922

$127,572

8 9 9 0

5% 6% 6% 7%

($325,940.37) ($291,331.59) ($291,331.59) ($260,598.04)

0 1 1 2 2 3 3 4

7% 7% 8%

($260,598.04) ($233,333.09) ($233,333.09) ($206,425.58)

($206,425.58) ($182,013.43) ($182,013.43) ($160,142.85) ($160,142.85) ($140,590.07)

8% 8% 9% 9%

Adjustments to Taxable Current Period TaxableIncome Loss (Income) Current PeriodTaxable TaxableLoss Loss (Income) Cummulative

$71,617 $71,617

$42,601 $42,601 $114,218

$32,965 $32,965 $147,183

$22,888 $22,888 $170,070

($390,247) ($390,247)

($470,439) ($470,439)

($551,962) ($551,962)

($584,004) ($584,004)

Cummulative Loss Annual PassiveTaxable Loss Limit Annual Passive Loss Limit Losses Taken This Year

$71,617 $0 $0

$114,218 $0 $0

$147,183 $0 $0

$170,070 $0 $0

($390,247) $0 $0 ($390,247)

($470,439) $0 $0 ($470,439)

($551,962) $0 $0 ($551,962)

($584,004) $0 $0 ($584,004)

Losses Taken This Year Total Carryforward Total Carryforward

$0 $71,617 $71,617

$0 $114,218 $114,218

$0 $147,183 $147,183

$0 $170,070 $170,070

($390,247) $0 $0

($470,439) $0 $0

($551,962) $0 $0

($584,004) $0 $0

Year 1 Year 1 $1,956,082

Year 2 Year 2 $1,929,077

Year 3 Year 3 $1,900,588

Year 4 Year 4 $1,870,531

Year 27 Year 27 $471,755

Year 28 Year 28 $363,112

Year 29 Year 29 $248,494

Year 30 Year 30 $127,572

Proforma Analysis “tweaked�

4 5 6 5 6 7

9% 9% 9%

7 8 8 9

9% 9%

9 0 0 1

9% 10% 10%

1 2 32

10% 10%

3 4 4 5 5 6

10% 10% 10% 10%

6 7 7 8

10% 10%

($30,194.70) ($26,412.05) ($26,412.05) ($23,915.85)

8 9 9 0 0

10% 10% 10%

($23,915.85) ($22,563.80) ($22,563.80) ($21,694.36) ($21,694.36)

($123,149.55) ($140,590.07) ($123,149.55) ($107,632.55) ($107,632.55) ($93,865.83)

Key Operating Schedules

Key Operating Mortgage AmortizationSchedules Mortgage Amortization Beginning Balance

($93,865.83) ($81,690.47) ($81,690.47) ($70,960.73)

Beginning Yearly DebtBalance Service Yearly InterestDebt Service

$1,956,082 $134,589 $134,589 $107,584

$1,929,077 $134,589 $134,589 $106,099

$1,900,588 $134,589 $134,589 $104,532

$1,870,531 $134,589 $134,589 $102,879

$471,755 $134,589 $134,589 $25,946

$363,112 $134,589 $134,589 $19,971

$248,494 $134,589 $134,589 $13,667

$127,572 $134,589 $134,589 $7,016

($70,960.73) ($61,543.01) ($61,543.01) ($53,314.91)

Interest Principle Principle Ending Balance

$107,584 $27,004 $27,004 $1,929,077 $1,929,077

$106,099 $28,490 $28,490 $1,900,588 $1,900,588

$104,532 $30,057 $30,057 $1,870,531 $1,870,531

$102,879 $31,710 $31,710 $1,838,821 $1,838,821

$25,946 $108,642 $108,642 $363,112 $363,112

$19,971 $114,618 $114,618 $248,494 $248,494

$13,667 $120,922 $120,922 $127,572 $127,572

$7,016 $127,572 $127,572 $0 $0

$2,797,836 $2,797,836 $101,739

$2,696,097 $2,696,097 $101,739

$2,594,357 $2,594,357 $101,739

$2,492,618 $2,492,618 $101,739

$152,609 $152,609 $101,739

$50,870 $50,870 $50,870

$0 $0 $0

$0 $0 $0

Current Depreciation Claimed Cummulative Depreciation Claimed Cummulative Depreciation Claimed Ending Balance

