, 01842596 mgarabedian@kw.com KW Commercial Jared Martin, Broker, CCIM 01319553 559-320-0611 jared.martin@kw.com Phone: 559-432-5533 Fax: 559-432-9324 1175 W. Shaw Avenue Fresno, CA 93711 kwcommercial.com Each Office is Independently Owned and Operated
Table of Contents Real Estate Investment Details... 3 Biography... 4 Property Description... 5 Property Photos... 6 Executive Summary... 7 Pro Forma Summary... 8 Cash Flow Analysis... 9 Annual Property Operating Data... 11 Annual Property Operating Data per Sq. Ft.... 15 Unit Mix Report... 19 Detailed General Expenses... 20 Property Resale Analysis... 24 Financial Indicators... 26 Loan Analysis... 28 Investment Return Analysis... 30 Property Equity Analysis... 32 Equity vs. Debt... 33 Cumulative Wealth Analysis... 34 Operating Income Analysis... 35 Gross Income Vs. Operating Expenses... 36 Attachment 1... Attachment
Real Estate Investment Details ANALYSIS Analysis Date: June 2010 PROPERTY Property: Property Address: Year Built: 1986 Villa Hermosa PURCHASE INFORMATION Property Type: Multi-Family Purchase Price: $6,900,000 Fair Market Value: $7,406,767 Units: 110 Total Rentable Sq. Ft.: 103,088 Resale Valuation 4.0% (annual appreciation) FINANCIAL INFORMATION Down Payment: $2,070,000 Closing Costs: $15,000 Federal Tax Rate: 15.0% State Tax Rate: 8.0% LOANS Debt Term Rate Payment LO Costs Adjustable $4,830,000 30 yrs 6.9% $31,810 $48,300 INCOME & EXPENSES Gross Operating Income: $1,142,880 Monthly GOI: $95,240 Total Annual Expenses: ($390,203) Monthly Expenses: ($32,517) CONTACT INFORMATION 01842596 mgarabedian@kw.com Jared Martin, Broker, CCIM 01319553 559-320-0611 jared.martin@kw.com The calculations and data presented are deemed to be accurate, but not guaranteed. They are intended for the purpose of illustrative projections and analysis. The information provided is not intended to replace or serve as substitute for any legal, accounting, investment, real estate, tax or other professional advice, consultation or service. The user of this software should consult with a professional in the respective legal, accounting, tax or other professional area before making any decisions. page 3 of 36
Biography PROFESSIONAL BIO Born in Fresno Ca, Matt attended Bullard High School and graduated in 1997. Matt excelled in the classroom and on the sports field competing in both Varsity Football and Baseball. In 1998 Matt attended a baseball camp at Long Beach State and immediately knew that becoming a Long Beach State Dirtbag was his destiny. As a 4 year member of the nationally ranked Long Beach State Baseball team, Matt experienced and developed the work ethic, discipline and drive that he uses in the Real Estate Profession today. Matt finished his undergraduate work at Long Beach State with a B.A. in Philosophy and studied for M.A. in Sports Management. In 2005, Matt moved back to Fresno and began working in the Finance Industry with Accredited Home Lenders and consistently performed amongst the best in the company in total volume and revenue each month. After the subprime meltdown, Matt knew he wanted to stay in the business and decided to go into Commercial Real Estate. In June of 2008 Matt obtained his California Real Estate Broker s License and immediately started in tenant representation and leasing as well as property management under the DBA Royal Realty which he took over from his grandfather who held the name in Fresno for over 60 years. In late 2009, Matt decided to join Keller Williams Westland Realty in Fresno to help launch its Commercial Real Estate Division. Coupled with his Commercial REO team and the Keller Williams network the transition was seamless and successful. Matt s primary focus with KW Commercial will be selling commercial investment properties throughout the Central Valley. Matt currently resides in Fresno, Ca with his wife Gianeh. page 4 of 36
Property Description Villa Hermosa 110 Unit Apartment Community Offering Villa Hermosa is a 110 Unit Apartment Community on 5.4 Acres in Fresno, California. As of 2010, Fresno's population was estimated at 505,479, making it the fifth largest city in California, the largest inland city in California, and the 35th largest in the nation. Fresno is located in the center of the wide San Joaquin Valley of Central California, approximately 200 miles (322 km) north of Los Angeles and 170 miles (274 km) south of the state capital, Sacramento. The city is part of the Fresno- Clovis metropolitan area, which, with a population of 1,002,046, is the second largest metropolitan area in the Central Valley after Sacramento. Home to strong neighborhoods, good schools, beautiful parks, vibrant culture, and a rich entrepreneurial spirit. And, let's not forget that Fresno boasts over 300 days of sunshine each year which blesses us with one of the best year 'round climates for outdoor activities anywhere in the country. Villa Hermosa Offers Many Amenities *Gated Community *3 Great Floor Plans to choose from *Laundry Center *Basketball Courts *Children's Playground *Icy Blue Pool Other Important Features Include: *Dishwasher *Washer/Dryer Hookups~ *Gas Water Heater page 5 of 36
