Analysis to arrive at NOI

Model Limitations:

5 year structure
Lease revenue buildup uses manual
analysis
Vacancy assumptions (three levels) require manual
analysis

Input Data:
Current Market Rent
Gross square feet of building
Net rentable square feet of
building
Projected Increase in Market
Rent
Management costs
Estimated increase in CPI
Vacancy rate Year 1 - 3
Vacancy rate Year 4
Vacancy rate Year 5 on

$17.00
101,350

per s.f.
s.f.

96,500

s.f.

2.50%
5.00%
2.50%
0.00%
5.00%
8.00%

per year
of EGI
per year

per year

SUMMARY LEASE INFORMATION

Tenant

Sq. ft.

Tenant 1
Tenant 2
Tenant 3 new
Tenant 4
Tenant 5 new
Tenant 6 new

20,000
15,000
15,000
9,000
16,000
21,500

Total

96,500

Base
Rent
per s.f.
$15.00
$15.50
$17.00
$14.50
$17.00
$16.75

Base
Rent

Remaining
term (yrs)

Expense
stop
per s.f.

CPI
adjustment
%

3
4
5
4
5
5

$4.00
4.25
4.50
4.25
4.50
4.50

40.00%
50.00%
50.00%
50.00%
50.00%
0.00%

$300,000
232,500
255,000
130,500
272,000
360,125
1,550,125

Note 1: Bolded rents are

new

Note 2: Expense stop excludes management

expenses

Summary Expense Information - Assumptions

Dollars
Property tax
Insurance
Utilities
Janitorial
Maintenance
Subtotal (before mgt fee)
Management (estimated using base
rent)
(EGI not yet known)
Total

Year

per s.f.

$196,000
14,000
120,000
79,000
25,000

2.03
0.15
1.24
0.82
0.26

434,000

4.50

$77,506

0.80

$511,506

$5.30

increase
increase
increase
increase
increase

3.00%
2.50%
3.50%
3.00%
2.50%

per year
per year
per year
per year
per year

(before management expenses)

5.00%

of EGI

Summary of Reimbursable Expenses - By year

1
2
3

Property tax
Insurance
Utilities
Janitorial
Maintenance
Total before management
Per s.f. (rounded)

196,000
14,000
120,000
79,000
25,000
434,000
4.50

Year

201,880
14,350
124,200
81,370
25,625
447,425
4.64

207,936
14,709
128,547
83,811
26,266
461,269
4.78

PROJECTED REVENUE
2
3

214,174
15,076
133,046
86,325
26,922
475,545
4.93

220,600
15,453
137,703
88,915
27,595
490,266
5.08

227,218
15,840
142,522
91,583
28,285
505,448
5.24

Base Rents
Tenant 1

300,000

300,000

300,000

366,143

366,143

366,143

Tenant 2

232,500

232,500

232,500

232,500

281,472

281,472

Tenant 3

255,000

255,000

255,000

255,000

255,000

288,509

Tenant 4

130,500

130,500

130,500

130,500

168,883

168,883

Tenant 5

272,000

272,000

272,000

272,000

272,000

307,743

Tenant 6

360,125

360,125

360,125

360,125

360,125

413,530

1,550,125

1,550,125

1,616,268

1,703,623

1,826,280

3,661

7,359

Total base

1,550,125

CPI
Tenant 1

3,000

6,030

9,090

Tenant 2

2,906

5,849

8,828

11,845

Tenant 3

Tenant 4

1,631

Tenant 5
Tenant 6

0
0

Total CPI

3,187

6,415

9,683

3,283

4,955

6,648

6,843
0

10,328

38,504

3,400
0

3,518

12,991

0
0

13,857
0

7,538

21,749

36,131

Tenant 1

10,000

12,800

15,600

Tenant 2

3,750

5,850

7,950

10,200

2,100

4,200

6,450

4,770
4,480
6,020

6,120

2,111
0
0

30,510

12,989

3,000

6,200

Expense Recoveries

Tenant 3
Tenant 4
Tenant 5
Tenant 6
Total
Reimbursements

Total Revenues

0
2,250

3,510
0
0

2,240
3,010

16,000

29,510

1,573,663

1,601,384

43,020

1,629,276

2,400

8,700

6,880
9,245

0
9,280
12,470

1,440
0
0

38,895

33,450

10,040

1,693,667

1,767,583

1,849,309

Year

PROJECTED NET OPERATING INCOME

1
2
3

Base income
Plus CPI Adjustment

1,550,125
7,538

1,550,125
21,749

Plus Reimbursements

16,000

29,510

Total Potential Income

Less Vacancy
Effective Gross Income
Less operating expenses:
Reimbursable expenses
Management Fee
NOI