$101,739 $101,739 $2,696,097

$101,739 $203,479 $203,479 $2,594,357

$101,739 $305,218 $305,218 $2,492,618

$101,739 $406,958 $406,958 $2,390,878

$101,739 $2,746,966 $2,746,966 $50,870

$50,870 $2,797,836 $2,797,836 $0

$0 $2,797,836 $2,797,836 $0

$0 $2,797,836 $2,797,836 $0

Ending Balance

$2,696,097

$2,594,357

$2,492,618

$2,390,878

$50,870

$0

$0

$0

$54,400 $54,400 $7,771

$46,629 $46,629 $7,771

$38,857 $38,857 $7,771

$31,086 $31,086 $7,771

$0 $0 $7,771

$0 $0 $7,771

$0 $0 $7,771

$7,771 $7,771 $46,629

$15,543 $7,771 $15,543 $38,857

$23,314 $7,771 $23,314 $31,086

$31,086 $7,771 $31,086 $23,314

$54,400 $7,771 $54,400 $0

$54,400 $7,771 $54,400 $0

$54,400 $7,771 $54,400 $0

$0 $0 $7,771 $54,400 $7,771 $54,400 $0

$46,629

$38,857

$31,086

$23,314

$0

$0

$0

$0

($53,314.91) ($46,164.34) ($46,164.34) ($39,988.70) ($39,988.70) ($34,694.10) ($34,694.10) ($30,194.70)

Ending Balance Building Depreciation Building Depreciation Beginning Basis Beginning Basis Current Depreciation Claimed

Personal Property Personal Property Beginning Basis Beginning Basis Current Depreciation Claimed Cummulative Depreciation Claimed Current Depreciation Claimed Cummulative Depreciation Claimed Ending Balance

$1,956,082 $1,956,082 $1,246,660 $1,246,660 $3,202,741

Ending Balance Fees and Points Amortization Fees and Points Amortization Beginning Basis

$3,202,741

Beginning Basis Current Amortization Current Amortization Cummulative Amortization

$58,682 $58,682 $1,956 $1,956

$56,726 $56,726 $1,956 $1,956 $3,912

$54,770 $54,770 $1,956 $1,956 $5,868

$52,814 $52,814 $1,956 $1,956 $7,824

$7,824 $7,824 $1,956 $1,956 $52,814

$5,868 $5,868 $1,956 $1,956 $54,770

$3,912 $3,912 $1,956 $1,956 $56,726

$1,956 $1,956 $1,956 $58,682

$200,000 $200,000 $517,556

Cummulative Amortization Ending Balance Ending Balance

$1,956 $56,726 $56,726

$3,912 $54,770 $54,770

$5,868 $52,814 $52,814

$7,824 $50,858 $50,858

$52,814 $5,868 $5,868

$54,770 $3,912 $3,912

$56,726 $1,956 $1,956

$58,682 ($0) ($0)

Year 2 Year 2 $174,966

Year 3 Year 3 $183,035

Year 4 Year 4 $191,458

Year 27 Year 27 $527,660

Year 28 Year 28 $551,008

Year 29 Year 29 $575,357

Year 30 Year 30 $600,748

$2,106,200 ($126,372) ($126,372) ($1,929,077)

$174,966 $2,499,509 $2,499,509 ($149,971) ($149,971) ($1,900,588)

$183,035 $2,614,781 $2,614,781 ($156,887) ($156,887) ($1,870,531)

$191,458 $2,735,121 $2,735,121 ($164,107) ($164,107) ($1,838,821)

$527,660 $7,538,006 $7,538,006 ($452,280) ($452,280) ($363,112)

$551,008 $7,871,541 $7,871,541 ($472,292) ($472,292) ($248,494)

$575,357 $8,219,379 $8,219,379 ($493,163) ($493,163) ($127,572)

$600,748 $8,582,119 $8,582,119 ($514,927) ($514,927) ($0)

($1,929,077) $50,751 $50,751 $155,177.19

($1,900,588) $448,951 $448,951 ($89,684)

($1,870,531) $587,363 $587,363 ($61,949)

