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

EQUITY INVESTMENT Member X Managing Member Z Total Equity Invested CASH FLOW DISTRIBUTED TO EQUITY Annual cash flow to equity 2% Terminal cash flow to equity Total Cash Flow to Equity Investors Cash-On-Cash Return TOTAL EQUITY NPV and IRR Total Cash Flow To/(From) All Investors Internal Rate of Return Equity Multiple Discount Rate Present Value of Annual Cash Flows Present Value of Terminal Cash Flow Total Present Value of ALL Cash Flows less Initial Investment Net Present Value TIER 1 RETURN OF CAPITAL PARI-PASSI Cash Flow Available Return of Capital to X Cumulative Return of Capital to X Return of Capital to Z Cumulative Return of Capital to Z Cash Flow Available for Next Tier 90% $ (2,430,000) 10% S (270,000) 100% $ (2,700,000) TIER 3 CARRIED INTEREST OF $540,000 TO Z Cash Flow Available from Prior Tier Cash Flows To/(From) Manager Z Cumulative Catchup to Z Cash Flow Available for Next Tier TIER 4 REMAINDER PARI-PASSU Cash Flow Available from Prior Tier TIER 2 PREFERRED RETURN OF $2,500,000 TO X Cash Flow Available from Prior Tier Cash Flows To/(From) Member X Cumulative Pref to X Cash Flow Available for Next Tier Remainder to X Remainder to Z Remaining Cash Flow year year 90% 10% 10% year 0 $ (2,700,000) $ 20.3% % Basis 90% 0 3.81 9.0% $ 2,771,906 53% $ 2,499,042 47% $ 5,270,949 '$ (2,700,000) $ 2,570,949 0 $ (2,430,000) 0 $ $ (270,000) S $ $ $ 1 $ 400,000 $ $ 360,000 $ $ $ WATERFALL Tier 1: Return Of Capital Tier 2: Pref of $2,500,000 Tier 3: Carry of $540,000 Tier 4: Remainder Pari-Passu S 1 400,000 $ $ 400,000 $ 14.8% 1 400,000 $ 1 40,000 $ 40,000 $ 2 408,000 $ $ 408,000 $ 15.1% 40,000 $ 2 408,000 $ 1 40,000 $ 2 408,000 $ 40,000 $ 408,000 $ 416,160 $ 2 408,000 $ 1 2 40,000 $ 408,000 $ 408,000 $ 408,000 $ 3 416,160 $ $ 416,160 $ 15.4% 2 408,000 $ 3 416,160 $ 3 416,160 $ 3 416,160 $ 416,160 $ 3 416,160 $ 416,160 $ 3 416,160 $ X 90% 100% 0% 50% 4 424,483 $ $ 424,483 $ 15.7% 4 424,483 $ 4 424,483 $ 424,483 $ 4 424,483 $ 4 424,483 $ 424,483 $ Z 10% 0% 100% 50% 4 424,483 $ 5 432,973 $ $ 432.973 $ 16.0% 5 432,973 $ 5 432.973 $ 424,483 $ 432,973 $ 432,973 $ 5 432,973 $ 5 432,973 $ 432,973 $ 6 441,632 $ $ 441,632 $ 16.4% 6 441,632 $ 6 441,632 $ 441,632 $ 6 441,632 $ 441.632 $ 6 441,632 $ 441,632 $ 5 6 432,973 $ 441,632 $ TERMINAL VALUE Sale Price less Loan Balance Remaining less Costs of Sale Net Cash Flow from Sale 7 450,465 $ $ 450,465 $ 16.7% 7 450,465 $ 7 450,465 $ 450.465 $ 7 450,465 $ 450,465 $ 7 450,465 $ 450,465 $ 7 450,465 $ 8 459,474 $ $ 459,474 $ 17.0% 8 459,474 $ 8 459,474 $ 459,474 $ 8 459,474 $ 459,474 $ 8 459,474 S 459,474 $ 8 459,474 $ $ 10,516,815 $ (4,180,000) $ (420,673) $ 5,916,142 9 10 468,664 $ 478,037 $ 5,916,142 468,664 $ 6,394,179 17.4% 9 10 458,664 $ 6,394,179 9 10 458,664 $ 6,394,179 458,664 $ 6,394,179 9 10 458,664 $ 6,394,179 458,664 $ 6,394,179 9 10 458,664 $ 6,394,179 458,664 $ 6,394,179 9 10 458,664 $ 6,394,179 $ 6,394,179