1,573,663

1,601,384

Average compound increase

in NOI

1,550,125
36,131
43,020

1,616,268
38,504

1,703,623
30,510

1,826,280
12,989

38,895

33,450

10,040

0
1,573,663

0
1,601,384

1,629,276
0
1,629,276

1,693,667
84,683
1,608,983

1,767,583
141,407
1,626,176

1,849,309
147,945
1,701,364

434,000
78,683
$1,060,979

447,425
80,069
$1,073,890

461,269
81,464
$1,086,543

475,545
80,449
$1,052,989

490,266
81,309
$1,054,601

505,448
85,068
$1,110,849

0.92%

(from year 1 to 6)

Deal Analysis
Partnership Cash Flows and Distributions
Property Assumptions
11,500,000

Purchase Price
Estimated closing costs (% of PP)
Annual "capex" reserve req't

1.0%
1.0%

Going-out "cap rate"

Selling expenses %

(capitalized - non
financing)

8.50%
4.0%
3rd Party Financing (Loan A shown here)

Loan To Value Maximum

DCR
Closing Points & Fees
Interest rate
Amortization Term
Term
Loan Calculations
Established Year 1 NOI
Implied Debt Service max
Implied Loan max (DCR)
Implied Loan max (LTV)
Max Actual Loan (lesser of two)

85.0%
1.35
2.5%
7.5%
30
10

$1,060,979
785,911
9,366,590
9,775,000
9,366,590

Estimated debt payment

years
years

[See NOI schedule]

[NOI/DCR]
[PV supported by above]

785,911
Equity Funding

Requirements:
Initial Reserve Requirement
Total Amount required to close
Less Loan Proceeds (net of pts.)
Total Equity Required

25,000
11,615,000
9,132,425
2,507,575

Source:
Limited Partners Funding %
General Partner Funding %

Equity Contrib.
2,382,196
125,379

Admin Fee
Admin Fee Max

On-going cash reserve

"Pref" on equity
Residual flow to Limiteds
Residual flow to General

1.0%
30,000
CF Distribution Rules
50,000
8.0%
70.0%
30.0%

95.0%
5.0%
of Ltd Ptr equity

(non-accruing)

Loan Analysis
Year
Mortgage Balance
(EOY)
Payments
Principal
Interest

9,366,590

9280245.23
785,911
86,344
699,566

9187197.64
785,911
93,048
692,863

9086926.52
785,911
100,271
685,640

8978871.10
785,911
108,055
677,855

8862427.05
785,911
116,444
669,467

8736943.14
785,911
125,484
660,427

4
1,052,989

5
1,054,601

Cash Flow Analysis (Partnership

Level)
Year
0
NOI

1
1,060,979

2
1,073,890

3
1,086,543

Capex
expenditures/reserve

10,610

10,739

10,865

10,530

10,546

Debt Service

785,911

785,911

785,911

785,911

785,911

Partnership Admin Fee

Before-tax Cash Flow

23,822
240,637

23,822
253,418

23,822
265,945

23,822
232,727

23,822
234,323

50,000
25,000

50,000
0

50,000
0

50,000
0

50,000
0

215,637

253,418

265,945

232,727

234,323

(1.350)

(1.366)

(1.383)

(1.340)

(1.342)

Cash reserve
requirement
Increase in reserve

25,000

Cash available for distribution (Ops)

DCR (info only)
Property Sale
Property Sale Gross
Proceeds

13,068,807

Selling expenses:

(522,752)

Debt retirement:
Release of cash held in
reserve
Cash available (on
Sale)

(8,862,427)

Total "ptshp level" CF

Total "Ptshp level" IRR

50,000
3,733,628

(2,507,575)
16.58%

215,637

253,418

265,945

232,727

3,967,950

6
1,110,849

Distributions to Partners
Operations Cash Flow
Waterfall

Cash Available

215,637

253,418

265,945

232,727

234,323

Pref to Ltds

190,576

190,576

190,576

190,576

190,576

Remaining

25,061

62,843

75,370

42,151

43,747

Pref to RCP

10,030

10,030

10,030

10,030

10,030

Remaining

15,031

52,812

65,339

32,121

33,717

Residual to Ltds

10,522

36,969

45,737

22,485

23,602

Residual to RCP
Remaining

4,509

15,844

19,602

9,636

10,115

Sale Proceeds Cash Flow Waterfall

Cash Available

3,733,628

Ltds payback

2,382,196

Remaining

1,351,432

RCP payback

125,379

Remaining

1,226,053

Special distribution to Ltds

Special distribution to RCP

430,700

Remaining

795,353

Residual to Ltds

556,747

Residual to RCP
Remaining

238,606
0

Calculation of special
distribution
C/F pre final dist.

(2,382,196)

201,097

227,544

236,313

213,060

214,177

Ltds payback

2,382,196

Special pref.

