Assume the project is acquired for $1,350,000 with an expected holding period of 4 years, using the following capital sources: $ 810,500 Senior mortgage loan. 431,600 Preferred equity (80% of equity) 107,900 Sponsor equity (20% of equity) $1,350,000

What is the expected annual return on the overall equity investment in the project for the holding period, if purchased using debt (i.e., levered)?

NOI Capx Cash Flow from Operations Annual Debt Service BTCF - avail. for distribution Year 1 91,200 0 91,200 49,290 41,910 Year 2 91,200 0 91,200 49,290 41,910 Year 3 91,200 0 91,200 49,290 41,910 Year 4 Year 5 91,200 100,320 0 0 91,200 100,320 49,290 49,290 41,910 51,030 Cash Flow from Sale in yr 4 Selling costs Net cash flow at sale Outstanding mortgage balance BTER - avail. for distribution in year 5 1,433,143 42,994 1,390,149 754,639 635,510 NOI Capx Cash Flow from Operations Annual Debt Service BTCF - avail. for distribution Year 1 91,200 0 91,200 49,290 41,910 Year 2 91,200 0 91,200 49,290 41,910 Year 3 91,200 0 91,200 49,290 41,910 Year 4 Year 5 91,200 100,320 0 0 91,200 100,320 49,290 49,290 41,910 51,030 Cash Flow from Sale in yr 4 Selling costs Net cash flow at sale Outstanding mortgage balance BTER - avail. for distribution in year 5 1,433,143 42,994 1,390,149 754,639 635,510