($1,838,821) $732,193 $732,193 ($31,987)

($363,112) $6,722,613 $6,722,613 $1,025,228

($248,494) $7,150,755 $7,150,755 $1,079,887

($127,572) $7,598,644 $7,598,644 $1,128,932

($0) $8,067,192 $8,067,192 $1,180,079

$155,177.19 ($56,726.37) ($56,726.37) $149,202

($89,684) ($54,770) ($54,770) $593,406

($61,949) ($52,814) ($52,814) $702,126

($31,987) ($50,858) ($50,858) $815,038

$1,025,228 ($5,868) ($5,868) $5,703,253

$1,079,887 ($3,912) ($3,912) $6,074,779

$1,128,932 ($1,956) ($1,956) $6,471,667

$1,180,079 $0 $0 $6,887,113

$149,202

$593,406

$702,126

$815,038

$5,703,253

$6,074,779

$6,471,667

$6,887,113

$2,106,200 $2,106,200 ($126,372)

$2,499,509 $2,499,509 ($149,971)

$2,614,781 $2,614,781 ($156,887)

$2,735,121 $2,735,121 ($164,107)

$7,538,006 $7,538,006 ($452,280)

$7,871,541 $7,871,541 ($472,292)

$8,219,379 $8,219,379 ($493,163)

$8,582,119 $8,582,119 ($514,927)

($126,372) ($200,000) ($200,000) ($2,696,097)

($149,971) ($200,000) ($200,000) ($2,594,357)

($156,887) ($200,000) ($200,000) ($2,492,618)

($164,107) ($200,000) ($200,000) ($2,390,878)

($452,280) ($200,000) ($200,000) ($50,870)

($472,292) ($200,000) ($200,000) $0

($493,163) ($200,000) ($200,000) $0

($514,927) ($200,000) ($200,000) $0

- Loss Remaining Personal Property Carryforward - Loss Carryforward Taxable Gain

($2,696,097) ($46,629) ($46,629) ($71,617) ($71,617) ($1,034,515)

($2,594,357) ($38,857) ($38,857) ($114,218) ($114,218) ($597,893)

($2,492,618) ($31,086) ($31,086) ($147,183) ($147,183) ($412,992)

($2,390,878) ($23,314) ($23,314) ($170,070) ($170,070) ($213,249)

($50,870) $0 $0 $0 $6,834,856

$0 $0 $0 $7,199,249

$0 $0 $0 $7,526,216

$0 $0 $0 $7,867,192

Taxable Gainon Gain Tax (Shelter) Tax (Shelter) on Gain

($1,034,515) ($155,177) ($155,177)

($597,893) ($89,684) ($89,684)

($412,992) ($61,949) ($61,949)

($213,249) ($31,987) ($31,987)

$6,834,856 $1,025,228 $1,025,228

$7,199,249 $1,079,887 $1,079,887

$7,526,216 $1,128,932 $1,128,932

$7,867,192 $1,180,079 $1,180,079

$517,556 $2,280,280 $2,280,280 $61,568 $61,568 $84,655 $84,655 $58,682

Reversion (Termination) Accounts Accounts Year 1

Reversion (Termination) Cash at Sale (using Cap Rates) Cash NOIat Sale (using Cap Rates)

$58,682 $0 $0

NOI Estimated Sales Price Estimated Sales Price - Selling Costs

$0 $3,202,741 $3,202,741

Selling Costs - Mortgage Balance - Mortgage Balance Before Tax Cash on Sale Before TaxGains Cash Tax on Sale - Capital on Sale Gains Tax on Sale Fees - Capital Write-off of Unamortized - Write-off of Unamortized Fees After Tax Cash on Sale After Tax Cash on Sale Calculation of Taxable Gain Calculation of Price Taxable Gain Project Sale Project Price - SellingSale Costs Selling Costs - Land - Remaining Land Depreciable Basis Depreciable Basis - Remaining Personal Property

Other Adjustments at Sale Other Adjustments at SaleFees Unamortized Financing Unamortized Financing FeesFees Write-off Value of Financing Write-off Value of Financing Fees

Year 1 $147,434 $147,434 $2,106,200

- Remaining Depreciable Basis

($2,696,097)

