Members X and Z form Rosmead Gardens LLC on January 1, 2024. Purpose of the LLC is to acquire an existing residential multifamily asset, known as Rosmead Gardens.

The total cost of acquisition is $6,750,000. There are no other capital investment costs. The existing asset has good operating performance. $4,050,000 of capital (60% LTV) is from a mortgage on the property. The remaining $2,700,000 is equity from the Members of the LLC. Member Z is the Sponsor and will be the Managing Member (or Manager). Following is the breakdown of initial equity cash contributions (original basis):

Member X $2,430,000 90% Member Z $270,000 10% Total Equity $2,700,000 100%

Assume all operating expenses, liabilities and debt service have been paid already. The net free cash flow to equity is what will be distributed to the LLC Members. Assume that the equity basis of the Members remains unchanged through the 10-year holding period. Annual equity cash flows and the terminal (sale) cash flow are shown in the template spreadsheet pictured below.

Waterfall Distributions to Members are as follows: Tier 1: All cash flow as Return Of Capital to all Members based on their original percent basis (90% and 10%), until such time that the cumulative cash flows to each have equaled their original investment amount (see above). Tier 2: Preferred Return to Member X of $2,500,000. As the forecasted cash flow is much less than this, it will take multiple years of distribution to Member X before the full Pref amount is fully distributed. Tier 3: Carried Interest of $540,000 to Member Z. Tier 4: All remaining cash flow split pari-passu to all Members.

Please assist in figuring out the numbers that go beginning in the underlined portion in red and throughout the rest of the spreadsheet in the highlighted cells ending in tier 4 above the 6,394,179

\begin{tabular}{lccr} \hline EQUITY INVESTMENT \\ \hline Member X & \\ Managing Member Z & 90% & $ & (2,430,000) \\ \hline Total Equity Invested & 10% & $ & (270,000) \\ \hline \end{tabular} \begin{tabular}{lcc} WATERFALL & X & Z \\ \hline Tier 1: Return Of Capital & 90% & 10% \\ Tier 2: Pref of $2,500,000 & 100% & 0% \\ Tier 3: Carry of $540,000 & 0% & 100% \\ Tier 4: Remainder Pari-Passu & 50% & 50% \\ \hline \end{tabular} TERMINAL VALUE \begin{tabular}{llr} \hline Sale Price & $10,516,815 \\ less Loan Balance Remaining & $ & (4,180,000) \\ less Costs of Sale & $ & (420,673) \\ \hline Net Cash Flow from Sale & $ & 5,916,142 \\ \hline \end{tabular} \begin{tabular}{lccr} \hline EQUITY INVESTMENT \\ \hline Member X & \\ Managing Member Z & 90% & $ & (2,430,000) \\ \hline Total Equity Invested & 10% & $ & (270,000) \\ \hline \end{tabular} \begin{tabular}{lcc} WATERFALL & X & Z \\ \hline Tier 1: Return Of Capital & 90% & 10% \\ Tier 2: Pref of $2,500,000 & 100% & 0% \\ Tier 3: Carry of $540,000 & 0% & 100% \\ Tier 4: Remainder Pari-Passu & 50% & 50% \\ \hline \end{tabular} TERMINAL VALUE \begin{tabular}{llr} \hline Sale Price & $10,516,815 \\ less Loan Balance Remaining & $ & (4,180,000) \\ less Costs of Sale & $ & (420,673) \\ \hline Net Cash Flow from Sale & $ & 5,916,142 \\ \hline \end{tabular}