Villa Hermosa Property Photos Villa Hermosa "A Rental Community" page 6 of 36
Executive Summary ACQUISITION COSTS Purchase Price, Points and Closing Costs $6,963,300 Investment - Cash $2,133,300 First Loan $4,830,000 INVESTMENT INFORMATION Purchase Price $6,900,000 Price per Unit $62,727 Price per Sq. Ft. $66.93 Income per Unit $10,931 Expenses per Unit ($3,547) INCOME, EXPENSES & CASH FLOW Gross Scheduled Income $1,202,400 Total Vacancy and Credits ($59,520) Operating Expenses ($390,203) Net Operating Income $752,677 Debt Service ($381,725) Cash Flow Before Taxes $370,952 Total Interest (Debt Service) ($331,708) Depreciation and Amortization ($211,104) Taxable Income (Loss) $209,864 Tax Savings (Costs) ($48,269) Cash Flow After Taxes $322,683 FINANCIAL INDICATORS Cash on Cash Return Before Taxes 17.39% Debt Coverage Ratio 1.97 Capitalization Rate 10.91% Gross Rent Multiplier 5.74 Gross Income / Square Feet $11.66 Gross Expenses / Square Feet ($3.79) Operating Expense Ratio 34.14% page 7 of 36
Pro Forma Summary UNIT MIX & ANNUAL SCHEDULED INCOME Type Units Actual Total Market Total TOTALS 110 $1,190,400 $1,190,400 ANNUALIZED INCOME INVESTMENT SUMMARY Price: $6,900,000 Year Built: 1986 Units: 110 Price/Unit: $62,727 RSF: 103,088 Price/RSF: $66.93 Actual Market Gross Potential Rent $1,190,400 $1,190,400 Less: Vacancy ($59,520) $0 Misc. Income $12,000 $148,752 Effective Gross Income $1,142,880 $1,339,152 Less: Expenses ($390,203) ($340,370) Net Operating Income $752,677 $998,782 Debt Service ($381,725) ($381,725) Net Cash Flow after Debt Service $370,952 $617,057 Principal Reduction $50,017 $50,017 Total Return $420,969 $667,074 Cap Rate: 10.91% Pro Forma Cap Rate: 14.48% GRM: 5.7 Pro Forma GRM: 5.2 FINANCING SUMMARY Loan Amount: $4,830,000 Down Payment: $2,070,000 Loan Type: Adjustable Interest Rate: 6.90000% Term: 30 years Monthly Payment: $31,810.39 ANNUALIZED EXPENSES Description Actual Market Replacement Reserves $30,000 $0 Wilmar-Misc Parts $13,721 $3,500 Trash, Water, Garbage $56,825 $27,564 Office Supplies $3,644 $3,000 PGE Vacancies $4,294 $2,200 Pool Care $3,937 $14,000 Management Fee Total $81,216 $24,000 Costless Plumbing $695 $27,000 Calif. Statewide Patrol $3,124 $6,672 Valley Wide Pest Control $3,205 $60,000 Farmers Insurance $57,946 $20,000 Carpet Installation $845 $72,000 Electrician Work $11,683 $58,524 Tel-Tech Communication $1,133 $2,400 Rubios Appliances $5,701 $13,188 Matson Alarm Company $423 $390 Big Bobs Carpet $10,458 $4,752 PGE Common area/office $12,929 $1,180 Farmers Workman Comp $5,639 $0 City Business Tax & Lic. $1,704 $0 Real Property Taxes $77,330 $0 AT&T (all lines) $3,752 $0 Total Expenses $390,203 $340,370 Expenses Per RSF $3.79 $3.30 Expenses Per Unit $3,547 $3,094 page 8 of 36
Cash Flow Analysis Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 GROSS SCHEDULED INCOME $1,202,400 $1,226,208 $1,250,492 $1,275,262 $1,300,527 $1,326,298 $1,352,584 $1,379,395 $1,406,743 $1,434,638 Turnover Vacancy ($14,802) ($15,098) ($15,400) ($15,708) ($16,022) ($16,343) ($16,669) ($17,003) ($17,343) ($17,690) General Vacancy ($44,718) ($45,612) ($46,525) ($47,455) ($48,404) ($49,372) ($50,360) ($51,367) ($52,394) ($53,442) Total Operating Expenses ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) NET OPERATING INCOME $752,677 $775,294 $798,364 $821,896 $845,898 $870,380 $895,351 $920,822 $946,803 $973,303 Loan Payment ($381,725) ($381,725) ($381,725) ($457,268) ($536,100) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) NET CASH FLOW (b/t) $370,952 $393,570 $416,640 $364,627 $309,798 $330,301 $355,272 $380,743 $406,724 $433,224 Cash On Cash Return b/t 17.39% 18.45% 19.53% 17.09% 14.52% 15.48% 16.65% 17.85% 19.07% 20.31% NET OPERATING INCOME $752,677 $775,294 $798,364 $821,896 $845,898 $870,380 $895,351 $920,822 $946,803 $973,303 Depreciation ($209,494) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) Amortization ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) Loan Interest ($331,708) ($328,145) ($324,329) ($413,797) ($502,540) ($503,300) ($499,044) ($494,295) ($488,997) ($483,086) TAXABLE INCOME (LOSS) $209,864 $226,905 $253,791 $187,854 $123,113 $146,835 $176,063 $206,283 $237,561 $269,972 Income Taxes ($48,269) ($52,188) ($58,372) ($43,207) ($28,316) ($33,772) ($40,495) ($47,445) ($54,639) ($62,094) CASH FLOW (a/t) $322,683 $341,382 $358,268 $321,421 $281,482 $296,529 $314,778 $333,298 $352,085 $371,130 Cash On Cash Return a/t 15.13% 16.00% 16.79% 15.07% 13.19% 13.90% 14.76% 15.62% 16.50% 17.40% Footnotes: b/t = before taxes;a/t = after taxes page 9 of 36
