Lets assume that you and a developer bought a site for $200,000 and developed a project for an additional $750,000 that will be built in one year which will be financed entirely by a construction loan including all interest. Upon completion, the project will be worth $1,000,000. At the completion of construction, the partners will obtain permanent financing in the amount of $750,000 with a payment and capital structure as outlined below. First mortgage of $750,000 Construction financing of $750,000 Preferred equity of $180,000 Developer equity of $20,000 Cash flow assumptions are as follows: 1. We will assume or define the time period when the land is purchased is at the end of Year 0 2. The project will take one year to complete and the construction loan will be paid off. This will be documented under Year 1. No cash flow during that year. 3. Rental operations begin Year 2. We will ignore partial leasing during the year and assume all cash flows received including any additional equity contributions will be at the END of the year. 4. Assume net operating cash flows start in Year 2 at $60,000/year and grow at 1%/year. 5. First mortgage of $750,000 has a pay rate of 5.5% PLUS $2,000 of amortization per year. 6. Assume that $50,000 of Cap Expenditures are required in years 3 and 8 thus reducing cash flow. NOTE: this will require additional equity contributions by the partners and would not be repaid until the project is sold. 7. At the end of the 10th year of property operations, the project is sold based on year 11s NOI capped at 6%. Given the discussion in class, I have populated the template to reflect the acquisition of the land, construction and financing of the property and the commencement of operations. Your project will focus on the operations of the property, capital account reconciliation and sale. The financial commitments and assumptions are as follows: 1. You as the Preferred Equity or Money Partner will cover 90% of the land cost while the operational partner will contribute 10% and retain operational control. Both partners are responsible for their proportionate shares of additional capital contributions. 2. You as the Money Partner will receive a 6% cumulative preferred return on your investment AFTER debt service has been paid on the senior loan. No preferred return for the operational partner. 3. Any cash flow remaining after all preferred return arrearages and preferred return are paid will be split 50/50. Compute the following: 1. Prepare a cash flow statement from Year 0 to Year 12. 2. Prepare a permanent debt amortization table. 3. Prepare a Preferred Equity Capital account for the Money Partner. 4. What is the IRR to the money partner and the operational partner upon sale after satisfaction of all debt and settlement of the capital accounts?

Please use excel to show formulas and work