Irr Excel Template 43152 | Re 01 07 Industrial Development Part 3 After

Partial file snippet.

Sheet 1: Dev-Pro-Forma

	
	
	
	
	
		4216 61 Ave SE - Investment Analysis
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		($ in CAD as Stated)
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Lesson Notes:
		

		

		

		

		

		

		

		

		

	
	
		Development Overview:
		

		Units:
		

		

		

		

		Units:
		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		This model/case combines elements of the previous two and expands on them. We've already explained how leases, Vacancies, Expense Reimbursements, etc.
		

		

		

		

		

		

		

		

		

	
	
		

		Project Name:
		Name
		4216 61 Ave SE
		

		# Square Feet in 1 Acre:
		

		sq. ft.
		43,560 sq. ft.
		

		

		work, so we will move through those parts of it quite quickly.
		

		

		

		

		

		

		

		

		

	
	
		

		Property Type:
		Name
		Industrial
		

		Total Square Feet to Purchase:
		

		sq. ft.
		784,080 sq. ft.
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		Percentage Required for Property:
		

		%
		43.0% 
		

		

		Similarities to Previous Lessons: Still calculating revenue and expenses on a lease-by-lease basis, and still calculating IRR and multiples to different groups.
		

		

		

		

		

		

		

		

		

	
	
		

		Location:
		Name
		Calgary
		

		Gross Square Feet of Property:
		

		sq. ft.
		337,154 sq. ft.
		

		

		Property is still funded with Debt and Equity, and we still sell the entire property at the end.
		

		

		

		

		

		

		

		

		

	
	
		

		Construction Start Date:
		Date
		2018-01-01
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Months in Year:
		#
		12
		

		Rentable to Gross Square Feet %:
		

		%
		95.0% 
		

		

		Differences: "Construction period" of 1 year where the property is developed (industrial properties take little time - just 1-story warehouses with few frills or
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		Rentable Square Feet:
		

		sq. ft.
		320,297 sq. ft.
		

		

		fancy features). During this period, both Debt and Equity are used as they are needed - not issued all at once!
		

		

		

		

		

		

		

		

		

	
	
		

		Number of Acres to Purchase:
		# Acres
		18.0 Acres
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Estimated Price per Acre:
		$ / Acre
		 $700,000 
		

		Construction Costs per Gross SF:
		

		$ / sq. ft.
		 $50.00 
		

		

		We also have a "lease-up period," where the new tenants start their leases at this brand-new building - some differences on the Pro-Forma.
		

		

		

		

		

		

		

		

		

	
	
		

		Land Acquisition Costs:
		$
		 $12,600,000 
		

		Total Construction Costs:
		

		$
		 $16,857,720 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		We also assume a Permanent Loan to refinance the Construction Loan, which is what happens in real life when the property stabilizes.
		

		

		

		

		

		

		

		

		

	
	
		

		Saleable Excess Land Percentage:
		%
		57.0% 
		

		

		

		

		

		

		

		This refinancing will also affect the equity IRR because the property's value will change over time!
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Sale of Excess Land will also affect the equity IRR - if we buy land but don't use it, we can sell it to someone else.
		

		

		

		

		

		

		

		

		

	
	
		Construction, Financing, and Exit Assumptions:
		

		Units:
		

		

		

		

		Units:
		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Finally, we build more of a "real" waterfall schedule here, with multiple tiers and cash flow splits based on project-level returns.
		

		

		

		

		

		

		

		

		

	
	
		

		Construction Financing:
		

		

		

		Permanent Loan Refinancing & Exit:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Loan-to-Cost (LTC) Ratio:
		%
		50.0% 
		

		Loan-to-Value (LTV) Ratio:
		

		%
		55.0% 
		

		

		We'll divide this 90-minute case study into 3 parts of roughly 20-30 minutes each and look at different aspects in each part.
		

		

		

		

		

		

		

		

		

	
	
		

		Interest Rate - Annual:
		%
		6.25%
		

		Interest Rate - Annual:
		

		%
		4.75%
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Interest Rate - Monthly:
		%
		0.506%
		

		

		

		

		

		

		

		Part 1: Assumptions, Construction Phase, and Tenant Rent and Expenses
		

		

		

		

		

		

		

		

		

	
	
		

		Issuance Fees:
		%
		1.00%
		

		Issuance Fees:
		

		%
		1.00%
		

		

		Part 2: Property Pro-Forma, Permanent Loan Refinancing, Excess Land Sale, and Equity Returns
		

		

		

		

		

		

		

		

		

	
	
		

		Amortization (Years):
		# Years
		Interest Only
		

		Amortization (Years):
		

		# Years
		30
		

		

		Part 3: Waterfall Returns and Case Study Answers
		

		

		

		

		

		

		

		

		

	
	
		

		Maturity:
		Date
		2018-12-31
		

		Maturity:
		

		Date
		2028-12-31
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Term:
		# Years
		1 year
		

		Prepayment Penalty:
		

