Key Facts 1. Value-add acquisition and rehab of empty warehouse into Amazon fulfillment center 2. 100,000 sq foot industrial building (currently vacant); a. 1 year to renovate and Amazon occupies entire building starting year 2 3. Purchase price: $2,500,000 4. Rehab costs: $5,000,000 (include in initial project capitalization) 5. Soft costs: $ 750,000 (include in initial project capitalization) 6. Accrued interest on bank loan (year 1, during renovation): $235,000 7. Pro-forma rent: $7.00 psf triple net to LL, increasing 2%/year; 10 year lease term 8. Expenses & Replacement reserves absorbed by LL: $.25/sf 9. Occupancy projection: 0% year 1, 100% year 2 to 10 10. Loan to cost ratio: 65% @ 5.25% interest and 20 year amortization; 10 year term a. year 1 interest accrues and is included in loan amount (#6 above) b. start interest and amortization payment in year 2, when Amazon occupies building c. 3% prepayment penalty on unamortized loan balance prepaid at sale (#13) 11. Joint venture terms a. Developer % of cash equity: 15% b. Investor % of cash equity: 85% c. Preferred return: 9% paid from cash flow after financing 12. Cash flow distribution a. Pay preferred return or pay pari-passu and accrue to the preferred return b. Surplus above preferred return repays capital accounts pari-passu 13. Sale price distribution a. Repay unamortized mortgage balance w/ prepayment penalty b. Repay capital accounts pari-passu c. 20% promote to Developer Calculations- assume sale at end of year 5 1. Prepare 6 year cash flow projection starting with acquisition of empty building 2. Show annual Capital Accounts at beginning and end of each year for investor & developer 3. Calculate IRR and equity multiple (investor and developer) based on JV terms above a. Terminal cap rate in year 5: 7.5% (sell on yr 6 NOI) Key Facts 1. Value-add acquisition and rehab of empty warehouse into Amazon fulfillment center 2. 100,000 sq foot industrial building (currently vacant); a. 1 year to renovate and Amazon occupies entire building starting year 2 3. Purchase price: $2,500,000 4. Rehab costs: $5,000,000 (include in initial project capitalization) 5. Soft costs: $ 750,000 (include in initial project capitalization) 6. Accrued interest on bank loan (year 1, during renovation): $235,000 7. Pro-forma rent: $7.00 psf triple net to LL, increasing 2%/year; 10 year lease term 8. Expenses & Replacement reserves absorbed by LL: $.25/sf 9. Occupancy projection: 0% year 1, 100% year 2 to 10 10. Loan to cost ratio: 65% @ 5.25% interest and 20 year amortization; 10 year term a. year 1 interest accrues and is included in loan amount (#6 above) b. start interest and amortization payment in year 2, when Amazon occupies building c. 3% prepayment penalty on unamortized loan balance prepaid at sale (#13) 11. Joint venture terms a. Developer % of cash equity: 15% b. Investor % of cash equity: 85% c. Preferred return: 9% paid from cash flow after financing 12. Cash flow distribution a. Pay preferred return or pay pari-passu and accrue to the preferred return b. Surplus above preferred return repays capital accounts pari-passu 13. Sale price distribution a. Repay unamortized mortgage balance w/ prepayment penalty b. Repay capital accounts pari-passu c. 20% promote to Developer Calculations- assume sale at end of year 5 1. Prepare 6 year cash flow projection starting with acquisition of empty building 2. Show annual Capital Accounts at beginning and end of each year for investor & developer 3. Calculate IRR and equity multiple (investor and developer) based on JV terms above a. Terminal cap rate in year 5: 7.5% (sell on yr 6 NOI)