APPENDIX II

2. You've just taken your first job for GTA Property Management and Developments, a large real estate firm in Etobicoke specializing in the purchase and management of rental housing complexes. GTA is plannng to buy Ford Haven, a recently built, 200-unit, affordable housing development in the Rosedale area of central Toronto. Data required to describe the economic performance and profitability of Ford Haven appears in Appendix II below. On the basis of this data, your supervisor orders you to: a. state the estimated NOI (net operating income) for the coming year for the Ford Haven housing complex2 b. state the estimated net cash flows for the coming year for this same housing complex by augment- ing your pro forma statement with the anticipated outlays for recurring and non-recurring items described in the situation below.3 2 You will, to do this, need to prepare a pro forma statement with revenues and costs for this complex, using as templates the pro forma statements in the lecture slides and in the examples in Chapter 9 of your text. The answer you submit, however, should consist of only the numerical NOI estimate you derive. 3 Again, the answer you submit should consist only of the numerical estimate you derive. a The Ford Haven complex consists of forty studio, eighty one-bedroom apartments and eighty two- bedroom apartments. All rental leases for units have a fixed twelve-month term. Beginning today, which is the first of the month, leases specify monthly rents for these three types of units of $550.00, $600.00, and $800.00. Each new lease specifies that these current monthly rents will be charged over the next six months, and then an escalator clause in each lease specifies rents for each type of apartment will rise to, respectively, $560.00, $610.00, and $810.00, where they will remain until the end of the current twelve-month lease. All new tenants will, one year from today, either renew their leases or vacate their units. The leases of existing tenants will remain valid on unchanged terms until they end, when those tenants will also need to vacate or renew their leases on the same terms as new tenants. All of the existing tenants, however, are expected to renew their leases on these new terms for an additional twelve months. Existing management currently has the following apartment types leased prior to today on these terms: ten studios were leased three months ago, at a monthly rent of $500.00; twenty one-bedroom units were leased two months ago for a monthly rent of $580.00; and ten two-bedroom units were leased one month ago for $805.00 All other occupied units have today been leased or renewed, on the terms for new leases described above. Four studios, six one-bedroom units and six two-bedroom units are currently vacant and expected to remain so for the next twelve months. Besides the above data, GTA has also provided you with its internal forecasts for other revenues and operating costs accruing to the complex. These are as follows: during the coming year, Ford Haven will generate revenue from laundry facilities, the awarding of an exclusive cable TV contract, parking, plus fees from net deposits on apartment and overdue rent payments. The GTA estimate for the total of all other such income over the coming year is $200,000.00 GTA plans to charge for heating and air-conditioning it will provide, on a compulsory basis, to its tenants, and forecasts that net revenue over the coming year from this source will be $100.00 per month for each occupied unit. Total turnover and operating expenses are forecast to be $100.00 per month for each occupied unit during the next year. During the next year, GTA forecasts that $100,000.00 will be required for recurring, make ready expenses, such as carpet, paint, and drywall repair, while another $250,000.00 will be required for non-recurring items such as countertops, parking lot repairs, and so on. Finally, a total of $10,000.00 in service fees will be paid to companies hired by GTA to provide marketing services for the complex. a One-bedroom Two bedroom Total $ $ 45,000 16,500 116,000 24,000 116,000 24,000 88,550 8,000 88,550 8,000 Form Haven Operating Cash Flow Studios Rental from leases Existing leases: 10 studio units Existing contract (9 months remaining) at $500 45,000 New contract (3 months) at $550 16,500 20 one-bedroom units Existing contract (10 months remaining) at $580 New contract (2 months) at $600 10 two-bedroom units Existing contract (11 months remaining) at $805 New contract (1 month) at $800 Other occupied units: 26 studio units First six months at $550 85,800 Next six months at $560 87,360 54 one-bedroom units First six months at $600 Next six months at $610 64 two-bedroom units First six months at $800 Next six months at $810 Total revenues from leases 234,660 Other income Heating and airconditioning ($100/month) 43,200 Turnover and operating expenses ($400/month) (172,800) Recurring, make ready expenses Nonrecurring items Service fees Net operating cash flow 85,800 87,360 194,400 197,640 194,400 197,640 307,200 311,040 714,790 532,040 88,800 (355,200) 88,800 (355,200) 307,200 311,040 1,481,490 200,000 220,800 (883,200) (100,000) (250,000) (10,000) 