The Lakes At Fair Meadow

Summary of Development Assumptions - 8/28/2012

SITE INFORMATION
The Lakes At Fair Meadow

Project Name

DEVELOPMENT USES OF FUNDS

Land and Acquisition Costs

Address
County
Land Owner
Zoning
Maximum Allowable Densiy
Site Acreage
Total Allowable Housing Units

Old Fairgrounds, Anytown, NY 12345

Fairford County
Jones Family Trust
Residential-4
4 DUs per acre
25 acres
100 Housing Units

PROJECT TIMING AND SALES VELOCITY ASSUMPTIONS

Month #
Mo. 1
Mo. 6
Mo. 9

Analysis Start Date

Land Deposit Date
Land Closing Date
Event
Pre-Construction (months)

Duration
8 months

100 Homes
Sitework and Infrastructure Construction Start
Construction Duration (months) / End
Post-Foundation House Construction Cycle
First House Foundation Start
Foundation Starts (Consecutive months)
Maximum Unit Closings per Month
Unit Sales
Closings Start / End Month
Months foundation takes to cure fully: 1

Duration

Date
4/1/2012
9/1/2012
12/1/2012

Total Hard Costs

Development Hard Costs
Owner Directed Hard Costs
Model Home(s) FF&E
Hard Costs Contingency

17 months
6 months

End Month #

# of Homes

25

74.85%
$110/SF
3 Mos. prior to Phase 1 Sales Start
4.00% of Development Hard Costs

$/House
$25,000
$249,805
$238,755

$9,550

Total Soft Costs and Fees

Soft Costs
15.00% of Development Hard Costs
Developer Fee
5.00% of Development Hard Costs
CM Fee
2.00% of Development Hard Costs
Financing Costs excl. any Operating Deficit

15.74%
$35,813

Total Uses of Funds

Operating Deficit (Funded by Equity)
Total Uses of Funds with Operating Def.

Go To Gantt Chart
Month #
9

% Total
7.49%

10.00% Deposit

1.92%

$6,394

100.00%

$333,725

Total
$2,500,000
$24,980,520
$23,875,500
$100,000
$50,000
$955,020
$5,252,610
$3,581,325
$1,193,775
$477,510
$639,363
$33,372,493
$43,701
$33,416,194

DEVELOPMENT SOURCES OF FUNDS

Equity
Sponsor Cash Equity
Third Party Investor
Equity Total

% of Total Equity
16.67%
83.33%
100.00%

Initial Amount
$2,000,000
$10,000,000
$12,000,000

Deficit
Share*
$58,188
$290,942
$349,131

% of Cost
6.16%
30.80%
36.96%

Total Equity
$2,058,188
$10,290,942
$12,349,131

10
10 months
10 months
10 months

11
17

20
26

10.00/Month
10.00/Month
10.00/Month

Debt
AD&C Senior Loan **
Mortgage Recording Tax
Loan Fees - Front End
Loan Fees - At Draws

6/1/2013
6/1/2013
6/1/2013

6.50% Interest
1.45%
0.50%
0.75%
Debt Total
Property Cash Flow
Total Sources of Funds

* Any Operating Deficit and Financing-related Deficits

** Loan amount includes capitalized interest and capitalized points/fees

% of
Cost
63.04%

Total
$21,064,113

63.04%
0.01%
100.00%

$21,064,113
$2,951
$33,416,194

The Lakes At Fair Meadow

Summary of Operating Assumptions - 8/28/2012
SALES CASH FLOWS
Sales Office / Marketing Spend
Developed Units
Total

Revenue
Residential Units Excluding Options
Options Income
Gross Revenues
Selling Costs
Total Revenues, Net

OPERATING ASSUMPTIONS
3 Mos. prior to Phase 1 Sales Start

$4,000/mo

100 Units

Average Price
$419,500

10.00% Deposit Amount

$7,500/Unit

4.00%

Average SF
1,950 SF

Amount
$41,950,000
$750,000
$42,700,000

Annual Inflation Rate for Operating Expenses/Deficit

Annual Operating Expenses/Unit after First C of O
Real Estate Taxes on Residential Units
Average Assessed Value
Tax Rate
Annual Real Estate Taxes/Unit after First Completion

