NOTE

Model Limitations: 5 year structure

Lease revenue buildup uses manual analysis
Vacancy assumptions (three levels) require manual analysis
Current Market Rent $17.00 per s.f.
Gross square feet of building 101,350 s.f.
Net rentable square feet of building 96,500 s.f.
Projected Increase in Market Rent 2.50% per year
Management costs 5.00% of EGI
Estimated increase in CPI 2.50% per year
Vacancy rate Year 1 - 3 0.00%
Vacancy rate Year 4 5.00%
Vacancy rate Year 5 on 8.00% per year
Base
Tenant Sq. ft. Rent Base
per s.f. Rent
Tenant 1 20,000 $15.00 $300,000
Tenant 2 15,000 $15.50 232,500
Tenant 3 new 15,000 $17.00 255,000
Tenant 4 9,000 $14.50 130,500
Tenant 5 new 16,000 $17.00 272,000
Tenant 6 new 21,500 $16.75 360,125
Total 96,500 1,550,125
Note 1: Bolded rents are new Note 2: Expense stop excludes management expenses
Dollars per s.f.
Property tax $196,000 2.03
Insurance 14,000 0.15
Utilities 120,000 1.24
Janitorial 79,000 0.82
Maintenance 25,000 0.26
Subtotal (before mgt fee) 434,000 4.50
Management (estimated using base rent) $77,506 0.80
(EGI not yet known)
Analysis to arrive at NOI
Input Data:
SUMMARY LEASE INFORMATION
Summary Expense Information - Assumptions
Total $511,506 $5.30
Year 1 2
Property tax 196,000 201,880
Insurance 14,000 14,350
Utilities 120,000 124,200
Janitorial 79,000 81,370
Maintenance 25,000 25,625
Total before management 434,000 447,425
Per s.f. (rounded) 4.50 4.64
Year 1 2
Base Rents
Tenant 1 300,000 300,000
Tenant 2 232,500 232,500
Tenant 3 255,000 255,000
Tenant 4 130,500 130,500
Tenant 5 272,000 272,000
Tenant 6 360,125 360,125
Total base 1,550,125 1,550,125
CPI
Tenant 1 3,000 6,030
Tenant 2 2,906 5,849
Tenant 3 - 3,187
Tenant 4 1,631 3,283
Tenant 5 - 3,400
Tenant 6 - -
Total CPI 7,538 21,749
Expense Recoveries
Tenant 1 10,000 12,800
Tenant 2 3,750 5,850
Tenant 3 - 2,100
Tenant 4 2,250 3,510
Tenant 5 - 2,240
Tenant 6 - 3,010
Total Reimbursements 16,000 29,510
Total Revenues 1,573,663 1,601,384
PROJECTED REVENUE
Summary of Reimbursable Expenses - By year
Year 1 2
Base income 1,550,125 1,550,125
Plus CPI Adjustment 7,538 21,749
Plus Reimbursements 16,000 29,510
Total Potential Income 1,573,663 1,601,384
Less Vacancy 0 0
Effective Gross Income 1,573,663 1,601,384
Less operating expenses:
Reimbursable expenses 434,000 447,425
Management Fee 78,683 80,069
NOI $1,060,979 $1,073,890
Average compound increase in NOI 0.92%
PROJECTED NET OPERATING INCOME
Vacancy assumptions (three levels) require manual analysis
Expense CPI
Remaining stop adjustment
term (yrs) per s.f. %
3 $4.00 40.00%
4 4.25 50.00%
5 4.50 50.00%
4 4.25 50.00%
5 4.50 50.00%
5 4.50 0.00%
Note 2: Expense stop excludes management expenses
increase 3.00% per year
increase 2.50% per year
increase 3.50% per year
increase 3.00% per year
increase 2.50% per year
(before management expenses)
5.00% of EGI
Analysis to arrive at NOI
SUMMARY LEASE INFORMATION
Summary Expense Information - Assumptions
3 4 5 6
207,936 214,174 220,600 227,218
14,709 15,076 15,453 15,840 `
128,547 133,046 137,703 142,522
83,811 86,325 88,915 91,583
26,266 26,922 27,595 28,285
461,269 475,545 490,266 505,448
4.78 4.93 5.08 5.24
3 4 5 6
300,000 366,143 366,143 366,143
232,500 232,500 281,472 281,472
255,000 255,000 255,000 288,509
130,500 130,500 168,883 168,883
272,000 272,000 272,000 307,743
360,125 360,125 360,125 413,530
