Real Estate Finance

bull Comparison with business finance

bull Real estate development process and financing

bull Real estate financial statements

bull Finance instruments amp underwritinging

bull Funding gaps

bull Project Examples

bull City Plaza

1

Real Estate vs Business Finance

bull Similarities to business fixed asset financing c Scale of investment is large c Financing of physical fixed assets c Need for longshyterm financing

bull Diff with b i fi bull Differences with business finance c More use of debt 31 or 41 debt to equity ratio

c Separate construction amp permanent financing c Competition amp markets are local or regional c More predictable income amp expenses

bull Land development vs building development bull Development for lease vs development for sale

2

Three Phases of Development

bull Predevelopment c Planning amp design site control permitting preshy

leasingsales securing financing c Large costs with high risk and no revenue

=gtrequires equity grants deferred loans bull C t ti amp d l tbull Construction amp development

c Site acquisition final design amp contractor selection construction

c Limited risk =gt construction or minishyperm loan and equity bridge loans

bull Occupancy and management c Asset management=gt permanent debt takeshyout c Retire debt realize equity returns

3

RE Financial Statements Development Budget

bull Sources and uses of funds statement

bull Analogous to a balance sheet c Acquisition hard costs and soft costs

c Contingencies and reserves

c Per square foot basis useful for comparisons

bull Sources of funds c Debt sources equity investments syndicationsale of tax

credits grants

4

RE Financial Statements Operating Pro Forma

bull Revenue expenses and net cash flow bull CAM escalators and percentage rent

c Lease terms define revenue ndashkey to analyze leases bull Vacancy rates bull Operating expensesbull Operating expenses

c IREM ULI comparable project data to analyze c Replacement and operating reserves

bull Cash flow debt service and net cash flow bull Supportable debt PV of [cash flowDSCR] bull Supportable equity PV of net cash flow amp

expected gain on sale

5

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Real Estate vs Business Finance

bull Similarities to business fixed asset financing c Scale of investment is large c Financing of physical fixed assets c Need for longshyterm financing

bull Diff with b i fi bull Differences with business finance c More use of debt 31 or 41 debt to equity ratio

c Separate construction amp permanent financing c Competition amp markets are local or regional c More predictable income amp expenses

bull Land development vs building development bull Development for lease vs development for sale

2

Three Phases of Development

bull Predevelopment c Planning amp design site control permitting preshy

leasingsales securing financing c Large costs with high risk and no revenue

=gtrequires equity grants deferred loans bull C t ti amp d l tbull Construction amp development

c Site acquisition final design amp contractor selection construction

c Limited risk =gt construction or minishyperm loan and equity bridge loans

bull Occupancy and management c Asset management=gt permanent debt takeshyout c Retire debt realize equity returns

3

RE Financial Statements Development Budget

bull Sources and uses of funds statement

bull Analogous to a balance sheet c Acquisition hard costs and soft costs

c Contingencies and reserves

c Per square foot basis useful for comparisons

bull Sources of funds c Debt sources equity investments syndicationsale of tax

credits grants

4

RE Financial Statements Operating Pro Forma

bull Revenue expenses and net cash flow bull CAM escalators and percentage rent

c Lease terms define revenue ndashkey to analyze leases bull Vacancy rates bull Operating expensesbull Operating expenses

c IREM ULI comparable project data to analyze c Replacement and operating reserves

bull Cash flow debt service and net cash flow bull Supportable debt PV of [cash flowDSCR] bull Supportable equity PV of net cash flow amp

expected gain on sale

5

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Three Phases of Development

bull Predevelopment c Planning amp design site control permitting preshy

leasingsales securing financing c Large costs with high risk and no revenue

=gtrequires equity grants deferred loans bull C t ti amp d l tbull Construction amp development

c Site acquisition final design amp contractor selection construction

c Limited risk =gt construction or minishyperm loan and equity bridge loans

bull Occupancy and management c Asset management=gt permanent debt takeshyout c Retire debt realize equity returns