		%
		1.00%
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		Refinancing Date:
		

		Date
		2018-12-31
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developer Equity Contribution:
		%
		10.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		IRR Hurdle 1:
		%
		10.0% 
		

		Discount Rate:
		

		

		
		BIWS:
Based on sponsor's targeted unleveraged IRR for new developments.
		15.0% 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developer Cash Flow Above IRR Hurdle 1:
		%
		20.0% 
		

		Property Value 1 Year After Refi.:
		

		$
		
		BIWS:
Using the Year 2 number because Year 1 includes Absorption & Turnover Vacancy, and 30% of the space is vacant in Year 1.
		 $32,969,370 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		IRR Hurdle 2:
		%
		20.0% 
		

		Property Value @ Refinancing:
		

		$
		
		BIWS:
Discounting to its value at the end of the Construction Year, i.e. one year back.
		 28,669,018 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developer Cash Flow Above IRR Hurdle 2:
		%
		30.0% 
		

		Permanent Loan Amount:
		

		$
		 15,767,960 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		Property Selling Costs:
		

		%
		1.50%
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		Sources & Uses of Funds:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Sources of Funds:
		

		

		

		Uses of Funds:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Construction Loan: 
		

		 $15,028,860 
		

		Land Acquisition Costs:
		

		

		 $12,600,000 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developer Equity:
		

		 1,502,886 
		

		Construction Costs:
		

		

		 16,857,720 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Investor Equity:
		

		 13,525,974 
		

		Replacement Reserves:
		

		

		 600,000 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Total Sources: 
		

		 $30,057,720 
		

		Total Uses: 
		

		

		 $30,057,720 
		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		Construction:
		Operational Years:
		Stabilized:
		

		

		

		

		

		

		

		

	
	
		Rent Roll & Operating Assumptions:
		

		Units:
		

		FY18
		FY19
		FY20
		FY21
		FY22
		FY23
		FY24
		FY25
		FY26
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Property-Wide Operating Assumptions:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Expenses & Taxes per SF per Year:
		$ / sq. ft. / Yr
		 2.35 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Expenses & Taxes Annual Growth Rate:
		%
		3.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Property Management Fees % EGI:
		%
		3.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Replacement Reserves per SF per Year:
		$ / sq. ft. / Yr
		 $0.30 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Replacement Reserve Growth Rate:
		%
		3.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		New Lease Term (Years):
		# Years
		5 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Renewal Probability:
		%
		60.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		# Months of Downtime for Non-Renewal:
		#
		6
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Free Rent and Capital Costs:
		

		New:
		Renewal:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		# Months of Free Rent:
		#
		4
		2
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Tenant Improvements (TIs) per RSF:
		$ / sq. ft. / Yr
		 $1.50 
		 1.00 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Leasing Commissions (LCs) % Total Lease Value:
		%
		3.0% 
		1.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Tenant #1 - Triple Net (NNN) Lease:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		% Rentable Square Feet Occupied:
		%
		65.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Rentable Square Feet Occupied:
		sq. ft.
		208,193 sq. ft.
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Lease Start Date:
		Date
		2018-12-31
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Lease Expiration Date:
		Date
		2022-12-31
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Baseline Rent per Square Foot:
		$ / sq. ft. / Yr
		

		

		 $7.50 
		 $7.73 
		 $7.96 
		 $8.20 
		 $8.44 
		 $8.69 
		 $8.96 
		 $9.22 
		 $9.50 
		

		

		

		

		

		

		

	
	
		

		Rental Growth Rate:
		%
		

		

		

		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(+) Base Rental Income:
		$
		

		

		 $1,561,446 
		 $1,608,290 
		 $1,656,538 
		 $1,706,235 
		 $1,757,422 
		 $1,810,144 
		 $1,864,449 
		 $1,920,382 
		 $1,977,993 
		

		

		

		

		

		

		

	
	
		

		(-) Absorption & Turnover Vacancy:
		$
		

		

		
		BIWS:
Not counting anything here because the tenant moves in as of January 1 of this year.
		- 
		- 
		- 
		- 
		(351,484)
		- 
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Concessions & Free Rent:
		$
		

		

		(520,482)
		- 
		- 
		- 
		(410,065)
		- 
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Tenant Improvements (TIs):
		$
		

		

		(312,289)
		- 
		- 
		- 
		(249,831)
		- 
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Leasing Commissions (LCs):
		$
		

		

		(195,975)
		- 
		- 
		- 
		(167,947)
		- 
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(+) Expense Reimbursements:
		$
		

		

		489,253 
		503,931 
		519,049 
		534,620 
		440,527 
		567,179 
		584,194 
		601,720 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Tenant #2 - Triple Net (NNN) Lease:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		% Rentable Square Feet Occupied:
		%
		30.0% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Rentable Square Feet Occupied:
		sq. ft.
		96,089 sq. ft.
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Lease Start Date:
		Date
		2019-12-31
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Lease Expiration Date:
		Date
		2023-12-31
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Baseline Rent per Square Foot:
		$ / sq. ft. / Yr
		