($2,594,357)

($2,492,618)

($2,390,878)

($50,870)

$0

$0

- Remaining Personal Property

($46,629)

($38,857)

($31,086)

($23,314)

$0

$0

$0

$0

- Loss Carryforward

($71,617)

($114,218)

($147,183)

($170,070)

$0

$0

$0

$0

Taxable Gain

($1,034,515)

($597,893)

($412,992)

($213,249)

$6,834,856

$7,199,249

$7,526,216

$7,867,192

Tax (Shelter) on Gain

($155,177)

($89,684)

($61,949)

($31,987)

$1,025,228

$1,079,887

$1,128,932

$1,180,079

Year -1

Year 0

Year 1

Year 2

Year 25

Year 26

Year 27

($1,007,152)

($239,508)

ATCF from Operations

$39,344

$56,139

$225,136

$236,672

$248,680

$242,356

$236,542

$250,078

ATCF at Sale

$149,202

$593,406

$5,025,532

$5,356,299

$5,703,253

$6,074,779

$6,471,667

$6,887,113

Total AT Proceeds

$188,545

$649,544

$5,250,667

$5,592,971

$5,951,933

$6,317,136

$6,708,209

$7,137,191

Year 2

Year 25

Year 26

Year 27

Proforma Analysis

$0

“tweaked” Other Adjustments at Sale

Unamortized Financing Fees Write-off Value of Financing Fees

Profitability Summary Cash Flow Summary Initial Cash-in

Year 28

Year 29

Year 30

'AT Return (Operations) on Cash-in IRR and NPV Pyramid

Year 0

Year 1

Year 1 ($1,007,152)

Year -1

($239,508)

$188,545

Year 2 ($1,007,152)

($239,508)

$39,344

Year 3 ($1,007,152)

($239,508)

$39,344

$56,139

Year 4 ($1,007,152)

($239,508)

$39,344

$56,139 $56,139

Year 28

Year 29

$649,544

Year 5 ($1,007,152)

($239,508)

$39,344

Year 6 ($1,007,152)

($239,508)

$39,344

$56,139

Year 7 ($1,007,152)

($239,508)

$39,344

$56,139

Year 8 ($1,007,152)

($239,508)

$39,344

$56,139

Year 9 ($1,007,152)

($239,508)

$39,344

$56,139

Year 10 ($1,007,152)

($239,508)

$39,344

$56,139

Year 11 ($1,007,152)

($239,508)

$39,344

$56,139

Year 12 ($1,007,152)

($239,508)

$39,344

$56,139

Year 13 ($1,007,152)

($239,508)

$39,344

$56,139

Year 14 ($1,007,152)

($239,508)

$39,344

$56,139

Year 15 ($1,007,152)

($239,508)

$39,344

$56,139

Year 16 ($1,007,152)

($239,508)

$39,344

$56,139

Year 17 ($1,007,152)

($239,508)

$39,344

$56,139

Year 18 ($1,007,152)

($239,508)

$39,344

$56,139

Year 19 ($1,007,152)

($239,508)

$39,344

$56,139

Year 20 ($1,007,152)

($239,508)

$39,344

$56,139

Year 21 ($1,007,152)

($239,508)

$39,344

$56,139

Year 22 ($1,007,152)

($239,508)

$39,344

$56,139

Year 23 ($1,007,152)

($239,508)

$39,344

$56,139

Year 24 ($1,007,152)

($239,508)

$39,344

$56,139

Year 25 ($1,007,152)

($239,508)

$39,344

$56,139

Year 26 ($1,007,152)

($239,508)

$39,344

$56,139

$225,136

$5,592,971

Year 27 ($1,007,152)

($239,508)

$39,344

$56,139

$225,136

$236,672

$5,951,933

Year 28 ($1,007,152)

($239,508)

$39,344

$56,139

$225,136

$236,672

$248,680

$6,317,136

Year 29 ($1,007,152)

($239,508)