2.00%
$5,660
$400,000
0.85%
$3,400

RETURNS (CALCULATED OFF OF MONTHLY CASH FLOWS)

Equity Investment
($1,708,000) Net Return on Equity
Multiple on Equity
$40,992,000 IRR
NPV off of Monthly CFs
IRR Kicker Return Hurdle
Land Owner Participation %

Developer
$2,000,000
$2,709,370
2.32x
76.92%
8.00%
0.00%
0.00%

NOTES

Investor
$10,000,000
$4,756,972
1.46x
49.66%

Total Project
$12,000,000
$7,466,342
1.60x
57.18%
$5,574,073

Capital Structure
The Lakes At Fair Meadow
% Equity

Developer Sponsor Equity +

Third Party Investor Equity +

16.67%
83.33%

% TDC

Equity %
TDC

Debt % TDC

6.16%
30.80%

Amount *

Total Equity
excl. Deficits ^

Total Debt *

Deficits
Funded by
Equity

$2,000,000
36.96%

$10,000,000

$12,000,000

Equity Investment
including Deficit
Liabilities

% TDC Actual %s

$2,058,188

Developer Sponsor Equity +

6.16%

$10,290,942

Third Party Investor Equity +

30.80%

Senior Loan **

63.04%

Property Cash Flow as Source of Funds

0.01%

$349,131
$12,349,131

AD&C Senior Loan **

Total Sources of Funds (TDC)

63.04%

100.00%

100.00%

63.04%

$21,064,113

$21,064,113

$33,413,244

100.00%
Sources of Funds From Above
Property Cash Flow As Source of Funds
Total Sources of Funds

$33,413,244
$2,951
$33,416,194

While the equity slices are shown stacked vertically, note that this is simply the graphic representation and does not imply that there is any Preferred equity in the transaction.
* The AD&C Senior Loan Amount sizes on a residual basis after designating the dollar amounts of the other sources of funds.
** Principal Amount includes Funded Interest Reserve and Funded Loan Fees.
^ Equity amounts in this column do not include the pro-rata portion of the Operating and Financing Deficits to be funded by the Equity investors. See Column S for adjusted totals.

Housing Mix and Pricing Details

The Lakes At Fair Meadow

Maximum Allowable Homes

100
$110 PSF

Unit Type
Cape Cod A
Cape Cod B
Modern A
Modern B
McMansion A
McMansion B
Average/Total

Totals/Averages

Beds

Baths

Garage

Average Sales
Price PSF

2.0
2.0
2.0
3.0
6.0
6.0

2.0
2.5
2.0
3.0
5.0
6.0

1.0
2.0
2.0
3.0
3.0
4.0

$233 PSF
$240 PSF
$286 PSF
$265 PSF
$143 PSF
$150 PSF
$215 PSF

Average
Unit Size
1,350 SF
1,500 SF
1,400 SF
1,700 SF
3,500 SF
4,000 SF
1,950 SSF

Sales
$41,950,000

Sales Price
$315,000
$360,000
$400,000
$450,000
$500,000
$600,000
$419,500

% of SSF
13.85%
11.54%
14.36%
21.79%
17.95%
20.51%
100.00%

SSF
27,000 SSF
22,500 SSF
28,000 SSF
42,500 SSF
35,000 SSF
40,000 SSF
195,000 SSF

Assessed Value at Delivery

$400,000

# of Homes

Base Hard
Costs

Hard Costs
Premium

Hard Costs

Total Hard
Costs

20
15
20
25
10
10
100

$148,500
$165,000
$154,000
$187,000
$385,000
$440,000

0%
0%
10%
10%
20%
20%

$148,500
$165,000
$169,400
$205,700
$462,000
$528,000

$2,970,000
$2,475,000
$3,388,000
$5,142,500
$4,620,000
$5,280,000
$23,875,500

Operating Expenses and RE Taxes - Per Unit Per Year

Management
$785
Administration
$495
Payroll
$1,935
Utilities
$975
Water & Sewer
$0
Repair & Maint.
$1,175
Insurance
$295
Taxes
$3,400
Total Operating Expenses
$9,060