3

RE Financial Statements Development Budget

bull Sources and uses of funds statement

bull Analogous to a balance sheet c Acquisition hard costs and soft costs

c Contingencies and reserves

c Per square foot basis useful for comparisons

bull Sources of funds c Debt sources equity investments syndicationsale of tax

credits grants

4

RE Financial Statements Operating Pro Forma

bull Revenue expenses and net cash flow bull CAM escalators and percentage rent

c Lease terms define revenue ndashkey to analyze leases bull Vacancy rates bull Operating expensesbull Operating expenses

c IREM ULI comparable project data to analyze c Replacement and operating reserves

bull Cash flow debt service and net cash flow bull Supportable debt PV of [cash flowDSCR] bull Supportable equity PV of net cash flow amp

expected gain on sale

5

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

RE Financial Statements Development Budget

bull Sources and uses of funds statement

bull Analogous to a balance sheet c Acquisition hard costs and soft costs

c Contingencies and reserves

c Per square foot basis useful for comparisons

bull Sources of funds c Debt sources equity investments syndicationsale of tax

credits grants

4

RE Financial Statements Operating Pro Forma

bull Revenue expenses and net cash flow bull CAM escalators and percentage rent

c Lease terms define revenue ndashkey to analyze leases bull Vacancy rates bull Operating expensesbull Operating expenses

c IREM ULI comparable project data to analyze c Replacement and operating reserves

bull Cash flow debt service and net cash flow bull Supportable debt PV of [cash flowDSCR] bull Supportable equity PV of net cash flow amp

expected gain on sale

5

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

RE Financial Statements Operating Pro Forma

bull Revenue expenses and net cash flow bull CAM escalators and percentage rent

c Lease terms define revenue ndashkey to analyze leases bull Vacancy rates bull Operating expensesbull Operating expenses

c IREM ULI comparable project data to analyze c Replacement and operating reserves

bull Cash flow debt service and net cash flow bull Supportable debt PV of [cash flowDSCR] bull Supportable equity PV of net cash flow amp

expected gain on sale

5

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Sizing Real Estate Debt Downtown Building Example

bull Start with lowest annual pro forma net cash flow (54299)

bull Calculate cash flow available for debt service (CFADS) c Divide by lenderrsquos required debt service coverage ratio

(54299125 = 43439)

bull Calculate Present Value of CFADS per loan terms c PV(0812 240 4343912) = 432777

6

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Real Estate Finance Tools

Debt bull Predevelopment loan bull Acquisition loan bull Construction loan bull Real estate mortgage bull Real estate mortgage bull Minishyperm loan bull Bridge loan Equity bull Developer and investor cash equity bull Tax credit equity (historic new market LIHTC) Grants

7

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Underwriting Real Estate Loans

bull Development Team Capacity c Experience amp ability of development team members c Management company deserves special attention

bull Project cash flow risk c Initial leaseshyup risk will property be occupied at target rent c Tenant credit risk will tenants pay their rent c Reshyleasingmarket risk will space be released at target rent c Operating expense risk are operating costs adequate

bull Collateral value and appraisals c Appraisals set the market value LTV and maximum loan c Quality of construction c Quality of maintenance and replacement funding

8

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Real Estate Funding Gaps

bull Supply of preshydevelopment and equity financing bull Weak markets

c Market rents do not support development costs c New development is needed to change market dynamics

Lith Bl k lc Lithgow Block example

bullIncome supported 575 of development costs bullGrantsubsidy for 425

9

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Jamaica Plain Brewery Reuse

bull Closed brewery complex acquired by neighborhood nonshyprofit (JPNDC) in 1983

bull Renovated in phases over 25 years

bull Final phase difficult and costly c Interior demolition and entire

reconstruction of 68000 square feet

c Reuse as fitness center retail restaurant and office space

bull Home to 50 small businesses

Courtesy of Ed Kopp on Flickr CC BY-NC-SA

10

Credits (MHIC)

New Market Tax Credits (MHIC)

$2160000

City of Boston Loan $150000

Developer loan amp deferred fees

$1095000

11

JP Brewery Project Financing

Total Dev Costs $12105000

Senior Debt (Life Ins Fund)