$39,344

$56,139

$225,136

$236,672

$248,680

$242,356

$5,250,667

$6,708,209

Year 30

me

0 5

orme

0

or

$200.00 $1,400 4% $200.00

Market Study Market Study

4% 12% 5% 12%

Market Study Market Study Market Study Study Market

Additional Cash-in (Cash-out) at Take-out Permanent Loan Points ►Cash In This Year (Cash-out) at Take-out Additional Cash-in ►Total In Cash ►Cash ThisInYear

$1,007,152 $1,007,152 $1,007,152

$239,508 $96,170 $1,246,660 $239,508

5%

Market Study

►Total Cash In

$1,007,152

$1,246,660

Proforma Analysis “tweaked”

5% $3,785

Market Study Exchange reports

$3,785 $4,690

Exchange reports BRT

$26,694 $4,690 $14,145 $26,694

Exchange reports BRT 5% gross rent Exchange reports

$6,972 $14,145 $22,632 $6,972

Interest Costs Construction Loan Cash In Permanent Loan Points Construction Interest Costs

$84,655

$228,028

$58,682 $84,655 $96,170 $58,682

Discounted Cash-flow Summary Discounted Cash-flowfor Summary Sale in Year

IRR

NPV

- Expenses Effective Gross Income Net Operating Income - Expenses

($103,918) $251,352 $147,434 ($103,918)

($107,036) $282,001 $174,966 ($107,036)

($1 $29 $18 ($1

- Yearly Debt Service Net Operating Income BTCF (Cash Throw-off) - Yearly Debt Service + Tax(Cash Shelter BTCF Throw-off)

$134,589 $147,434 $12,845 $134,589 ($26,498) $12,845

$134,589 $174,966 $40,377 $134,589 ($15,762) $40,377

$13 $18 $48 $13 ($1 $48

After TaxShelter Cash Flow + Tax

$39,344 ($26,498)

$56,139 ($15,762)

$6 ($1

After Tax Cash Flow Taxable Income Accounts

$39,344

$56,139

$6

Taxable Income Accounts Cash Throw-off (BTCF)

$12,845

$40,377

$48

1 for Sale inYear Year Year 12

-67% IRR -19% -67%

($971,876.22) NPV ($640,325.90) ($971,876.22)

+ Principal Amortization Cash Throw-off (BTCF) - Depreciation + Principal Amortization

$27,004 $12,845 ($109,511) $27,004

$28,490 $40,377 ($109,511) $28,490

$30 $48 ($1 $30

Exchange reports 5% gross rent 8% gross rent, biggerpockets.com Exchange reports

Year 23 Year 34

-10% -19% -4% -10%

($572,010.68) ($640,325.90) ($511,026.14) ($572,010.68)

- Depreciation Fees & Points Amortization - Pre-leasing Fees & Points Amortization

($1,956) ($109,511) $0 ($1,956)

($1,956) ($109,511) $0 ($1,956)

($1 $0 ($1

$25,000 $22,632 $103,918 $25,000 $5,195.90 $103,918

common sensebiggerpockets.com estimate 8% gross rent, Sum of Above common sense estimate Total Expenses Sum of Above /# of units

Year 5 4 Year 56 Year 67

0% -4% 2% 0%

($456,616.80) ($511,026.14) ($408,103.87) ($456,616.80) ($364,877.49) ($408,103.87)

Taxable Income (Loss) - Pre-leasing Tax Due Income (Shelter)(Loss) Taxable

($71,617) $0 ($26,498) ($71,617)

($42,601) $0 ($15,762) ($42,601)

($3 $0 ($1 ($3

($26,498)

($15,762)

($1

37% $5,195.90 3% 37%

Calculated from/#P.3 Total Expenses of units Market Studyfrom P.3 Calculated

Year 78 Year 89

3% $2,797,836

Market Study TDC-Land

Year Year10 9 11 Year 10

ation Deduc.