Cash Flow Analysis Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 GROSS SCHEDULED INCOME $1,463,091 $1,492,113 $1,521,715 $1,551,909 $1,582,708 $1,614,122 $1,646,164 $1,678,847 $1,712,184 $1,746,188 Turnover Vacancy ($18,044) ($18,404) ($18,773) ($19,148) ($19,531) ($19,922) ($20,320) ($20,726) ($21,141) ($21,564) General Vacancy ($54,511) ($55,601) ($56,713) ($57,848) ($59,004) ($60,185) ($61,388) ($62,616) ($63,868) ($65,146) Total Operating Expenses ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) NET OPERATING INCOME $1,000,333 $1,027,904 $1,056,026 $1,084,711 $1,113,969 $1,143,812 $1,174,253 $1,205,302 $1,236,972 $1,269,275 Loan Payment ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) ($540,079) NET CASH FLOW (b/t) $460,254 $487,825 $515,947 $544,632 $573,890 $603,733 $634,174 $665,223 $696,893 $729,196 Cash On Cash Return b/t 21.57% 22.87% 24.19% 25.53% 26.90% 28.30% 29.73% 31.18% 32.67% 34.18% NET OPERATING INCOME $1,000,333 $1,027,904 $1,056,026 $1,084,711 $1,113,969 $1,143,812 $1,174,253 $1,205,302 $1,236,972 $1,269,275 Depreciation ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($218,634) ($209,514) Amortization ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) ($1,610) Loan Interest ($476,491) ($469,133) ($460,923) ($451,763) ($441,543) ($430,141) ($417,419) ($403,225) ($387,389) ($369,719) TAXABLE INCOME (LOSS) $303,598 $338,527 $374,859 $412,703 $452,181 $493,427 $536,589 $581,832 $629,339 $688,432 Income Taxes ($69,827) ($77,861) ($86,217) ($94,922) ($104,002) ($113,488) ($123,416) ($133,821) ($144,748) ($158,339) CASH FLOW (a/t) $390,427 $409,964 $429,730 $449,710 $469,888 $490,245 $510,758 $531,401 $552,145 $570,857 Cash On Cash Return a/t 18.30% 19.22% 20.14% 21.08% 22.03% 22.98% 23.94% 24.91% 25.88% 26.76% Footnotes: b/t = before taxes;a/t = after taxes page 10 of 36
Annual Property Operating Data Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Rental Income $1,190,400 $1,214,208 $1,238,492 $1,263,262 $1,288,527 $1,314,298 $1,340,584 $1,367,395 $1,394,743 $1,422,638 Miscellaneous Income $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 GROSS SCHEDULED INCOME $1,202,400 $1,226,208 $1,250,492 $1,275,262 $1,300,527 $1,326,298 $1,352,584 $1,379,395 $1,406,743 $1,434,638 Turnover Vacancy ($14,802) ($15,098) ($15,400) ($15,708) ($16,022) ($16,343) ($16,669) ($17,003) ($17,343) ($17,690) General Vacancy ($44,718) ($45,612) ($46,525) ($47,455) ($48,404) ($49,372) ($50,360) ($51,367) ($52,394) ($53,442) GROSS OPERATING INCOME $1,142,880 $1,165,498 $1,188,568 $1,212,099 $1,236,101 $1,260,583 $1,285,555 $1,311,026 $1,337,006 $1,363,506 Expenses Replacement Reserves ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Wilmar-Misc Parts ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) Trash, Water, Garbage ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) Office Supplies ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) PGE Vacancies ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) Pool Care ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) Management Fee Total ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) Costless Plumbing ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) Calif. Statewide Patrol ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) Valley Wide Pest Control ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) Farmers Insurance ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) Carpet Installation ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) Electrician Work ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) page 11 of 36
Annual Property Operating Data Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Tel-Tech Communication ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) Rubios Appliances ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) Matson Alarm Company ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) Big Bobs Carpet ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) PGE Common area/office ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) Farmers Workman Comp ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) City Business Tax & Lic. ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) Real Property Taxes ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) AT&T (all lines) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) TOTAL OPERATING EXPENSES ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) NET OPERATING INCOME $752,677 $775,294 $798,364 $821,896 $845,898 $870,380 $895,351 $920,822 $946,803 $973,303 page 12 of 36
