***PLEASE ONLY ANSWER PART 2 QUESTIONS IN BOLD***

Valuation Analysis Problem Enter all answers on this page and attach your cash flow Underwriting information: 300 unit apartment building 1,500 per month average rent 7% vacancy 38% total operating expense ratio Replacement Reserves of $250 per unit per year 3% growth rate Purchase price is $50 million Exit cap rate is 6.5% Sales costs are 2% Unlevered discount rate is 7% Assume 5 year holding period Part 1 - Prepare 5 year pro forma operating statement What is cap rate on the purchase price? Determine the sales price at the end of year 5 Based on your analysis, what do you think the initial value of the asset is? If you buy the asset for $50 million, what is your NPV? IRR?

Part 2 - Assume the above but now with the following loan information: Loan principal of $30 million 5% interest rate 30 year term with amortization 2% loan fees Calculate levered cash flows Calculate net sales proceeds after debt repayment What are net loan proceeds? What is monthly loan payment? What is effective annual interest rate (effective borrowing cost)? What is your required equity investment if you buy the asset for $50 million? What is your equity dividend rate? What is the DSCR? If the required return (discount rate) increases to 10%, what is your NPV? Levered IRR?

***PLEASE ONLY ANSWER PART 2 QUESTIONS***