27.5 $2,797,836 $101,739 27.5

IRS TDC-Land Deprec. Basis/UL IRS

12 Year 11 Year 12 13 Year

7% 8% 7% 8% 8%

ve

ve

y

y

actor

actor

4% 2% 5% 4% 6% 5% 7% 6%

($325,940.37) ($364,877.49) ($291,331.59) ($325,940.37) ($260,598.04) ($291,331.59) ($233,333.09) ($260,598.04)

Tax Due (Shelter) Adjustments to Taxable Income Current Period TaxableIncome Loss (Income) Adjustments to Taxable Cummulative Current PeriodTaxable TaxableLoss Loss (Income)

($206,425.58) ($233,333.09) ($182,013.43) ($206,425.58)

Annual PassiveTaxable Loss Limit Cummulative Loss Losses Taken This Year Annual Passive Loss Limit Total Carryforward Losses Taken This Year Total Carryforward

$71,617

$42,601

$32

$71,617 $0 $71,617

$114,218 $42,601 $0 $114,218

$14 $32 $0 $14

$0 $71,617 $0 $71,617

$0 $114,218 $0 $114,218

$0 $14 $0 $14

ation Deduc. nal Property/unit

$101,739 $2,720

Deprec.

Basis/UL 20% yearly average unit rent

13 Year 14

8% 9%

($182,013.43) ($160,142.85)

rtyProperty/unit Amount nal ife Amount rty

$54,400 $2,720 7 $54,400

Pers.Property/unit * units 20% yearly average unit rent IRS Pers.Property/unit * units

Year 15 14 Year Year 16 15

9% 9% 9%

($140,590.07) ($160,142.85) ($123,149.55) ($140,590.07)

ife Depreciation rty

7 $7,771.43

IRS Property/UL

16 Year 17

9%

($123,149.55) ($107,632.55)

Key Operating Mortgage AmortizationSchedules

Year 1

Year 2

Ye

tization rty Depreciation stization Limit

$1,956 $7,771.43 $0 $1,956

Mortg.

Points/Term Property/UL InvestorPoints/Term Mortg.

Year 17 18 19 Year 18

9% 9%

($93,865.83) ($107,632.55) ($81,690.47) ($93,865.83)

Beginning Balance Mortgage Amortization Yearly DebtBalance Service Beginning

$1,956,082 Year 1 $134,589 $1,956,082

$1,929,077 Year 2 $134,589 $1,929,077

$1, Ye $13 $1,

0.370 $0

Fed + State - Interaction Investor

0.370 0.07

Fed + State - Interaction Market Study

Year 19 20 21 Year 20

10% 9% 10%

($70,960.73) ($81,690.47) ($61,543.01) ($70,960.73)

InterestDebt Service Yearly Principle Interest

$107,584 $134,589 $27,004 $107,584

$106,099 $134,589 $28,490 $106,099

$10 $13 $30 $10

Ending Balance Principle

$1,929,077 $27,004

$1,900,588 $28,490

$1, $30

$1,929,077

$1,900,588

$1,

s Limit

Key Operating Schedules

ate ate ate

6% 0.07 15% 6% 10% 15%

Industry standard Market Study IRS Industry standard Developer-Investor Requirement IRS

22 Year 21 Year 23 22 24 Year 23 Year Year 25 24

10% 10% 10% 10% 10%

($53,314.91) ($61,543.01) ($46,164.34) ($53,314.91) ($39,988.70) ($46,164.34) ($34,694.10) ($39,988.70)

$2,797,836

$2,696,097

$2,

ate

10%

Developer-Investor Requirement

26 Year 25

10%

($30,194.70) ($34,694.10)

Current Depreciation Claimed Beginning Basis

$101,739 $2,797,836

$101,739 $2,696,097

$10 $2,

27 Year 26 28 Year 27

10% 10%

($26,412.05) ($30,194.70) ($23,915.85) ($26,412.05)

Cummulative Depreciation Claimed Current Depreciation Claimed Ending Balance Cummulative Depreciation Claimed

$101,739 $2,696,097 $101,739

$203,479 $101,739 $2,594,357 $203,479

$30 $10 $2, $30

29 Year 28 Year Year 30 29

10% 10% 10%

($22,563.80) ($23,915.85) ($21,694.36) ($22,563.80)

Ending Balance Personal Property

$2,696,097

$2,594,357

$2,

Year 30

10%

($21,694.36)

Beginning Basis Personal Property

Sources and Uses Sources and Uses Sources Permanent Mortgage Sources Investor's PermanentEquity Mortgage Total Sources Investor's Equity Total Sources Uses