Annual Property Operating Data Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Rental Income $1,451,091 $1,480,113 $1,509,715 $1,539,909 $1,570,708 $1,602,122 $1,634,164 $1,666,847 $1,700,184 $1,734,188 Miscellaneous Income $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 GROSS SCHEDULED INCOME $1,463,091 $1,492,113 $1,521,715 $1,551,909 $1,582,708 $1,614,122 $1,646,164 $1,678,847 $1,712,184 $1,746,188 Turnover Vacancy ($18,044) ($18,404) ($18,773) ($19,148) ($19,531) ($19,922) ($20,320) ($20,726) ($21,141) ($21,564) General Vacancy ($54,511) ($55,601) ($56,713) ($57,848) ($59,004) ($60,185) ($61,388) ($62,616) ($63,868) ($65,146) GROSS OPERATING INCOME $1,390,536 $1,418,107 $1,446,229 $1,474,914 $1,504,172 $1,534,016 $1,564,456 $1,595,505 $1,627,175 $1,659,479 Expenses Replacement Reserves ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Wilmar-Misc Parts ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) Trash, Water, Garbage ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) Office Supplies ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) PGE Vacancies ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) Pool Care ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) Management Fee Total ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) Costless Plumbing ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) Calif. Statewide Patrol ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) Valley Wide Pest Control ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) Farmers Insurance ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) Carpet Installation ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) Electrician Work ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) page 13 of 36
Annual Property Operating Data Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Tel-Tech Communication ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) Rubios Appliances ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) Matson Alarm Company ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) Big Bobs Carpet ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) PGE Common area/office ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) Farmers Workman Comp ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) City Business Tax & Lic. ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) Real Property Taxes ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) AT&T (all lines) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) TOTAL OPERATING EXPENSES ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) NET OPERATING INCOME $1,000,333 $1,027,904 $1,056,026 $1,084,711 $1,113,969 $1,143,812 $1,174,253 $1,205,302 $1,236,972 $1,269,275 page 14 of 36
Annual Property Operating Data per Sq. Ft. Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Rental Income $11.55 $11.78 $12.01 $12.25 $12.50 $12.75 $13.00 $13.26 $13.53 $13.80 Miscellaneous Income $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 GROSS SCHEDULED INCOME $11.66 $11.89 $12.13 $12.37 $12.62 $12.87 $13.12 $13.38 $13.65 $13.92 Turnover Vacancy ($0.14) ($0.15) ($0.15) ($0.15) ($0.16) ($0.16) ($0.16) ($0.16) ($0.17) ($0.17) General Vacancy ($0.43) ($0.44) ($0.45) ($0.46) ($0.47) ($0.48) ($0.49) ($0.50) ($0.51) ($0.52) GROSS OPERATING INCOME $11.09 $11.31 $11.53 $11.76 $11.99 $12.23 $12.47 $12.72 $12.97 $13.23 Expenses Replacement Reserves ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) Wilmar-Misc Parts ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) Trash, Water, Garbage ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) Office Supplies ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) PGE Vacancies ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) Pool Care ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) Management Fee Total ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) Costless Plumbing ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Calif. Statewide Patrol ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) Valley Wide Pest Control ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) Farmers Insurance ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) Carpet Installation ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Electrician Work ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) page 15 of 36