Tax Rate 0.85%

Annual Sources and Uses Summary

The Lakes At Fair Meadow
Project Year
Calendar Year

USES OF FUNDS
Total

1
Year 2012
8/28/2012

2
Year 2013
8/28/2013

3
Year 2014
8/28/2014

4
Year 2015
8/28/2015

5
Year 2016
8/28/2016

6
Year 2017
8/28/2017

7
Year 2018
8/28/2018

8
Year 2019
8/28/2019

9
Year 2020
8/28/2020

10
Year 2021
8/28/2021

11
Year 2022
8/28/2022

Data Series Profile

Land & Acquisition Costs

Development Hard Costs
Owner Directed Hard Costs
Model Home(s) FF&E
Hard Costs Contingency
Total Hard Costs

$2,500,000
$23,875,500
$100,000
$50,000
$955,020
$24,980,520

2,500,000
477,510
2,000
50,000
19,100
548,610

0
20,055,420
84,000
0
802,217
20,941,637

0
3,342,570
14,000
0
133,703
3,490,273

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

Developer Fee
CM Fee
Soft Costs
Total Soft Costs

$1,193,775
$477,510
$3,581,325
$5,252,610

23,876
9,550
1,146,024
1,179,450

1,002,771
401,108
1,504,157
2,908,036

167,129
66,851
931,145
1,165,124

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

Subtotal Eligible Development Costs for Senior Loan Funding

$32,733,130

$4,228,060

$23,849,673

$4,655,397

$0

$0

$0

$0

$0

$0

$0

$0

Senior Debt Financing

Capitalized (funded) Front End Loan Fee
Capitalized (funded) Loan Fees at Loan Draws
Loan Interest - paid in Cash
Capitalized (funded) Loan Interest Reserve
Mortgage Recording Tax - paid in Cash

$105,321
$155,498
$70,164
$2,951
$305,430

0
0
0
0
0

105,321
120,583
70,164
2,694
305,430

0
34,915
0
257
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

Total Financing Costs

$639,363

604,191

35,172

$33,372,493
($43,701)
$33,416,194

$4,228,060
(8,000)
$4,236,060

$24,453,864
(35,701)
$24,489,565

$4,690,570
0
$4,690,570

$0
0
$0

$0
0
$0

$0
0
$0

$0
0
$0

$0
0
$0

$0
0
$0

$0
0
$0

$0
0
$0

Developer Sponsor Equity

Direct Project Costs Draw
Operating Deficit and Financing-related Deficits Draw
Total Funding

$2,000,000
$58,188
$2,058,188

2,000,000
1,333
2,001,333

0
56,855
56,855

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

Third Party Investor Equity

Direct Project Costs Draw
Operating Deficit and Financing-related Deficits Draw
Total Funding

$10,000,000
$290,942
$10,290,942

2,228,060
6,667
2,234,727

7,771,940
284,276
8,056,215

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

Total Equity Contribution

$10,290,942

$4,236,060

$8,113,071

$0

$0

$0

$0

$0

$0

$0

$0

$0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

Total Development Costs (TDC) before Operating Deficit

Operating Deficit
Total Development Costs including Operating Deficit

SOURCES OF FUNDS

Senior Loan
Beginning Balance
Direct Project Costs Draw
Loan Fees - Front End
Loan Fees - At Loan Draws
Funded Interest Reserve
Cash Interest Payments, if any
Repayment from Net Revenues

$20,733,130
$105,321
$155,498
$70,164
$2,951
($21,064,113)

0
0
0
0
0
0
0

13,450,653
16,077,733
105,321
120,583
70,164
2,694
(16,361,292)

47,423
4,655,397
0
34,915
0
257
(4,702,821)

Annual Cash Flow and Returns Summary

The Lakes At Fair Meadow
Project Year
Calendar Year
Units Closed

100

1
Year 2012
8/28/2012
0

2
Year 2013
8/28/2013
50

3
Year 2014
8/28/2014
50

4
Year 2015
8/28/2015
0

5
Year 2016
8/28/2016
0

6
Year 2017
8/28/2017
0

7
Year 2018
8/28/2018
0

0
8,000
(8,000)