1,550,125 1,616,268 1,703,623 1,826,280
9,090 - 3,661 7,359
8,828 11,845 - 3,518
6,415 9,683 12,991 -
4,955 6,648 - 2,111
6,843 10,328 13,857 -
- - - -
36,131 38,504 30,510 12,989
15,600 - 3,000 6,200
7,950 10,200 - 2,400
4,200 6,450 8,700 -
4,770 6,120 - 1,440
4,480 6,880 9,280 -
6,020 9,245 12,470 -
43,020 38,895 33,450 10,040
1,629,276 1,693,667 1,767,583 1,849,309
PROJECTED REVENUE
Summary of Reimbursable Expenses - By year
3 4 5 6
1,550,125 1,616,268 1,703,623 1,826,280
36,131 38,504 30,510 12,989
43,020 38,895 33,450 10,040
1,629,276 1,693,667 1,767,583 1,849,309
0 84,683 141,407 147,945
1,629,276 1,608,983 1,626,176 1,701,364
461,269 475,545 490,266 505,448
81,464 80,449 81,309 85,068
$1,086,543 $1,052,989 $1,054,601 1,110,849
(from year 1 to 6)
PROJECTED NET OPERATING INCOME
Purchase Price 11,500,000
Estimated closing costs (% of PP) 1.0% (capitalized - non financing)
Annual "capex" reserve req't 1.0%
Going-out "cap rate" 8.5%
Selling expenses % 4.0%
Loan To Value Maximum 85.0%
DCR 1.35
Closing Points & Fees 2.5%
Interest rate 7.5%
Amortization Term 30 years
Term 10 years
Loan Calculations
Established Year 1 NOI $1,060,979 [See NOI schedule]
Implied Debt Service max (debt pmt) 785,911 [NOI/DCR]
Implied Loan max (DCR) 9,366,590 [PV supported by above]
Implied Loan max (LTV) 9,775,000
Max Actual Loan (lesser of two) 9,366,590
Estimated debt payment 785,911
Requirements:
Initial Reserve Requirement 25,000
Total Amount required to close 11,615,000
Less Loan Proceeds (net of pts.) 9,132,425
Total Equity Required 2,507,575
Source: Equity Contrib.
Limited Partners Funding % 2,382,196 95.0%
General Partner Funding % 125,379 5.0%
Admin Fee 1.0% of Ltd Ptr equity
Admin Fee Max 30,000
On-going cash reserve 50,000
"Pref" on equity 8.0% (non-accruing)
Residual flow to Limiteds 70.0%
Residual flow to General 30.0%
CF Distribution Rules
Deal Analysis
Partnership Cash Flows and Distributions
3rd Party Financing (Loan A shown here)
Equity Funding
Property Assumptions
Loan Analysis
Year 0 1 2
Mortgage Balance (EOY) 9,366,590 9,280,245 9,187,198
Payments 785,911 785,911
Principal 86,344 93,048
Interest 699,566 692,863
Cash Flow Analysis (Partnership Level)
Year 0 1 2
NOI 1,060,979 1,073,890
Capex expenditures/reserve (10,610) (10,739)
Debt Service (785,911) (785,911)
Partnership Admin Fee (23,822) (23,822)
Before-tax Cash Flow 240,637 253,418
Cash reserve requirement 25,000 50,000 50,000
Increase in reserve 25,000 0
Cash available for distribution (Ops) 215,637 253,418
DCR (info only) 1.350 1.366
Property Sale
Property Sale Gross Proceeds
Selling expenses:
Debt retirement:
Release of cash held in reserve
Cash available (on Sale)
Total "ptshp level" CF (2,507,575) 215,637 253,418
Total "Ptshp level" IRR 16.58%
Distributions to Partners
Operations Cash Flow Waterfall
Cash Available 215,637 253,418
Pref to Ltds (190,576) (190,576)
Remaining 25,061 62,843
Pref to RCP (10,030) (10,030)
Remaining 15,031 52,812
Residual to Ltds (10,522) (36,969)
Residual to RCP (4,509) (15,844)
Remaining - -
Sale Proceeds Cash Flow Waterfall
Cash Available
Ltds payback
Remaining
RCP payback
Remaining
Special distribution to Ltds
Special distribution to RCP
Remaining
Residual to Ltds
Residual to RCP
Remaining
Calculation of special distribution
C/F pre final dist. (2,382,196) 201,097 227,544
Ltds payback
Special pref.