$4700000

HHiiststoorriicc TTaaxx $$44000000000000

The Auburn MixedshyUse Development

Part of multi-project and investment strategy to attract new residents to Midtown Detroit neighborhood

bull Demolition and new construction project bull 58 market rate apartments bull 9100 SF retail space

bull Completed in 2012

bull Hard to finance after Great Recession

12

Total Development Cost $123 million

The Auburn Financing Sources

CDFI Loan $37 million

New Market Tax Credits $76 million

S Gra $10 illi

bull 2nd local CDFI guaranteed retail rental income

bull Market rate project needed 70 subsidy

bull Due to low rents and low property values in Detroit

State Grant $10 million

13

ReFresh Development Budget

Sources Amount Uses Amount

Senior DebtshyGS $3000000 Acquisition $2400000

Junior DebtshyLIIF $1558000 Construction $12421638

Fresh Food Financing Initiative $1000000 Soft Costs $2749754

New Orleans Redevelopment $900000 Developer $610436 A h it FAuthority Fee

NMTC Equity $5491200 Total $18181818

Whole Foods Build out $5300000 Uses PSG

Foundation for LA Grant $500000 Acquisition $37

Newmans Own Grant $250000 Construction $191

Developers Equity $181818 Soft Costs $42

Total $18181818 Developer Fee

$9

Total $279

14

15

ReFresh Proforma Year One

Tenant

BCC Rent

Whole Foods Rent

Libertyrsquos Kitchen Rent

Tulane Rent

First Line Rent

Other Tenant Rent

Tenant ReimbursementsshyOperating Cost

Vacancy Allowance (10)

Total Income After Vacancy

Management and Operating Expenses

NOI

Debt Service

Net Cash Flow

Percentage Rent on $15 million sales

Year 1

$6250

$130000

$73883

$46890

$56250

$127735

$186624

$62138

$559244

$201071

$358173

$339529

$18644

$125000

Year 5

$6250

$130000

$73883

$46890

$56250

$127735

$206042

$64170

$577630

$226307

$351223

$339529

$11694

$125000

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

The Auburn MixedshyUse Development

Part of multi-project and investment strategy to attract new residents to Midtown Detroit neighborhood

bull Demolition and new construction project bull 58 market rate apartments bull 9100 SF retail space

bull Completed in 2012

bull Hard to finance after Great Recession

12

Total Development Cost $123 million

The Auburn Financing Sources

CDFI Loan $37 million

New Market Tax Credits $76 million

S Gra $10 illi

bull 2nd local CDFI guaranteed retail rental income

bull Market rate project needed 70 subsidy

bull Due to low rents and low property values in Detroit

State Grant $10 million

13

ReFresh Development Budget

Sources Amount Uses Amount

Senior DebtshyGS $3000000 Acquisition $2400000

Junior DebtshyLIIF $1558000 Construction $12421638

Fresh Food Financing Initiative $1000000 Soft Costs $2749754

New Orleans Redevelopment $900000 Developer $610436 A h it FAuthority Fee

NMTC Equity $5491200 Total $18181818

Whole Foods Build out $5300000 Uses PSG

Foundation for LA Grant $500000 Acquisition $37

Newmans Own Grant $250000 Construction $191

Developers Equity $181818 Soft Costs $42

Total $18181818 Developer Fee

$9

Total $279

14

15

ReFresh Proforma Year One

Tenant

BCC Rent

Whole Foods Rent

Libertyrsquos Kitchen Rent

Tulane Rent

First Line Rent

Other Tenant Rent

Tenant ReimbursementsshyOperating Cost

Vacancy Allowance (10)

Total Income After Vacancy

Management and Operating Expenses

NOI

Debt Service

Net Cash Flow

Percentage Rent on $15 million sales

Year 1

$6250

$130000

$73883

$46890

$56250

$127735

$186624

$62138

$559244

$201071

$358173

$339529

$18644

$125000

Year 5

$6250

$130000

$73883

$46890

$56250

$127735

$206042

$64170

$577630

$226307

$351223

$339529

$11694

$125000

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

Total Development Cost $123 million

The Auburn Financing Sources

CDFI Loan $37 million

New Market Tax Credits $76 million

S Gra $10 illi

bull 2nd local CDFI guaranteed retail rental income

bull Market rate project needed 70 subsidy

bull Due to low rents and low property values in Detroit

State Grant $10 million

13

ReFresh Development Budget

Sources Amount Uses Amount

Senior DebtshyGS $3000000 Acquisition $2400000

Junior DebtshyLIIF $1558000 Construction $12421638

Fresh Food Financing Initiative $1000000 Soft Costs $2749754

New Orleans Redevelopment $900000 Developer $610436 A h it FAuthority Fee

NMTC Equity $5491200 Total $18181818

Whole Foods Build out $5300000 Uses PSG

Foundation for LA Grant $500000 Acquisition $37

Newmans Own Grant $250000 Construction $191

Developers Equity $181818 Soft Costs $42

Total $18181818 Developer Fee

$9

Total $279

14

15

ReFresh Proforma Year One

Tenant

BCC Rent

Whole Foods Rent

Libertyrsquos Kitchen Rent

Tulane Rent

First Line Rent

Other Tenant Rent

Tenant ReimbursementsshyOperating Cost

Vacancy Allowance (10)