20,496,000
94,206
20,401,794

20,496,000
50,958
20,445,042

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

305,430
2,694
308,123

0
257
257

0
0
0

0
0
0

0
0
0

0
0
0

($8,000)

$20,093,670

$20,444,785

$0

$0

$0

$0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

0
0
0
0
0
0

$0

$0

$0

$0

Data Series Profile

Sales Revenue, Net of Selling Costs
Total Operating Expenses
Net Revenue After Operating Expenses

Total
$40,992,000
$153,165
$40,838,835

Senior Loan Mortgage Recording Tax

Senior Loan Cash Interest Expense
Total Financing Costs

$305,430
$2,951
$308,380

Net Revenue After Financing Costs

$40,530,455

Financing Cash Flows

Sponsor Equity Investment
Sponsor Operating Deficit Draw
Investor Equity Investment
Investor Operating Deficit Draw
Senior Loan Draw
Senior Loan Repayment

($2,000,000)
($58,188)
($10,000,000)
($290,942)
$20,733,130
($21,064,113)

Net Levered Cash Flow

$7,466,342

Net Profit
Internal Rate of Return (XIRR)
Net Present Value (XNPV) 8.00%

$7,466,342
50.90%
$5,519,802

Off of Annual Cash Flows

(2,000,000)
(1,333)
(2,228,060)
(6,667)
0
0

0
(56,855)
(7,771,940)
(284,276)
16,077,733
(16,361,292)

($4,236,060)

($4,039,562)

0
0
0
0
4,655,397
(4,702,821)
$15,741,964

Equity Joint Venture Partnership Structure

The Lakes At Fair Meadow
Total Required Equity (Purchase + Operation)

$12,349,131 (Includes any Deficit Funding)

Sponsor
Third Party Investor

$2,058,188
$10,290,942
$12,349,131

6.16%
93.84%
100.00%

100.00%

Profit Sharing

Preferred Return

Residual Split

8.00%
Partnership Structure
Sponsor Equity
Third Party Investor
Total

% Equity
6.16%
93.84%
100.00%

Note: By its nature, the Preferred Return includes the Return of Capital.

Profit >>
Sharing >>
Splits >>

Sponsor Equity
Sponsor Promote
Investor Equity

6.16%
0.00%
93.84%
100.00%

50.00%
50.00%
100.00%

Joint Venture Return Detail

The Lakes At Fair Meadow
Sponsor
Equity Investment
Share of Equity Investment
Gross Return
Net Profit (Return on Equity)
Multiple on Equity
Internal Rate of Return
Time from Equity Investment to
Final Return (months)

$2,058,188
16.67%
$4,767,559
$2,709,370
2.32x
76.92%
26

Third Party
Investor
$10,290,942
83.33%
$15,047,914
$4,756,972
1.46x
49.66%
26

Total Project
$12,349,131
100.00%
$19,815,473
$7,466,342
1.60x
57.18%
26

Profit Sharing Summary - Sponsor and Third Party Investor

Tier

Sponsor
Cashflow

Developer
Share

Profit Sharing Structure - Developer and Third Party Investor

Third Party
Investor
Cashflow

Third Party
Investor Share

Total Cashflow

Developer
Promote

IRR Hurdle Ranges

ROC and Pref Return
Tier 1
Total
Less Equity Investment
Net Profit (Return on Equity)

$722,152
$4,045,407
$4,767,559

6%
50%
24%

$11,002,507
$4,045,407
$15,047,914

94%
50%
76%

$11,724,658
$8,090,815
$19,815,473

($2,058,188)
$2,709,370

17%
36%

($10,290,942)
$4,756,972

83%
64%

($12,349,131)
$7,466,342

Share of Total Equity Investment

Sponsor

Third Party Investor

Preferred ReturnFrom
Residual Split

through
Above

8%
8%

0%
44%

Share of Total Profit

Sponsor

Third Party Investor

64%

$5,000,000

$3,000,000

36%

6%
6%

Net Profits

$4,000,000

17%

83%

0%

Developer
Equity Pro- Investor Total (must
Rata Share Profit Share be 100%)

$2,000,000
$1,000,000
$0

Sponsor
Third Party Investor

94%
50%

100%
100%