		

		 $8.00 
		 $8.24 
		 $8.49 
		 $8.74 
		 $9.00 
		 $9.27 
		 $9.55 
		 $9.84 
		 $10.13 
		 $10.44 
		

		

		

		

		

		

	
	
		

		Rental Growth Rate:
		%
		

		

		

		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(+) Base Rental Income:
		$
		

		

		 $768,712 
		 $791,773 
		 $815,527 
		 $839,992 
		 $865,192 
		 $891,148 
		 $917,882 
		 $945,419 
		 $973,781 
		 $1,002,995 
		

		

		

		

		

		

	
	
		

		(-) Absorption & Turnover Vacancy:
		$
		

		

		
		BIWS:
It takes a year to find the tenant, so we're deducting the entire Base Rental Income here.
		(768,712)
		- 
		- 
		- 
		- 
		(178,230)
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Concessions & Free Rent:
		$
		

		

		- 
		(263,924)
		- 
		- 
		- 
		(207,935)
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Tenant Improvements (TIs):
		$
		

		

		- 
		(144,134)
		- 
		- 
		- 
		(115,307)
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		(-) Leasing Commissions (LCs):
		$
		

		

		- 
		(99,375)
		- 
		- 
		- 
		(85,162)
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(+) Expense Reimbursements:
		$
		

		

		
		BIWS:
No tenant move-in yet, so no expense reimbursements.
		- 
		232,583 
		239,561 
		246,748 
		254,150 
		209,420 
		269,628 
		277,717 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Annual Capital Costs:
		$
		

		

		(508,265)
		(243,508)
		- 
		- 
		(417,778)
		(200,469)
		- 
		- 
		

		

		

		

		

		

		

		

	
	
		

		Replacement Reserve Amount:
		$
		

		600,000 
		187,824 
		43,288 
		145,229 
		250,228 
		- 
		- 
		114,735 
		232,913 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Numerical Year: 
		Year
		

		2018
		2019
		2020
		2021
		2022
		2023
		2024
		2025
		2026
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		Construction:
		Operational Years:
		Stabilized:
		

		

		

		

		

		

		

		

	
	
		Property Pro-Forma:
		

		Units:
		

		FY18
		FY19
		FY20
		FY21
		FY22
		FY23
		FY24
		FY25
		FY26
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Revenue:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(+) Base Rental Income:
		$
		

		

		 $2,450,270 
		 $2,523,778 
		 $2,599,491 
		 $2,677,476 
		 $2,757,800 
		 $2,840,534 
		 $2,925,750 
		 $3,013,523 
		

		

		

		

		

		

		

		

	
	
		

		(-) Absorption & Turnover Vacancy:
		$
		

		

		 (768,712)
		 - 
		 - 
		 - 
		 (351,484)
		 (178,230)
		 - 
		 - 
		

		

		

		

		

		

		

		

	
	
		

		(-) Concessions & Free Rent:
		$
		

		

		 (520,482)
		 (263,924)
		 - 
		 - 
		 (410,065)
		 (207,935)
		 - 
		 - 
		

		

		

		

		

		

		

		

	
	
		

		(+) Expense Reimbursements:
		$
		

		

		 489,253 
		 736,514 
		 758,610 
		 781,368 
		 694,677 
		 776,598 
		 853,822 
		 879,436 
		

		

		

		

		

		

		

		

	
	
		

		Potential Gross Revenue:
		$
		

		

		 1,650,329 
		 2,996,367 
		 3,358,101 
		 3,458,844 
		 2,690,928 
		 3,230,968 
		 3,779,572 
		 3,892,959 
		

		

		

		

		

		

		

		

	
	
		

		  (-) General Vacancy:
		$
		

		

		 (120,111)
		 (123,715)
		 (127,426)
		 (131,249)
		 (135,186)
		 (139,242)
		 (143,419)
		 (147,722)
		

		

		

		

		

		

		

		

	
	
		

		Effective Gross Income (EGI):
		$
		

		

		 1,530,217 
		 2,872,653 
		 3,230,675 
		 3,327,595 
		 2,555,742 
		 3,091,726 
		 3,636,153 
		 3,745,237 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Operating Expenses:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		  (-) Recoverable Expenses:
		$
		

		

		 (752,697)
		 (775,278)
		 (798,536)
		 (822,493)
		 (847,167)
		 (872,582)
		 (898,760)
		 (925,723)
		

		

		

		

		

		

		

		

	
	
		

		  (-) Management Fee:
		$
		

		

		 (45,907)
		 (86,180)
		 (96,920)
		 (99,828)
		 (76,672)
		 (92,752)
		 (109,085)
		 (112,357)
		

		

		

		

		

		

		

		

	
	
		

		  (-) CapEx, TI, and LC Reserves:
		$
		

		