Annual Property Operating Data per Sq. Ft. Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Tel-Tech Communication ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Rubios Appliances ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) Matson Alarm Company ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) Big Bobs Carpet ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) PGE Common area/office ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) Farmers Workman Comp ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) City Business Tax & Lic. ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) Real Property Taxes ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) AT&T (all lines) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) TOTAL OPERATING EXPENSES ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) NET OPERATING INCOME $7.30 $7.52 $7.74 $7.97 $8.21 $8.44 $8.69 $8.93 $9.18 $9.44 page 16 of 36
Annual Property Operating Data per Sq. Ft. Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Rental Income $14.08 $14.36 $14.64 $14.94 $15.24 $15.54 $15.85 $16.17 $16.49 $16.82 Miscellaneous Income $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 $0.12 GROSS SCHEDULED INCOME $14.19 $14.47 $14.76 $15.05 $15.35 $15.66 $15.97 $16.29 $16.61 $16.94 Turnover Vacancy ($0.18) ($0.18) ($0.18) ($0.19) ($0.19) ($0.19) ($0.20) ($0.20) ($0.21) ($0.21) General Vacancy ($0.53) ($0.54) ($0.55) ($0.56) ($0.57) ($0.58) ($0.60) ($0.61) ($0.62) ($0.63) GROSS OPERATING INCOME $13.49 $13.76 $14.03 $14.31 $14.59 $14.88 $15.18 $15.48 $15.78 $16.10 Expenses Replacement Reserves ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) ($0.29) Wilmar-Misc Parts ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) Trash, Water, Garbage ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) ($0.55) Office Supplies ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) PGE Vacancies ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) Pool Care ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) Management Fee Total ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) ($0.79) Costless Plumbing ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Calif. Statewide Patrol ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) Valley Wide Pest Control ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) ($0.03) Farmers Insurance ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) ($0.56) Carpet Installation ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Electrician Work ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) ($0.11) page 17 of 36
Annual Property Operating Data per Sq. Ft. Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Tel-Tech Communication ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) Rubios Appliances ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) ($0.06) Matson Alarm Company ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) ($0.00) Big Bobs Carpet ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) ($0.10) PGE Common area/office ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) ($0.13) Farmers Workman Comp ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) ($0.05) City Business Tax & Lic. ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) ($0.02) Real Property Taxes ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) ($0.75) AT&T (all lines) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) ($0.04) TOTAL OPERATING EXPENSES ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) NET OPERATING INCOME $9.70 $9.97 $10.24 $10.52 $10.81 $11.10 $11.39 $11.69 $12.00 $12.31 page 18 of 36
Unit Mix Report UNIT MIXES # Units Type Approx. SqFt Avg. Rents Monthly Mkt Rents Monthly 23 4 Bed/ 2 Bath 1050 $1,050 $24,150 $1,050 $24,150 56 3 Bed/ 2 Bath 966 $925 $51,800 $925 $51,800 31 2 Bed/ 1 Bath 750 $750 $23,250 $750 $23,250 0 0 page 19 of 36 $0 $0 $0 $0
Detailed General Expenses Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Expenses ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) Replacement Reserves ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Wilmar-Misc Parts ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) Trash, Water, Garbage ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) Office Supplies ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) PGE Vacancies ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) Pool Care ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) Management Fee Total ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) Costless Plumbing ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) Calif. Statewide Patrol ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) Valley Wide Pest Control ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) Farmers Insurance ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) Carpet Installation ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) Electrician Work ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) Tel-Tech Communication ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) Rubios Appliances ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) Matson Alarm Company ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) Big Bobs Carpet ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) PGE Common area/office ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) Farmers Workman Comp ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) City Business Tax & Lic. ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) page 20 of 36
Detailed General Expenses Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Real Property Taxes ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) AT&T (all lines) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) page 21 of 36
Detailed General Expenses Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Total Expenses ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) ($390,203) Replacement Reserves ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Wilmar-Misc Parts ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) ($13,721) Trash, Water, Garbage ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) ($56,825) Office Supplies ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) ($3,644) PGE Vacancies ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) ($4,294) Pool Care ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) ($3,937) Management Fee Total ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) ($81,216) Costless Plumbing ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) ($695) Calif. Statewide Patrol ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) ($3,124) Valley Wide Pest Control ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) ($3,205) Farmers Insurance ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) ($57,946) Carpet Installation ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) ($845) Electrician Work ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) ($11,683) Tel-Tech Communication ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) ($1,133) Rubios Appliances ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) ($5,701) Matson Alarm Company ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) ($423) Big Bobs Carpet ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) ($10,458) PGE Common area/office ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) ($12,929) Farmers Workman Comp ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) ($5,639) City Business Tax & Lic. ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) ($1,704) page 22 of 36
Detailed General Expenses Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Real Property Taxes ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) ($77,330) AT&T (all lines) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) ($3,752) page 23 of 36
Property Resale Analysis Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Projected Property Value $7,703,038 $8,011,159 $8,331,606 $8,664,870 $9,011,465 $9,371,923 $9,746,800 $10,136,672 $10,542,139 $10,963,825 Resale Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Proceeds b/f Debt Payoff $7,703,038 $8,011,159 $8,331,606 $8,664,870 $9,011,465 $9,371,923 $9,746,800 $10,136,672 $10,542,139 $10,963,825 Basis at Acquisition $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 Depreciation ($209,494) ($428,129) ($646,763) ($865,397) ($1,084,031) ($1,302,666) ($1,521,300) ($1,739,934) ($1,958,569) ($2,177,203) Adjusted Tax Basis $6,705,506 $6,486,871 $6,268,237 $6,049,603 $5,830,969 $5,612,334 $5,393,700 $5,175,066 $4,956,431 $4,737,797 Resale Tax Gain (Loss) $997,532 $1,524,288 $2,063,369 $2,615,267 $3,180,496 $3,759,589 $4,353,100 $4,961,606 $5,585,707 $6,226,027 Resale Tax Benefit (Cost) ($31,424) ($64,219) ($97,014) ($129,810) ($162,605) ($195,400) ($228,195) ($260,990) ($293,785) ($326,580) Ord. Income Tax Savings (Cost) $10,739 $10,368 $9,998 $9,628 $9,258 $8,887 $8,517 $8,147 $7,776 $7,406 Loan Principal Balance ($4,779,983) ($4,726,404) ($4,669,009) ($4,625,537) ($4,591,977) ($4,555,198) ($4,514,163) ($4,468,380) ($4,417,298) ($4,360,306) Replacement Reserves $30,000 $60,000 $90,000 $120,000 $150,000 $180,000 $210,000 $240,000 $270,000 $300,000 Net Resale Proceeds $2,932,369 $3,290,904 $3,665,581 $4,039,151 $4,416,140 $4,810,212 $5,222,959 $5,655,449 $6,108,832 $6,584,344 Footnotes: b/f = before page 24 of 36