430,700

Total
Initial IRR to Ltd

(2,382,196)
12.000%

201,097

227,544

236,313

213,060

3,027,074

SUMMARY RECAP BY
PARTNER

0
Ltds - ops

(2,382,196)

1
201,097

2
227,544

3
236,313

4
213,060

- from sale
Total
IRR

RCP - ops

IRR

214,177
3,369,643

(2,382,196)
15.26%

201,097

227,544

236,313

213,060

3,583,821

(125,379)

14,540

25,874

29,632

19,667

20,145

- from sale
Total

363,985
(125,379)
35.84%

14,540

25,874

29,632

19,667

384,130

Deal Analysis
Partnership Cash Flows and Distributions
Property Assumptions
11,500,000

Purchase Price
Estimated closing costs (% of PP)
Annual "capex" reserve req't

1.0%
1.0%

Going-out "cap rate"

Selling expenses %

(capitalized - non
financing)

8.50%
4.0%
3rd Party Financing (Loan B shown here)

Loan To Value Maximum

DCR
Closing Points & Fees
Interest rate
Amortization Term
Term
Loan Calculations
Established Year 1 NOI
Implied Debt Service max
Implied Loan max (DCR)
Implied Loan max (LTV)
Max Actual Loan (lesser of two)

75.0%
1.40
1.5%
6.0%
30
10

$1,060,979
757,842
10,533,480
8,625,000
8,625,000

Estimated debt payment

years
years

[See NOI schedule]

[NOI/DCR]
[PV supported by above]

620,535
Equity Funding

Requirements:
Initial Reserve Requirement
Total Amount required to close
Less Loan Proceeds (net of pts.)
Total Equity Required

25,000
11,615,000
8,495,625
3,144,375

Source:
Limited Partners Funding %
General Partner Funding %

Equity Contrib.
2,987,156
157,219

Admin Fee
Admin Fee Max

On-going cash reserve

"Pref" on equity
Residual flow to Limiteds
Residual flow to General

1.0%
30,000
CF Distribution Rules
50,000
8.0%
70.0%
30.0%

95.0%
5.0%
of Ltd Ptr equity

(non-accruing)

Loan Analysis
Year
Mortgage Balance (EOY)
Payments
Principal
Interest

0
8,625,000

Cash Flow Analysis (Partnership Level)

Year
0
NOI

8519083.99
620,535
105,916
514,619

8406635.31
620,535
112,449
508,086

8287251.05
620,535
119,384
501,151

8160503.42
620,535
126,748
493,787

8025938.28
620,535
134,565
485,970

7883073.45
620,535
142,865
477,670

1
1,060,979

2
1,073,890

3
1,086,543

4
1,052,989

5
1,054,601

6
1,110,849

Capex expenditures/reserve

10,610

10,739

10,865

10,530

10,546

Debt Service

620,535

620,535

620,535

620,535

620,535

Partnership Admin Fee

Before-tax Cash Flow

29,872
399,963

29,872
412,745

29,872
425,272

29,872
392,053

29,872
393,649

50,000
25,000

50,000
0

50,000
0

50,000
0

50,000
0

374,963

412,745

425,272

392,053

393,649

(1.710)

(1.731)

(1.751)

(1.697)

(1.700)

Cash reserve requirement

Increase in reserve

25,000

Cash available for distribution (Ops)

DCR (info only)
Property Sale
Property Sale Gross
Proceeds

13,068,807

Selling expenses:

(522,752)

Debt retirement:
Release of cash held in
reserve
Cash available (on Sale)

(8,025,938)

Total "ptshp level" CF

Total "Ptshp level" IRR

50,000
4,570,117

(3,144,375)

374,963

412,745

425,272

392,053

4,963,765

18.91%

Distributions to Partners
Operations Cash Flow
Waterfall

Cash Available

374,963

412,745

425,272

392,053

393,649

Pref to Ltds

238,973

238,973

238,973

238,973

238,973

Remaining

135,991

173,772

186,299

153,080

154,676

Pref to RCP

12,578

12,578

12,578

12,578

12,578

Remaining

123,413

161,195

173,722

140,503

142,099

Residual to Ltds

86,389

112,836

121,605

98,352

99,469

Residual to RCP
Remaining

37,024

48,358
0

52,116
0

42,151
0

42,630
0

Sale Proceeds Cash Flow Waterfall

Cash Available

4,570,117

Ltds payback

2,987,156

Remaining

1,582,960

RCP payback

157,219

Remaining

1,425,742

Special distribution to Ltds

Special distribution to RCP

102,451

Remaining

1,323,291

Residual to Ltds

926,304

Residual to RCP
Remaining

396,987
0

Calculation of special
distribution
C/F pre final dist.

(2,987,156)

325,362

351,809

360,578

337,325

338,442

Ltds payback

2,987,156

Special pref.

102,451

Total
Initial IRR to Ltd

(2,987,156)
12.000%

325,362

351,809

360,578

337,325

3,428,049

SUMMARY RECAP BY
PARTNER

0
Ltds - ops

(2,987,156)

1
325,362

2
351,809

3
360,578

4
337,325

5
338,442

- from sale
Total
IRR

RCP - ops

4,015,911
(2,987,156)
16.42%

325,362

351,809

360,578

337,325

4,354,352

(157,219)

49,601

60,936

64,694

54,728

55,207

- from sale
Total
IRR

554,206
(157,219)
53.56%

49,601

60,936

64,694

54,728

609,413