		 (96,089)
		 (98,972)
		 (101,941)
		 (104,999)
		 (108,149)
		 (111,393)
		 (114,735)
		 (118,177)
		

		

		

		

		

		

		

		

	
	
		

		Total Operating Expenses:
		$
		

		

		 (894,693)
		 (960,429)
		 (997,398)
		 (1,027,319)
		 (1,031,989)
		 (1,076,728)
		 (1,122,580)
		 (1,156,257)
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Net Operating Income (NOI):
		$
		

		

		 635,525 
		 1,912,223 
		 2,233,277 
		 2,300,275 
		 1,523,753 
		 2,014,999 
		 2,513,573 
		 2,588,980 
		

		

		

		

		

		

		

		

	
	
		

		NOI Margin:
		%
		

		

		41.5% 
		66.6% 
		69.1% 
		69.1% 
		59.6% 
		65.2% 
		69.1% 
		69.1% 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(-) CapEx, TIs, and LCs:
		$
		

		

		 (508,265)
		 (243,508)
		 - 
		 - 
		 (417,778)
		 (200,469)
		 - 
		 - 
		

		

		

		

		

		

		

		

	
	
		

		(+) Capital Costs Paid from Reserves:
		$
		

		

		 508,265 
		 243,508 
		 - 
		 - 
		 358,377 
		 111,393 
		 - 
		 - 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Adjusted Net Operating Income:
		$
		

		

		 635,525 
		 1,912,223 
		 2,233,277 
		 2,300,275 
		 1,464,352 
		 1,925,923 
		 2,513,573 
		 2,588,980 
		

		

		

		

		

		

		

		

	
	
		

		Adjusted NOI Margin:
		%
		

		

		41.5% 
		66.6% 
		69.1% 
		69.1% 
		57.3% 
		62.3% 
		69.1% 
		69.1% 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(-) Interest Expense on Permanent Loan:
		$
		

		

		(748,978)
		(737,212)
		(724,887)
		(711,977)
		(698,453)
		(684,287)
		(669,448)
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Permanent Loan Principal Repayment:
		$
		

		

		(247,706)
		(259,472)
		(271,797)
		(284,707)
		(298,231)
		(312,397)
		(327,236)
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Cash Flow to Equity Investors:
		$
		

		

		 (361,159)
		 915,539 
		 1,236,593 
		 1,303,591 
		 467,667 
		 929,239 
		 1,516,889 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Ending Permanent Loan Balance:
		$
		

		15,767,960 
		15,520,254 
		15,260,782 
		14,988,985 
		14,704,277 
		14,406,046 
		14,093,649 
		13,766,414 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Debt Yield:
		%
		

		

		4.0% 
		12.1% 
		14.2% 
		14.6% 
		9.7% 
		12.8% 
		15.9% 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Interest Coverage Ratio - NOI:
		x
		

		

		0.85 x 
		2.59 x 
		3.08 x 
		3.23 x 
		2.18 x 
		2.94 x 
		3.75 x 
		

		

		

		

		

		

		

		

		

	
	
		

		Interest Coverage Ratio - Adjusted NOI:
		x
		

		

		0.85 x 
		2.59 x 
		3.08 x 
		3.23 x 
		2.10 x 
		2.81 x 
		3.75 x 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Debt Service Coverage Ratio (DSCR) - NOI:
		x
		

		

		0.64 x 
		1.92 x 
		2.24 x 
		2.31 x 
		1.53 x 
		2.02 x 
		2.52 x 
		

		

		

		

		

		

		

		

		

	
	
		

		Debt Service Coverage Ratio (DSCR) - Adj. NOI:
		x
		

		

		0.64 x 
		1.92 x 
		2.24 x 
		2.31 x 
		1.47 x 
		1.93 x 
		2.52 x 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		Construction:
		Operational Years:
		Stabilized:
		

		

		

		

		

		

		

		

	
	
		Returns to All Equity Investors:
		

		Units:
		

		FY18
		FY19
		FY20
		FY21
		FY22
		FY23
		FY24
		FY25
		FY26
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Value of Excess Land:
		$
		 $7,182,000 
		 $7,397,460 
		 $7,619,384 
		 $7,847,965 
		 $8,083,404 
		 $8,325,906 
		 $8,575,684 
		 $8,832,954 
		 $9,097,943 
		

		

		

		

		

		

		

		

		

	
	
		

		Annual Growth Rate in Land Value:
		%
		

		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		3.0% 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Forward NOI:
		$
		

		

		 1,912,223 
		 2,233,277 
		 2,300,275 
		 1,523,753 
		 2,014,999 
		 2,513,573 
		 2,588,980 
		

		

		

		

		

		

		

		

		

	
	
		

		Applicable Cap Rate:
		%
		

		

		5.80%
		5.70%
		5.60%
		5.50%
		5.60%
		5.70%
		5.75%
		

		

		

		

		

		

		

		

		

	
	
		

		Implied Property Value:
		$
		

		