$1,956,082 $1,246,660 $1,956,082 $3,202,741 $1,246,660 $3,202,741

Ending Balance Building Depreciation Beginning Basis Building Depreciation

$54,400

$46,629

$38

Current Depreciation Claimed Beginning Basis Cummulative Depreciation Claimed Current Depreciation Claimed

$7,771 $54,400 $7,771 $7,771

$7,771 $46,629 $15,543 $7,771

$7, $38 $23 $7,

Cummulative Depreciation Claimed Ending Balance

$7,771 $46,629

$15,543 $38,857

$23 $31

Ending Balance Fees and Points Amortization

$46,629

$38,857

$31

Beginning Basis Fees and Points Amortization Current Amortization Beginning Basis

$58,682

$56,726

$54

$1,956 $58,682 $1,956

$1,956 $56,726 $3,912 $1,956

$1, $54 $5, $1,

$56,726 $1,956

$54,770 $3,912

$52 $5,

$56,726

$54,770

$52

Land Acquisition Uses

$200,000

Cummulative Amortization Current Amortization Ending Balance Cummulative Amortization

Soft costs Land Acquisition

$517,556 $200,000

Ending Balance

Hard costs Soft costs

$2,280,280 $517,556

Hard costs loan fees Construction

$2,280,280 $61,568

loan fees Construction interest

$61,568 $84,655

Reversion (Termination) Cash at Sale (using Cap Rates)

Reversion (Termination) Accounts Accounts Year 1

Year 2

Ye

Permanent loan fees and points Construction interest Developer'sloan fee fees and points Permanent

$58,682 $84,655 $0 $58,682

NOIat Sale (using Cap Rates) Cash Estimated Sales Price NOI

$147,434 Year 1 $2,106,200 $147,434

$174,966 Year 2 $2,499,509 $174,966

$18 Ye $2, $18

Syndication fee costs Developer's Total Uses costs Syndication

$0 $3,202,741 $0

- Selling Costs Estimated Sales Price - Mortgage Balance Selling Costs

($126,372) $2,106,200 ($1,929,077) ($126,372)

($149,971) $2,499,509 ($1,900,588) ($149,971)

($1 $2, ($1

Total Uses

$3,202,741

Before Tax Cash on Sale - Mortgage Balance

$50,751 ($1,929,077)

$448,951 ($1,900,588)

$58 ($1

- Capital on Sale Before TaxGains Cash Tax on Sale - Capital Write-off of Unamortized Gains Tax on Sale Fees

$155,177.19 $50,751 ($56,726.37) $155,177.19

($89,684) $448,951 ($54,770) ($89,684)

($6 $58 ($5 ($6

Research and Baseline Sources

The depreciable basis for the building structure was calculated by subtracting the land costs (not depreciable) from the total development costs, and depreciated over a period of 27.5 years as per IRS publicaions (www.irs.gov/pub/irs-pdf/p946.pdf) to establish the yearly depreciable total. Personal property was estimated as being 20% of the first year’s gross yearly rent and depreciated over 7 years (as was specified in class lectures and handouts) to establish the yearly depreciable total. A further look into IRS publications seemed to describe the depreciable life of rental property equipment (curtains, carpets, etc.) as being 5 years, however a 7 year span was decided upon for use in the proformas as a more conservative figure.

The marginal tax rate was calculated by adding the state of Pennsylvania’s flat tax of 3.07% on long- and short-term capital gains to the tax-bracket derived federal tax rate of 35%, then subtracting the product of 3.07% and 35%.

Aerial images taken from (bingmaps.com) Information about Brewerytown and Strawberry Mansion development trends taken from various online articles posted at (nakedphilly.com). Other development data gathered from Philadelphia Redevelopment Authority’s website (http://www.phila.gov/pra) Information concerning plans for the East Fairmount Park reservoir and nature center gathered from PlanPhilly.com (http://planphilly.com/articles/2013/02/27) Unit mix and rent rate research conducted through (zillow.com) and (craigslist.com) Construction cost estimates conducted through (RSMeansOnline.com) Common area utilities, maintenance figures taken from BOMA Experience Exchange Report CAP rate estimated by cross-referencing the CBRE 2013 city-wide CAP Rate Survey with cap rates of comparable rental units being sold on (zillow.com)