6. You have been asked to develop a pro forma statement of cash flow for the coming year for

Autumn Seasons, a 200-unit suburban garden apartment community. This community has a mix

of 40 studio, 80 one-, and 80 two-bedroom apartments with current monthly rents of $550, $600,

and $800, respectively. Leases with tenants are usually made for 12-month periods. Current

rents are expected to remain fixed for the next six months. After that time, monthly rents for each

apartment type should increase by $10 per unit and remain at those levels for the remainder of

the year. Ten studios were leased three months ago for $500, 20 one-bedroom units were leased

two months ago for $580, and 10 two-bedroom units were leased last month for $805. All other

units have been leased recently at current rents. All of the previously leased units also are on

12-month leases. When those leases roll over, all are expected to be renewed at market rents

upon rollover for an additional 12 months. Presently, 4 studios, 6 one-, and 6 two-bedroom units

are vacant. This vacancy pattern should remain the same for the remainder of the year.

Autumn Seasons anticipates that during the coming year, it will earn other income from

laundry facilities, the awarding of an exclusive cable TV contract, parking, plus fees from net

deposits, late fees, and so on of $200,000. Autumn Seasons expect to pay total turnover and operating

expenses of $400 per month, per occupied unit during the next year. However, it expects to

recover some of these expenses for heating and central cooling that it provides to tenants in an

amount totaling $100 per month, per occupied unit. During the next year, it is also anticipated that

$100,000 will be required for recurring, make-ready expenses (carpet, paint, drywall repair, etc.),

and another $250,000 will be required as an allowance for nonrecurring items including parking

lot repairs, and so on. A total of $10,000 in fees will be paid to Apartment Locator Services, a

company that provides marketing services and finds new tenants for Autumn.

a. Prepare a statement of operating cash flow (NOI) for the coming year.

b. Add to the (a) anticipated outlays for nonrecurring items and commissions. What will be net

cash flow for the coming year?