		 32,969,370 
		 39,180,300 
		 41,076,347 
		 27,704,600 
		 35,982,120 
		 44,097,773 
		 45,025,743 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		(-) Equity Draws:
		$
		

		 (15,028,860)
		
		BIWS:
No equity draws after construction finishes.
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		

		

		

		

		

		

		

		

		

	
	
		

		(+) Permanent Loan Issued:
		$
		

		 15,767,960 
		
		BIWS:
Only happens once.
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Permanent Loan Financing Fees:
		$
		

		 (157,680)
		
		BIWS:
Only happens once.
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Construction Loan Refinanced:
		$
		

		 (15,583,300)
		
		BIWS:
Only happens once.
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		

		

		

		

		

		

		

		

		

	
	
		

		(+) Cash Flow to Equity Investors:
		$
		

		 - 
		 (361,159)
		 915,539 
		 1,236,593 
		 1,303,591 
		 467,667 
		 929,239 
		 1,516,889 
		

		

		

		

		

		

		

		

		

	
	
		

		(+) Proceeds from Sale of Excess Land:
		$
		

		 - 
		 - 
		 - 
		 - 
		 8,325,906 
		 - 
		 - 
		 - 
		

		

		

		

		

		

		

		

		

	
	
		

		(+) Proceeds from Sale of Property:
		$
		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 45,025,743 
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Selling Costs:
		$
		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 (675,386)
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Repayment of Permanent Loan:
		$
		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 (13,766,414)
		

		

		

		

		

		

		

		

		

	
	
		

		(-) Prepayment Penalty on Permanent Loan:
		$
		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 (137,664)
		

		

		

		

		

		

		

		

		

	
	
		

		Total Cash Flows to Equity Investors:
		$
		

		 (15,001,880)
		 (361,159)
		 915,539 
		 1,236,593 
		 9,629,498 
		 467,667 
		 929,239 
		 31,963,169 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Internal Rate of Return (IRR):
		%
		

		20.2% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Total Returns to Equity:
		$
		

		 44,807,525 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Invested Equity:
		$
		

		 15,028,860 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Cash-on-Cash Multiple:
		x
		

		3.0 x
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Annual Yield on Initial Investment:
		%
		

		

		(2.4%)
		6.1% 
		8.2% 
		64.1% 
		3.1% 
		6.2% 
		212.7% 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		Construction:
		Operational Years:
		Stabilized:
		

		

		

		

		

		

		

		

	
	
		Waterfall Returns Schedule:
		

		Units:
		

		FY18
		FY19
		FY20
		FY21
		FY22
		FY23
		FY24
		FY25
		FY26
		

		Lesson Notes:
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Tier 1 IRR - Up to 10.0%:
		

		

		

		

		

		

		

		

		

		

		

		

		The setup is very similar to what we saw in the last case study - calculate how much we "should" earn in a given year based on the IRR hurdle
		

		

		

		

		

		

	
	
		

		Leveraged IRR to All Equity Investors:
		

		

		

		

		

		

		

		

		

		

		

		

		we're at, such as 10% in Level 1. Then, "repay" however much we can based on the Cash Flow to Equity Investors.
		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (15,001,880)
		 (16,863,228)
		 (17,634,011)
		 (18,160,819)
		 (10,347,404)
		 (10,914,477)
		 (11,076,685)
		

		

		

		

		

		

		

		

		

	
	
		

		Returns Accrual:
		10.0% 
		

		

		 (1,500,188)
		 (1,686,323)
		 (1,763,401)
		 (1,816,082)
		 (1,034,740)
		 (1,091,448)
		 (1,107,668)
		

		

		And we keep splitting this differently depending on the level we're in - 90/10 initially, then 80/20, and then 70/30.
		

		

		

		

		

		

	
	
		

		Repayment:
		100.0% 
		

		

		 (361,159)
		 915,539 
		 1,236,593 
		 9,629,498 
		 467,667 
		 929,239 
		 12,184,353 
		

		

		

		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (15,001,880)
		 (16,863,228)
		 (17,634,011)
		 (18,160,819)
		 (10,347,404)
		 (10,914,477)
		 (11,076,685)
		 - 
		

		

		DIFFERENCES: We now have multiple tiers, and we're looking at the project-level IRR - not the leveraged IRR to just the LPs! There's no "right" or
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		"wrong" way to set this up, just different ways. We're looking at a variation here.
		

		

		

		

		

		

	
	
		

		Limited Partners (LPs):
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (13,501,692)
		 (15,176,905)
		 (15,870,610)
		 (16,344,737)
		 (9,312,663)
		 (9,823,029)
		 (9,969,016)
		

		

		Also, you must be VERY careful with the Initial Equity Contributed. Not just equal to the Equity Draws!
		