Property Resale Analysis Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Projected Property Value $11,402,378 $11,858,473 $12,332,812 $12,826,124 $13,339,169 $13,872,736 $14,427,645 $15,004,751 $15,604,941 $16,229,139 Resale Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Proceeds b/f Debt Payoff $11,402,378 $11,858,473 $12,332,812 $12,826,124 $13,339,169 $13,872,736 $14,427,645 $15,004,751 $15,604,941 $16,229,139 Basis at Acquisition $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 $6,915,000 Depreciation ($2,395,837) ($2,614,471) ($2,833,106) ($3,051,740) ($3,270,374) ($3,489,008) ($3,707,643) ($3,926,277) ($4,144,911) ($4,354,425) Adjusted Tax Basis $4,519,163 $4,300,529 $4,081,894 $3,863,260 $3,644,626 $3,425,992 $3,207,357 $2,988,723 $2,770,089 $2,560,575 Resale Tax Gain (Loss) $6,883,215 $7,557,944 $8,250,917 $8,962,864 $9,694,543 $10,446,744 $11,220,288 $12,016,028 $12,834,852 $13,668,564 Resale Tax Benefit (Cost) ($359,376) ($392,171) ($424,966) ($457,761) ($490,556) ($523,351) ($556,146) ($588,942) ($621,737) ($653,164) Ord. Income Tax Savings (Cost) $7,036 $6,665 $6,295 $5,925 $5,555 $5,184 $4,814 $4,444 $4,073 $0 Loan Principal Balance ($4,296,718) ($4,225,772) ($4,146,616) ($4,058,301) ($3,959,765) ($3,849,827) ($3,727,168) ($3,590,314) ($3,437,624) ($3,267,264) Replacement Reserves $330,000 $360,000 $390,000 $420,000 $450,000 $480,000 $510,000 $540,000 $570,000 $600,000 Net Resale Proceeds $7,083,320 $7,607,195 $8,157,525 $8,735,987 $9,344,402 $9,984,741 $10,659,145 $11,369,939 $12,119,654 $12,908,710 Footnotes: b/f = before page 25 of 36
Financial Indicators Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Gross Rent Multiplier 6.41 6.53 6.66 6.79 6.93 7.07 7.21 7.35 7.49 7.64 Capitalization Rate 10.91% 11.24% 11.57% 11.91% 12.26% 12.61% 12.98% 13.35% 13.72% 14.11% Cash On Cash Return b/t 17.39% 18.45% 19.53% 17.09% 14.52% 15.48% 16.65% 17.85% 19.07% 20.31% Cash On Cash Return a/t 15.13% 16.00% 16.79% 15.07% 13.19% 13.90% 14.76% 15.62% 16.50% 17.40% Debt Coverage Ratio 1.97 2.03 2.09 1.80 1.58 1.61 1.66 1.70 1.75 1.80 Gross Income per Sq. Ft. $11.66 $11.89 $12.13 $12.37 $12.62 $12.87 $13.12 $13.38 $13.65 $13.92 Expenses per Sq. Ft. ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) Net Income Multiplier 10.23 10.33 10.44 10.54 10.65 10.77 10.89 11.01 11.13 11.26 Operating Expense Ratio 34.14% 33.48% 32.83% 32.19% 31.57% 30.95% 30.35% 29.76% 29.18% 28.62% Loan To Value Ratio 62.05% 59.00% 56.04% 53.38% 50.96% 48.60% 46.31% 44.08% 41.90% 39.77% Footnotes: b/t = before taxes; a/t = after taxes page 26 of 36
Financial Indicators Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Gross Rent Multiplier 7.79 7.95 8.10 8.26 8.43 8.59 8.76 8.94 9.11 9.29 Capitalization Rate 14.50% 14.90% 15.30% 15.72% 16.14% 16.58% 17.02% 17.47% 17.93% 18.40% Cash On Cash Return b/t 21.57% 22.87% 24.19% 25.53% 26.90% 28.30% 29.73% 31.18% 32.67% 34.18% Cash On Cash Return a/t 18.30% 19.22% 20.14% 21.08% 22.03% 22.98% 23.94% 24.91% 25.88% 26.76% Debt Coverage Ratio 1.85 1.90 1.96 2.01 2.06 2.12 2.17 2.23 2.29 2.35 Gross Income per Sq. Ft. $14.19 $14.47 $14.76 $15.05 $15.35 $15.66 $15.97 $16.29 $16.61 $16.94 Expenses per Sq. Ft. ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) ($3.79) Net Income Multiplier 11.40 11.54 11.68 11.82 11.97 12.13 12.29 12.45 12.62 12.79 Operating Expense Ratio 28.06% 27.52% 26.98% 26.46% 25.94% 25.44% 24.94% 24.46% 23.98% 23.51% Loan To Value Ratio 37.68% 35.64% 33.62% 31.64% 29.69% 27.75% 25.83% 23.93% 22.03% 20.13% Footnotes: b/t = before taxes; a/t = after taxes page 27 of 36
Loan Analysis Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 LOAN 1 Debt Service Analysis Principal Payments $50,017 $53,579 $57,395 $43,471 $33,560 $36,779 $41,035 $45,783 $51,082 $56,993 Interest Payments $331,708 $328,145 $324,329 $413,797 $502,540 $503,300 $499,044 $494,295 $488,997 $483,086 Total Debt Service $381,725 $381,725 $381,725 $457,268 $536,100 $540,079 $540,079 $540,079 $540,079 $540,079 Principal Balance Analysis Beginning Principal Balance $4,830,000 $4,779,983 $4,726,404 $4,669,009 $4,625,537 $4,591,977 $4,555,198 $4,514,163 $4,468,380 $4,417,298 Principal Reductions $50,017 $53,579 $57,395 $43,471 $33,560 $36,779 $41,035 $45,783 $51,082 $56,993 Ending Principal Balance $4,779,983 $4,726,404 $4,669,009 $4,625,537 $4,591,977 $4,555,198 $4,514,163 $4,468,380 $4,417,298 $4,360,306 page 28 of 36
