On the pages below you will find parts of an offering memorandum (OM) for an apartment building that was foreclosed on by a lender. In addition to the OM, I have provided some clarifying assumptions below.

Property Acquisition

The property is a judicial foreclosure so there is very limited income and expense information on the property. You can assume that the property exterior and mechanicals are in good working condition, however, a property inspection revealed $48,200 in deferred maintenanceeed for capital expenditures. Loan and acquisition fees are expected to be $15,309 and $22,300 respectively.

Property Revenue, Expenses, and Expected Returns

While the building is largely occupied, rental rates are uncertain and therefore you will need to use the comparable information to determine the appropriate rent levels. For consistency of data, please go to the Shoreline and Katz Property web pages and secure comparable rents for the Shorewood neighborhood. All other needed information should be available through this assignment or as stated in the assignment. Please be sure to annualize data when appropriate.

All subject building leases are assumed to be gross leases with tenants paying for separately metered and separately billed electric costs. The property owner pays for heat and hot water. Each underground parking stall rents for $75 per month and each surface parking stall rents for $50 per month. Monthly vending and laundry net income is expected to be $500.

Annual capital expenditures are anticipated to be $300 per unit per year.

Estimated property expense categories should follow the IREM subtotals of: Administrative and Management, Operating Expenses, Maintenance, Insurance and Fees, and Payroll, with a separate line for actual Real Estate Tax Expenses from the Village of Shorewood, Assessors Office, Property Information.Use the % of GPI for elevator-serviced buildings in Milwaukee (see page 11 below).

Assume that all information provided is for 2014 for a 12/31/14 acquisition date.

For the loan information, assume an 75% LTVR Life Insurance loan with a 10 year term and 30 year amortization. The property is expected to trade at a 6.75% cap rate.

Complete a property acquisition analysis using this format:

3955 N. Murray Street
Revenue				2015	Percent
	Rent	Units	Rents
	One Bedroom
	Two Bedroom
	Three Bedroon
	Underground Parking
	Surface Parking
	Vending & Misc.
	Gross Potential Income
	Vacancy
	Effective Gross Income
Expenses
	Administrative and Management
	Utilities/ Water/ Rubbish
	Repairs/ Maintenance/ Supplies
	Insurance and Fees
	Real Estate Taxes
	Payroll
	Total Expenses
	NOI
	Capital Expenditures
	NOI after Capital Expenditures
Property Valuation
	NOI
	Cap Rate
	Value
	Deferred Maintenance
	Existing Value
Financing
	Value
	Loan-to-Value Ratio
	Loan Amount
	Difference
	Loan Fees
	Acquisition Fee
	Deferred Maintenance
	Total Required Equity
Return on Equity
	NOI after Capital Expenditures
	Debt Service
	Before Tax Cash Flow
	Return on Equity
	Equity Build-up
	Return on Equity and Equity Build up

Milwaukee Place 2014 Rank: 2S 2013 Rank: 26 New Apartments Brewing in Milwaukee Employment Trends As Growing Demand Keeps Developers Active bgiowth will reach a 15-year high in Milwaukee thi ng sales will Re vacancy upward. Local cmploy: will incrrasc oayrous 15 nud 2014. Al Class tknus siu abuwa monthly munuguge paymene on a mexlian-prival home, which will motivate some tenants to choose bo rship ahead A n from new invenrary. With merrawide vacancy near i percen, Oom Permal Mote City of Milwaukce and as larger projects come unline supply will overaku demand, pushing vacancy up in selecr area and dampening renr f.mowTh. Supply and Demand ing tbcMwenir and Standard at East Library will targku Young fessionals Is and empry nevrers tor a quick leate up 3 12 Buyer d n M waukee wi remain well abwe sia apply yar as rising NO inventory will oecr some additional buyi opportunitics at th top cnd ing of the marker. pecially in the hig -d Class C Milwaukee, where cap rates can risc above y percent. rs who are not ao old are plentiful, supply is low, and a rise in interest rates could wane investor Effective Rent Trends gruwu, and another yuuruf heighunul inwntory expansion is expectad to tarren rent ains. 2014 Market Outlook 201i NAl Ranla 25 Up i Place. Average operarional Improvement Employment Forecast: Muer posting a 1.4 pctocnu addition during -es 2013, head counts will jump 1.9 percent this year with the crearian of 6,200 Sales Trends Construct Forecast: ly 1,400 aparumenes will come i sn Approximate online in 201i, down slightly from last year's 1,530 units. use: Re ply points 2013 vacancy rose il basis paints 3920 per month in 2014, Mulluwing a i.5 purkunt jump last ykat. Investnent A small may momWatc some further incturnas kad uo tv-pricing, Market Forecast Cmployment: 1.9% A Construction: 130 Vacancy: 50 bps A Crective Rents: 3.4% A Marcus SMillichap Milwaukee Place 2014 Rank: 2S 2013 Rank: 26 New Apartments Brewing in Milwaukee Employment Trends As Growing Demand Keeps Developers Active bgiowth will reach a 15-year high in Milwaukee thi ng sales will Re vacancy upward. Local cmploy: will incrrasc oayrous 15 nud 2014. Al Class tknus siu abuwa monthly munuguge paymene on a mexlian-prival home, which will motivate some tenants to choose bo rship ahead A n from new invenrary. With merrawide vacancy near i percen, Oom Permal Mote City of Milwaukce and as larger projects come unline supply will overaku demand, pushing vacancy up in selecr area and dampening renr f.mowTh. Supply and Demand ing tbcMwenir and Standard at East Library will targku Young fessionals Is and empry nevrers tor a quick leate up 3 12 Buyer d n M waukee wi remain well abwe sia apply yar as rising NO inventory will oecr some additional buyi opportunitics at th top cnd ing of the marker. pecially in the hig -d Class C Milwaukee, where cap rates can risc above y percent. rs who are not ao old are plentiful, supply is low, and a rise in interest rates could wane investor Effective Rent Trends gruwu, and another yuuruf heighunul inwntory expansion is expectad to tarren rent ains. 2014 Market Outlook 201i NAl Ranla 25 Up i Place. Average operarional Improvement Employment Forecast: Muer posting a 1.4 pctocnu addition during -es 2013, head counts will jump 1.9 percent this year with the crearian of 6,200 Sales Trends Construct Forecast: ly 1,400 aparumenes will come i sn Approximate online in 201i, down slightly from last year's 1,530 units. use: Re ply points 2013 vacancy rose il basis paints 3920 per month in 2014, Mulluwing a i.5 purkunt jump last ykat. Investnent A small may momWatc some further incturnas kad uo tv-pricing, Market Forecast Cmployment: 1.9% A Construction: 130 Vacancy: 50 bps A Crective Rents: 3.4% A Marcus SMillichap