		

		

		

		

		

	
	
		

		Returns Accrual:
		10.0% 
		

		

		 (1,350,169)
		 (1,517,691)
		 (1,587,061)
		 (1,634,474)
		 (931,266)
		 (982,303)
		 (996,902)
		

		

		

		

		

		

		

		

		

	
	
		

		Repayment:
		90.0% 
		

		

		 (325,044)
		 823,985 
		 1,112,934 
		 8,666,548 
		 420,901 
		 836,315 
		 10,965,918 
		

		

		The issue is that we assume a Construction Loan refinancing and Permanent Loan at the end of the Construction Year, so that changes things and
		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (13,501,692)
		 (15,176,905)
		 (15,870,610)
		 (16,344,737)
		 (9,312,663)
		 (9,823,029)
		 (9,969,016)
		 - 
		

		

		boosts the proceeds to equity investors.
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developer:
		

		

		

		

		

		

		

		

		

		

		

		

		So… when we look at the "Ending Balance," we need to factor that in. Assume a proportional 90/10 split since we have no other information.
		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (1,500,188)
		 (1,686,323)
		 (1,763,401)
		 (1,816,082)
		 (1,034,740)
		 (1,091,448)
		 (1,107,668)
		

		

		

		

		

		

		

		

		

	
	
		

		Returns Accrual:
		10.0% 
		

		

		 (150,019)
		 (168,632)
		 (176,340)
		 (181,608)
		 (103,474)
		 (109,145)
		 (110,767)
		

		

		Cash Flow Available for Tier 2 Distribution: Cash Flow to Equity Investors (overall) minus Total Repayment in this tier.
		

		

		

		

		

		

	
	
		

		Repayment:
		10.0% 
		

		

		 (36,116)
		 91,554 
		 123,659 
		 962,950 
		 46,767 
		 92,924 
		 1,218,435 
		

		

		

		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (1,500,188)
		 (1,686,323)
		 (1,763,401)
		 (1,816,082)
		 (1,034,740)
		 (1,091,448)
		 (1,107,668)
		 - 
		

		

		Tier 2 is largely the same - we just calculate everything based on a 20% IRR instead. Don't bother to split the cash flows up at this stage since
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		it's easier just to calculate what the cash flows "should be" at this 20% IRR level first.
		

		

		

		

		

		

	
	
		

		Cash Flow Available for Tier 2 Distribution:
		

		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 19,778,815 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		Cash Flow Available for Tier 3 Distribution: Cash Flow to Equity Investors (overall) minus Total Repayment in this tier. Do NOT have to subtract
		

		

		

		

		

		

	
	
		

		Tier 2 IRR - Up to 20.0%:
		

		

		

		

		

		

		

		

		

		

		

		

		the Tier 1 Distributions since Tier 2 included everything up to a 20% IRR.
		

		

		

		

		

		

	
	
		

		Leveraged IRR to All Equity Investors:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (15,001,880)
		 (18,363,416)
		 (21,120,560)
		 (24,108,079)
		 (19,300,197)
		 (22,692,569)
		 (26,301,843)
		

		

		Waterfall Returns Distributions by Investor Group and IRR Tier: The only tricky part here is that we must get only the cash flows that correspond
		

		

		

		

		

		

	
	
		

		Returns Accrual:
		20.0% 
		

		

		 (3,000,376)
		 (3,672,683)
		 (4,224,112)
		 (4,821,616)
		 (3,860,039)
		 (4,538,514)
		 (5,260,369)
		

		

		to the Tier 2 IRR - so we take the Tier 3 Availability and subtract the Tier 2 Availability, and then multiply by the split percentage.
		

		

		

		

		

		

	
	
		

		Repayment:
		100.0% 
		

		

		 (361,159)
		 915,539 
		 1,236,593 
		 9,629,498 
		 467,667 
		 929,239 
		 31,562,212 
		

		

		

		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (15,001,880)
		 (18,363,416)
		 (21,120,560)
		 (24,108,079)
		 (19,300,197)
		 (22,692,569)
		 (26,301,843)
		 - 
		

		

		Tier 1 and Tier 3 are easy and exactly what you'd expect.
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Limited Partners (LPs):
		

		

		

		

		

		

		

		

		

		

		

		

		Returns Analysis by Investor Group: Also fairly straightforward - just add together everything in the area above, and use the IRR function, or
		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (13,501,692)
		 (16,490,958)
		 (19,056,719)
		 (21,878,788)
		 (18,550,947)
		 (21,887,003)
		 (25,521,012)
		

		

		calculate the multiple(s) manually, or calculate the annual yield.
		

		

		

		

		

		

	
	
		

		Returns Accrual:
		20.0% 
		

		

		 (2,700,338)
		 (3,298,192)
		 (3,811,344)
		 (4,375,758)
		 (3,710,189)
		 (4,377,401)
		 (5,104,202)
		

		

		

		

		

		

		

		

		

	
	
		

		Repayment:
		80.0% 
		

		

		 (288,928)
		 732,431 
		 989,274 
		 7,703,598 
		 374,134 
		 743,391 
		 25,570,535 
		

		

		Case Study Answers:
		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (13,501,692)
		 (16,490,958)
		 (19,056,719)
		 (21,878,788)
		 (18,550,947)
		 (21,887,003)
		 (25,521,012)
		 (5,054,679)
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		No, we would not do the deal with the current terms because the LP IRR is below 20%, and the excess land assumption in the beginning makes no
		

		

		

		

		

		

	
	
		

		Developer:
		

		

		

		

		

		

		

		

		

		

		

		

		sense to us. Issues with the Permanent Loan refinancing, waterfall structure, and lack of data on other scenario as well.
		

