Due Diligence Report TARPON POINTE MARINA and RESIDENCES You have been asked by a group of potential investors, Flatlander Equity Partners, L.P., (Flatlander) to conduct a due diligence investigation of a condominium/marina project in Bradenton, Florida. The investors have reviewed the deal summary (see TARPON INVESTMENT OPPORTUNITY) provided by the project sponsor, North Star Interests, L.P., (North Star) and are seeking your professional opinion of the viability of the investment going forward. You have gleaned from initial meetings with the project sponsor that there are three potential development opportunities with this site. The greatest opportunity in terms of potential profits lies in entitling the roughly seven-acre tract with a vested right to construct and sell private boat slips for yachts up to 100 feet in length. In addition, the development of high-end condominiums on the remaining upland acreage is another consideration. They can be developed in conjunction with the boat slips or as a stand-alone project. Finally, but still significant to the marina development opportunity, is the conversion or sale of an existing "high and dry" boat storage facility. Motivated by the potential profitability of selling these private slips at a price that exceeds $5,000 per linear foot, other developers have converted public marinas and boat ramps to private operations all along the Florida coast. Finding and entitling a site with direct access to the Gulf of Mexico or Atlantic Ocean has, however, become increasingly difficult. Particularly so when you consider the fact that the State of Florida has become actively involved in preserving every citizen's right to public access to the state's water resources. In plain language, what this means to you is that obtaining dredging and construction permits for private marina development along the shores or in the waters owned by the state has become tedious, time consuming and expensive. Once obtained, however, these acquired rights can be extremely lucrative. You have recently received the seller's feasibility documents (see attached documents) and have met with him and his engineer and architect regarding the 1 marina and load-out dock permits and residential development approvals. They assure you that all is progressing well regarding obtaining permits. The City appears to be fully behind this development and is extremely excited at the prospect of redeveloping the riverfront adjacent to their revitalized urban center. Being from the plains of Texas you have a lot to learn about riparian rights, submerged lands and aquatic vegetation, not to mention, "rack-o-minium" and condo development in a highly sensitive natural environment. A market study, appraisal and geotech report have been ordered (and not yet received) but you have decided to proceed now with what you have, recognizing that North Star currently has the property under contract as has already invested a considerable sum in this venture. They are looking for a commitment from investors to shoulder the responsibility for most of the substantial financial burden required during the feasibility period, and beyond. YOUR ASSIGNMENT: Conduct a project evaluation and review of the attached due diligence documents. Prepare a final written report in MEMORANDUM format that provides a final recommendation to your investment group regarding continued pursuit of this opportunity. The investment group is relying on your expertise in asking the difficult questions, in evaluating the issues for yourself and in making sound judgments based on facts taken at face value. You have been engaged by your investment group because they know you have the intuition that comes from years of experience in looking below the surface for the real issues and by not becoming influenced by the exuberance of the seller, his consultants, or by City officials. Prior to making that final recommendation you need to assemble the relevant facts in categories that reflect the orderly investigation of the issues and assessment of the risks. To accomplish this, you are to review the seller's due diligence and site analysis data that has been provided by the seller and his consultants. These documents will provide background information which will allow you to understand the context of the project, the players, and the tenants of the deal. 2 You are to divide into teams of three students. Each team should analyze the above information and generate a MEMORANDUM which addresses the feasibility for developing the site with any or all the potential uses, i.e., a marina with private boat slips, a condominium/townhouse development, and a relocated load-out ramp for the boat storage facility. For the purposes of this assignment you are to assume that a market exists for each use that is proposed and that the project would be financially feasible upon completion. Included in the LEGAL AND REGULATORY section of your report should be a review of the purchase contract as it bears heavily in the final decision as well. The MEMORANDUM should address each of the following due diligence categories: ENVIRONMENTAL LEGAL AND REGULATORY PHYSICAL LOCATIONAL AND SITUS FINAL RECOMMENDATION Make a recommendation outlining a course of action to the investment group that hired you. If your recommendation is to terminate the contract with the seller, you should substantiate that decision based on the results of the complete site analysis and due diligence investigation. Should you recommend going forward with any or all of the proposed development options, outline the process you would recommend that would be necessary to mitigate the risk to the investors and provide the maximum return on their investment