Total Income After Vacancy

Management and Operating Expenses

NOI

Debt Service

Net Cash Flow

Percentage Rent on $15 million sales

Year 1

$6250

$130000

$73883

$46890

$56250

$127735

$186624

$62138

$559244

$201071

$358173

$339529

$18644

$125000

Year 5

$6250

$130000

$73883

$46890

$56250

$127735

$206042

$64170

$577630

$226307

$351223

$339529

$11694

$125000

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

ReFresh Development Budget

Sources Amount Uses Amount

Senior DebtshyGS $3000000 Acquisition $2400000

Junior DebtshyLIIF $1558000 Construction $12421638

Fresh Food Financing Initiative $1000000 Soft Costs $2749754

New Orleans Redevelopment $900000 Developer $610436 A h it FAuthority Fee

NMTC Equity $5491200 Total $18181818

Whole Foods Build out $5300000 Uses PSG

Foundation for LA Grant $500000 Acquisition $37

Newmans Own Grant $250000 Construction $191

Developers Equity $181818 Soft Costs $42

Total $18181818 Developer Fee

$9

Total $279

14

15

ReFresh Proforma Year One

Tenant

BCC Rent

Whole Foods Rent

Libertyrsquos Kitchen Rent

Tulane Rent

First Line Rent

Other Tenant Rent

Tenant ReimbursementsshyOperating Cost

Vacancy Allowance (10)

Total Income After Vacancy

Management and Operating Expenses

NOI

Debt Service

Net Cash Flow

Percentage Rent on $15 million sales

Year 1

$6250

$130000

$73883

$46890

$56250

$127735

$186624

$62138

$559244

$201071

$358173

$339529

$18644

$125000

Year 5

$6250

$130000

$73883

$46890

$56250

$127735

$206042

$64170

$577630

$226307

$351223

$339529

$11694

$125000

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

15

ReFresh Proforma Year One

Tenant

BCC Rent

Whole Foods Rent

Libertyrsquos Kitchen Rent

Tulane Rent

First Line Rent

Other Tenant Rent

Tenant ReimbursementsshyOperating Cost

Vacancy Allowance (10)

Total Income After Vacancy

Management and Operating Expenses

NOI

Debt Service

Net Cash Flow

Percentage Rent on $15 million sales

Year 1

$6250

$130000

$73883

$46890

$56250

$127735

$186624

$62138

$559244

$201071

$358173

$339529

$18644

$125000

Year 5

$6250

$130000

$73883

$46890

$56250

$127735

$206042

$64170

$577630

$226307

$351223

$339529

$11694

$125000

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

City Plaza Supportable Debt and Financing Gap

Minimum Annual Cash Flow $144550

Divide by Debt Service Coverage Ratio 125

= Cash Flow Available for Debt Service (144550125 ) $115640

Supportable Mortgage Loan $1152105uppor gage

=PV(081224011564012)

$1152105

Estimated Value at 11 cap rate (14455011) $1314091

Maximum Senior Loan at 80 LTV (80 1314091) $1051273

Senior Loan Amount Rounded 1051000

TDC (1490000) less grants (150000) 1340000

Remaining Funding Gap (1340000- 1051000) 289000

16

City Plaza Subordinate Loan Analysis

$144550Minimum Annual Cash Flow

110Divide by Debt Combined Coverage Ratio

$131409= Cash Flow Available for Debt Service

$105492Less Senior Debt Service 12 pmt(0812 240 p ( 1051000)

$105492

=Cash Flow to Repay Subordinate Loan $25917

Supportable Sub Loan per CF -pv(0912240 2591712)

$240045

LTV at 95 (95$1314091) rounded $1248000

Max Sub Loan per LTV (1248000-1051000) $197000

Remaining Gap (1340000-1248000) $92000

17

MIT OpenCourseWare httpsocwmitedu

11437 Financing Economic Development Fall 2016

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MIT OpenCourseWare httpsocwmitedu

11437 Financing Economic Development Fall 2016

For information about citing these materials or our Terms of Use visit httpsocwmiteduterms