		

		

		

		

		

	
	
		

		Beginning Balance:
		

		

		

		 (1,500,188)
		 (1,872,458)
		 (2,063,841)
		 (2,229,291)
		 (749,249)
		 (805,566)
		 (780,831)
		

		

		

		

		

		

		

		

		

	
	
		

		Returns Accrual:
		20.0% 
		

		

		 (300,038)
		 (374,492)
		 (412,768)
		 (445,858)
		 (149,850)
		 (161,113)
		 (156,166)
		

		

		Biggest issue with the Permanent Loan is Year 1 - we recommend pushing back the refinancing a year so that the property has truly "stabilized."
		

		

		

		

		

		

	
	
		

		Repayment:
		20.0% 
		

		

		 (72,232)
		 183,108 
		 247,319 
		 1,925,900 
		 93,533 
		 185,848 
		 936,997 
		

		

		Construction Loan repayment would be higher, but we would also be able to use a bigger Permanent Loan balance and possibly even push for
		

		

		

		

		

		

	
	
		

		Ending Balance:
		

		

		 (1,500,188)
		 (1,872,458)
		 (2,063,841)
		 (2,229,291)
		 (749,249)
		 (805,566)
		 (780,831)
		 - 
		

		

		a higher LTV with different amortization/interest assumptions.
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Cash Flow Available for Tier 3 Distribution:
		

		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 400,957 
		

		

		Approximate IRRs - You can calculate both of these in Excel with XIRR or IRR. Different from the interest rates due to compounding and loan
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		fees for the Construction Loan, and Loan Fees/Prepayment Penalty/Early Repayment for the Permanent Loan.
		

		

		

		

		

		

	
	
		

		Waterfall Returns Distributions by Investor Group and IRR Tier:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		Much bigger difference for the Construction Loan, which reflects reality - higher risk/potential reward and much shorter time frame.
		

		

		

		

		

		

	
	
		

		Tier 1 IRR - Up to 10.0%:
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Limited Partners (LPs):
		90.0% 
		

		

		 (325,044)
		 823,985 
		 1,112,934 
		 8,666,548 
		 420,901 
		 836,315 
		 10,965,918 
		

		

		Lender would stress test this very heavily and look at cases where the Downtime between tenants goes up to 12 months, where the rent increases
		

		

		

		

		

		

	
	
		

		Developers:
		10.0% 
		

		

		 (36,116)
		 91,554 
		 123,659 
		 962,950 
		 46,767 
		 92,924 
		 1,218,435 
		

		

		are negative or much lower, where the renewal probabilities are lower, etc., and see just how bad things get under those assumptions.
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Tier 2 IRR - Up to 20.0%:
		

		

		

		

		

		

		

		

		

		

		

		

		"Cash Flow Armageddon" - Worst-case scenario analysis. Won't necessarily say "no" if the numbers look terrible in this case, but might change the
		

		

		

		

		

		

	
	
		

		Limited Partners (LPs):
		80.0% 
		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 15,502,287 
		

		

		terms of the loan.
		

		

		

		

		

		

	
	
		

		Developers:
		20.0% 
		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 3,875,572 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		Operating assumptions seem realistic based on the market figures provided in the document - rent, free rent/TIs, and so on. But we question the value
		

		

		

		

		

		

	
	
		

		Tier 3 IRR - 20.0% or Above:
		

		

		

		

		

		

		

		

		

		

		

		

		of the excess land - why buy it if we're not going ot use it? We're also a bit skeptical of the Cap Rate trend and the General Vacancy number since 5%
		

		

		

		

		

		

	
	
		

		Limited Partners (LPs):
		70.0% 
		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 280,670 
		

		

		is very low, even in Calgary. We also can't assess the construction costs, operating expenses, or property taxes.
		