Loan Analysis Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 LOAN 1 Debt Service Analysis Principal Payments $63,588 $70,946 $79,156 $88,316 $98,535 $109,938 $122,660 $136,854 $152,690 $170,359 Interest Payments $476,491 $469,133 $460,923 $451,763 $441,543 $430,141 $417,419 $403,225 $387,389 $369,719 Total Debt Service $540,079 $540,079 $540,079 $540,079 $540,079 $540,079 $540,079 $540,079 $540,079 $540,079 Principal Balance Analysis Beginning Principal Balance $4,360,306 $4,296,718 $4,225,772 $4,146,616 $4,058,301 $3,959,765 $3,849,827 $3,727,168 $3,590,314 $3,437,624 Principal Reductions $63,588 $70,946 $79,156 $88,316 $98,535 $109,938 $122,660 $136,854 $152,690 $170,359 Ending Principal Balance $4,296,718 $4,225,772 $4,146,616 $4,058,301 $3,959,765 $3,849,827 $3,727,168 $3,590,314 $3,437,624 $3,267,264 page 29 of 36
Investment Return Analysis Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cash Flow - To Date $322,683 $664,065 $1,022,333 $1,343,753 $1,625,235 $1,921,764 $2,236,541 $2,569,840 $2,921,925 $3,293,055 Net Resale Proceeds $2,932,369 $3,290,904 $3,665,581 $4,039,151 $4,416,140 $4,810,212 $5,222,959 $5,655,449 $6,108,832 $6,584,344 Invested Capital ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) Net Return on Investment $1,121,752 $1,821,669 $2,554,613 $3,249,604 $3,908,075 $4,598,676 $5,326,200 $6,091,989 $6,897,456 $7,744,100 Internal Rate of Return N/A 38.27% 33.29% 30.12% 27.77% 26.12% 24.88% 23.91% 23.13% 22.48% Modified IRR 52.58% 36.16% 30.01% 26.04% 23.14% 21.11% 19.58% 18.38% 17.39% 16.56% NPV (cash flow + reversion) $1,170,021 $1,922,126 $2,713,442 $3,451,639 $4,138,426 $4,862,799 $5,630,818 $6,444,052 $7,304,158 $8,212,895 PV (NOI + reversion) $8,455,714 $9,539,130 $10,657,941 $11,813,101 $13,005,593 $14,236,431 $15,506,659 $16,817,353 $18,169,623 $19,564,612 Footnotes: a/t = after taxes; Modified IRR = Modified Internal Rate of Return; PV = Present Value; NPV = Net Present Value; NOI = Net Operating Income Reversion = Amount received from the resale; Net Return on Investment = Cash Flow (a/t To Date) + Net Proceeds from Resale - Invested Capital. page 30 of 36
Investment Return Analysis Description Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Cash Flow - To Date $3,683,482 $4,093,446 $4,523,175 $4,972,885 $5,442,774 $5,933,019 $6,443,777 $6,975,179 $7,527,324 $8,098,181 Net Resale Proceeds $7,083,320 $7,607,195 $8,157,525 $8,735,987 $9,344,402 $9,984,741 $10,659,145 $11,369,939 $12,119,654 $12,908,710 Invested Capital ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) ($2,133,300) Net Return on Investment $8,633,502 $9,567,341 $10,547,400 $11,575,573 $12,653,876 $13,784,460 $14,969,622 $16,211,818 $17,513,677 $18,873,591 Internal Rate of Return 21.93% 21.45% 21.04% 20.68% 20.37% 20.08% 19.83% 19.60% 19.39% 19.21% Modified IRR 15.85% 15.24% 14.70% 14.21% 13.78% 13.38% 13.03% 12.70% 12.40% 12.12% NPV (cash flow + reversion) $9,172,125 $10,183,825 $11,250,102 $12,373,196 $13,555,501 $14,799,574 $16,108,151 $17,484,168 $18,930,776 $20,449,029 PV (NOI + reversion) $21,003,498 $22,487,497 $24,017,862 $25,595,885 $27,222,898 $28,900,277 $30,629,439 $32,411,847 $34,249,009 $36,142,482 Footnotes: a/t = after taxes; Modified IRR = Modified Internal Rate of Return; PV = Present Value; NPV = Net Present Value; NOI = Net Operating Income Reversion = Amount received from the resale; Net Return on Investment = Cash Flow (a/t To Date) + Net Proceeds from Resale - Invested Capital. page 31 of 36
Property Equity Analysis $13,000,000 $11,700,000 $10,400,000 $9,100,000 $7,800,000 $6,500,000 $5,200,000 $3,900,000 $2,600,000 $1,300,000 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Legend Initial Equity Equity (loan reduction) Equity (appreciation) page 32 of 36
Equity vs. Debt $13,000,000 $11,700,000 $10,400,000 $9,100,000 $7,800,000 $6,500,000 $5,200,000 $3,900,000 $2,600,000 $1,300,000 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Legend Equity Loan Principal Balance page 33 of 36
Cumulative Wealth Analysis $19,000,000 $17,100,000 $15,200,000 $13,300,000 $11,400,000 $9,500,000 $7,600,000 $5,700,000 $3,800,000 $1,900,000 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Legend Equity (loan reduction) Equity (appreciation) CASH FLOW (a/t) page 34 of 36
Operating Income Analysis $1,700,000 $1,530,000 $1,360,000 $1,190,000 $1,020,000 $850,000 $680,000 $510,000 $340,000 $170,000 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Legend GROSS OPERATING INCOME NET OPERATING INCOME NET CASH FLOW (b/t) page 35 of 36
Gross Income Vs. Operating Expenses $1,800,000 $1,620,000 $1,440,000 $1,260,000 $1,080,000 $900,000 $720,000 $540,000 $360,000 $180,000 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Legend GROSS SCHEDULED INCOME Total Operating Expenses page 36 of 36