Total (2,382,196) 201,097 227,544
Initial IRR to Ltd 12.00%
SUMMARY RECAP BY PARTNER
0 1 2
Ltds - ops (2,382,196) 201,097 227,544
- from sale
Total (2,382,196) 201,097 227,544
IRR 15.26%
RCP - ops (125,379) 14,540 25,874
- from sale
Total (125,379) 14,540 25,874
IRR 35.85%
Deal Analysis
Partnership Cash Flows and Distributions
3 4 5 6
9,086,927 8,978,871 8,862,427 8,736,943
785,911 785,911 785,911 785,911
100,271 108,055 116,444 125,484
685,640 677,855 669,467 660,427
3 4 5 6
1,086,543 1,052,989 1,054,601 1,110,849
(10,865) (10,530) (10,546)
(785,911) (785,911) (785,911)
(23,822) (23,822) (23,822)
265,945 232,727 234,323
50,000 50,000 50,000
0 0 0
265,945 232,727 234,323
1.383 1.340 1.342
13,068,807
(522,752)
(8,862,427)
50,000
3,733,628
265,945 232,727 3,967,950
265,945 232,727 234,323
(190,576) (190,576) (190,576)
75,370 42,151 43,747
(10,030) (10,030) (10,030)
65,339 32,121 33,717
(45,737) (22,485) (23,602)
(19,602) (9,636) (10,115)
- - -
3,733,628
(2,382,196)
1,351,432
(125,379)
1,226,053
(429,980)
796,073
(557,251)
(238,822)
236,313 213,060 214,177
2,382,196
429,980
236,313 213,060 3,026,354
3 4 5
236,313 213,060 214,177
3,369,427
236,313 213,060 3,583,605
29,632 19,667 20,145
364,201
29,632 19,667 384,346
Purchase Price 11,500,000
Estimated closing costs (% of PP) 1.0% (capitalized - non financing)
Annual "capex" reserve req't 1.0%
Going-out "cap rate" 8.5%
Selling expenses % 4.0%
Loan To Value Maximum 75.0%
DCR 1.40
Closing Points & Fees 1.5%
Interest rate 6.0%
Amortization Term 30 years
Term 10 years
Loan Calculations
Established Year 1 NOI $1,060,979 [See NOI schedule]
Implied Debt Service max (debt pmt) 757,842 [NOI/DCR]
Implied Loan max (DCR) 10,533,480 [PV supported by above]
Implied Loan max (LTV) 8,625,000
Max Actual Loan (lesser of two) 8,625,000
Estimated debt payment 620,535
Requirements:
Initial Reserve Requirement 25,000
Total Amount required to close 11,615,000
Less Loan Proceeds (net of pts.) 8,495,625
Total Equity Required 3,144,375
Source: Equity Contrib.