659,090 2. You've just taken your first job for GTA Property Management and Developments, a large real estate firm in Etobicoke specializing in the purchase and management of rental housing complexes. GTA is plannng to buy Ford Haven, a recently built, 200-unit, affordable housing development in the Rosedale area of central Toronto. Data required to describe the economic performance and profitability of Ford Haven appears in Appendix II below. On the basis of this data, your supervisor orders you to: a. state the estimated NOI (net operating income) for the coming year for the Ford Haven housing complex2 b. state the estimated net cash flows for the coming year for this same housing complex by augment- ing your pro forma statement with the anticipated outlays for recurring and non-recurring items described in the situation below.3 2 You will, to do this, need to prepare a pro forma statement with revenues and costs for this complex, using as templates the pro forma statements in the lecture slides and in the examples in Chapter 9 of your text. The answer you submit, however, should consist of only the numerical NOI estimate you derive. 3 Again, the answer you submit should consist only of the numerical estimate you derive. a The Ford Haven complex consists of forty studio, eighty one-bedroom apartments and eighty two- bedroom apartments. All rental leases for units have a fixed twelve-month term. Beginning today, which is the first of the month, leases specify monthly rents for these three types of units of $550.00, $600.00, and $800.00. Each new lease specifies that these current monthly rents will be charged over the next six months, and then an escalator clause in each lease specifies rents for each type of apartment will rise to, respectively, $560.00, $610.00, and $810.00, where they will remain until the end of the current twelve-month lease. All new tenants will, one year from today, either renew their leases or vacate their units. The leases of existing tenants will remain valid on unchanged terms until they end, when those tenants will also need to vacate or renew their leases on the same terms as new tenants. All of the existing tenants, however, are expected to renew their leases on these new terms for an additional twelve months. Existing management currently has the following apartment types leased prior to today on these terms: ten studios were leased three months ago, at a monthly rent of $500.00; twenty one-bedroom units were leased two months ago for a monthly rent of $580.00; and ten two-bedroom units were leased one month ago for $805.00 All other occupied units have today been leased or renewed, on the terms for new leases described above. Four studios, six one-bedroom units and six two-bedroom units are currently vacant and expected to remain so for the next twelve months. Besides the above data, GTA has also provided you with its internal forecasts for other revenues and operating costs accruing to the complex. These are as follows: during the coming year, Ford Haven will generate revenue from laundry facilities, the awarding of an exclusive cable TV contract, parking, plus fees from net deposits on apartment and overdue rent payments. The GTA estimate for the total of all other such income over the coming year is $200,000.00 GTA plans to charge for heating and air-conditioning it will provide, on a compulsory basis, to its tenants, and forecasts that net revenue over the coming year from this source will be $100.00 per month for each occupied unit. Total turnover and operating expenses are forecast to be $100.00 per month for each occupied unit during the next year. During the next year, GTA forecasts that $100,000.00 will be required for recurring, make ready expenses, such as carpet, paint, and drywall repair, while another $250,000.00 will be required for non-recurring items such as countertops, parking lot repairs, and so on. Finally, a total of $10,000.00 in service fees will be paid to companies hired by GTA to provide marketing services for the complex. a One-bedroom Two bedroom Total $ $ 45,000 16,500 116,000 24,000 116,000 24,000 88,550 8,000 88,550 8,000 Form Haven Operating Cash Flow Studios Rental from leases Existing leases: 10 studio units Existing contract (9 months remaining) at $500 45,000 New contract (3 months) at $550 16,500 20 one-bedroom units Existing contract (10 months remaining) at $580 New contract (2 months) at $600 10 two-bedroom units Existing contract (11 months remaining) at $805 New contract (1 month) at $800 Other occupied units: 26 studio units First six months at $550 85,800 Next six months at $560 87,360 54 one-bedroom units First six months at $600 Next six months at $610 64 two-bedroom units First six months at $800 Next six months at $810 Total revenues from leases 234,660 Other income Heating and airconditioning ($100/month) 43,200 Turnover and operating expenses ($400/month) (172,800) Recurring, make ready expenses Nonrecurring items Service fees Net operating cash flow 85,800 87,360 194,400 197,640 194,400 197,640 307,200 311,040 714,790 532,040 88,800 (355,200) 88,800 (355,200) 307,200 311,040 1,481,490 200,000 220,800 (883,200) (100,000) (250,000) (10,000) 659,090