Limited Partners Funding % 2,987,156 95.0%
General Partner Funding % 157,219 5.0%
Admin Fee 1.0% of Ltd Ptr equity
Admin Fee Max 30,000
On-going cash reserve 50,000
"Pref" on equity 8.0% (non-accruing)
Residual flow to Limiteds 70.0%
Residual flow to General 30.0%
CF Distribution Rules
Deal Analysis
Partnership Cash Flows and Distributions
Property Assumptions
3rd Party Financing (Loan B shown here)
Equity Funding
Loan Analysis
Year 0 1 2
Mortgage Balance (EOY) 8,625,000 8,519,084 8,406,635
Payments 620,535 620,535
Principal 105,916 112,449
Interest 514,619 508,086
Cash Flow Analysis (Partnership Level)
Year 0 1 2
NOI 1,060,979 1,073,890
Capex expenditures/reserve (10,610) (10,739)
Debt Service (620,535) (620,535)
Partnership Admin Fee (29,872) (29,872)
Before-tax Cash Flow 399,963 412,745
Cash reserve requirement 25,000 50,000 50,000
Increase in reserve 25,000 0
Cash available for distribution (Ops) 374,963 412,745
DCR (info only) 1.710 1.731
Property Sale
Property Sale Gross Proceeds
Selling expenses:
Debt retirement:
Release of cash held in reserve
Cash available (on Sale)
Total "ptshp level" CF (3,144,375) 374,963 412,745
Total "Ptshp level" IRR 18.91%
Distributions to Partners
Operations Cash Flow Waterfall
Cash Available 374,963 412,745
Pref to Ltds (238,973) (238,973)
Remaining 135,991 173,772
Pref to RCP (12,578) (12,578)
Remaining 123,413 161,195
Residual to Ltds (86,389) (112,836)
Residual to RCP (37,024) (48,358)
Remaining - -
Sale Proceeds Cash Flow Waterfall
Cash Available
Ltds payback
Remaining
RCP payback
Remaining
Special distribution to Ltds
Special distribution to RCP
Remaining
Residual to Ltds
Residual to RCP
Remaining
Calculation of special distribution
C/F pre final dist. (2,987,156) 325,362 351,809
Ltds payback
Special pref.
Total (2,987,156) 325,362 351,809
Initial IRR to Ltd 12.00%
SUMMARY RECAP BY PARTNER
0 1 2
Ltds - ops (2,987,156) 325,362 351,809
- from sale
Total (2,987,156) 325,362 351,809
IRR 16.42%
RCP - ops (157,219) 49,601 60,936
- from sale
Total (157,219) 49,601 60,936
IRR 53.56%
Deal Analysis
Partnership Cash Flows and Distributions
3 4 5 6
8,287,251 8,160,503 8,025,938 7,883,073
620,535 620,535 620,535 620,535
119,384 126,748 134,565 142,865
501,151 493,787 485,970 477,670
3 4 5 6
1,086,543 1,052,989 1,054,601 1,110,849
(10,865) (10,530) (10,546)
(620,535) (620,535) (620,535)
(29,872) (29,872) (29,872)
425,272 392,053 393,649
50,000 50,000 50,000
0 0 0
425,272 392,053 393,649
1.751 1.697 1.700
13,068,807
(522,752)
(8,025,938)
50,000
4,570,117
425,272 392,053 4,963,765
425,272 392,053 393,649
(238,973) (238,973) (238,973)
186,299 153,080 154,676
(12,578) (12,578) (12,578)
173,722 140,503 142,099
(121,605) (98,352) (99,469)
(52,116) (42,151) (42,630)
- - -
4,570,117
(2,987,156)
1,582,960
(157,219)
1,425,742
(102,055)
1,323,686
(926,580.29)
(397,106)
360,578 337,325 338,442
2,987,156
102,055
360,578 337,325 3,427,653
3 4 5
360,578 337,325 338,442
4,015,792
360,578 337,325 4,354,234
64,694 54,728 55,207
554,325
64,694 54,728 609,532