		

		

		

		

		

	
	
		

		Developers:
		30.0% 
		

		

		 - 
		 - 
		 - 
		 - 
		 - 
		 - 
		 120,287 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		More time and resources - sensitivities and scenarios. What happens when the Cap Rate changes by 1-2% in absolute terms? What about when the 
		

		

		

		

		

		

	
	
		

		Returns Analysis by Investor Group:
		

		

		

		

		

		

		

		

		

		

		

		

		Downtime Months change or when the TIs/LCs/rent changes? What happens if it takes more or less time to find tenants?
		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Limited Partners (LP) - Leveraged Returns:
		$
		

		 (13,501,692)
		 (325,044)
		 823,985 
		 1,112,934 
		 8,666,548 
		 420,901 
		 836,315 
		 26,748,875 
		

		

		

		

		

		

		

		

		

	
	
		

		Internal Rate of Return (IRR):
		%
		

		19.3% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Cash-on-Cash Multiple:
		x
		

		2.8 x
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Annual Yield on Initial Investment:
		%
		

		

		(2.4%)
		6.1% 
		8.2% 
		64.2% 
		3.1% 
		6.2% 
		198.1% 
		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Developers - Leveraged Returns:
		$
		

		 (1,500,188)
		 (36,116)
		 91,554 
		 123,659 
		 962,950 
		 46,767 
		 92,924 
		 5,214,294 
		

		

		

		

		

		

		

		

		

	
	
		

		Internal Rate of Return (IRR):
		%
		

		26.6% 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Cash-on-Cash Multiple:
		x
		

		4.3 x
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Annual Yield on Initial Investment:
		%
		

		

		(2.4%)
		6.1% 
		8.2% 
		64.2% 
		3.1% 
		6.2% 
		347.6%

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...Sheet devproforma ave se investment analysis in cad as stated lesson notes development overview units this modelcase combines elements of the previous two and expands on them we ve already explained how leases vacancies expense reimbursements etc project name square feet acre sq ft work so will move through those parts it quite quickly property type industrial total to purchase percentage required for similarities lessons still calculating revenue expenses a leasebylease basis irr multiples different groups location calgary gross is funded with debt equity sell entire at end construction start date months year rentable differences quot period where developed properties take little time just story warehouses few frills or fancy features during both are used they needed not issued all once number acres estimated price per costs sf also have leaseup new tenants their brandnew building some proforma land acquisition assume permanent loan refinance which what happens real life when stabiliz...

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4216 61 Ave SE - Investment Analysis
($ in CAD as Stated)
											Lesson Notes:
Development Overview:		*Units:*					*Units:*
											This model/case combines elements of the previous two and expands on them. We've already explained how leases, Vacancies, Expense Reimbursements, etc.
	Project Name:	Name	4216 61 Ave SE		# Square Feet in 1 Acre:		sq. ft.	43,560 sq. ft.			work, so we will move through those parts of it quite quickly.
	Property Type:	Name	Industrial		Total Square Feet to Purchase:		sq. ft.	784,080 sq. ft.
					Percentage Required for Property:		%	43.0%			Similarities to Previous Lessons: Still calculating revenue and expenses on a lease-by-lease basis, and still calculating IRR and multiples to different groups.
	Location:	Name	Calgary		Gross Square Feet of Property:		sq. ft.	337,154 sq. ft.			Property is still funded with Debt and Equity, and we still sell the entire property at the end.
	Construction Start Date:	Date	2018-01-01
	Months in Year:	#	12		Rentable to Gross Square Feet %:		%	95.0%			Differences: "Construction period" of 1 year where the property is developed (industrial properties take little time - just 1-story warehouses with few frills or
					Rentable Square Feet:		sq. ft.	320,297 sq. ft.			fancy features). During this period, both Debt and Equity are used as they are needed - not issued all at once!
	Number of Acres to Purchase:	# Acres	18.0 Acres
	Estimated Price per Acre:	$ / Acre	$700,000		Construction Costs per Gross SF:		$ / sq. ft.	$50.00			We also have a "lease-up period," where the new tenants start their leases at this brand-new building - some differences on the Pro-Forma.
	Land Acquisition Costs:	$	$12,600,000		Total Construction Costs:		$	$16,857,720
											We also assume a Permanent Loan to refinance the Construction Loan, which is what happens in real life when the property stabilizes.
	Saleable Excess Land Percentage:	%	57.0%								This refinancing will also affect the equity IRR because the property's value will change over time!
											Sale of Excess Land will also affect the equity IRR - if we buy land but don't use it, we can sell it to someone else.
Construction, Financing, and Exit Assumptions:		*Units:*					*Units:*
											Finally, we build more of a "real" waterfall schedule here, with multiple tiers and cash flow splits based on project-level returns.
	Construction Financing:				Permanent Loan Refinancing & Exit:
	Loan-to-Cost (LTC) Ratio:	%	50.0%		Loan-to-Value (LTV) Ratio:		%	55.0%			We'll divide this 90-minute case study into 3 parts of roughly 20-30 minutes each and look at different aspects in each part.
	Interest Rate - Annual:	%	6.25%		Interest Rate - Annual:		%	4.75%
	Interest Rate - Monthly:	%	0.506%								Part 1: Assumptions, Construction Phase, and Tenant Rent and Expenses
	Issuance Fees:	%	1.00%		Issuance Fees:		%	1.00%			Part 2: Property Pro-Forma, Permanent Loan Refinancing, Excess Land Sale, and Equity Returns
	Amortization (Years):	# Years	Interest Only		Amortization (Years):		# Years	30			Part 3: Waterfall Returns and Case Study Answers
	Maturity:	Date	2018-12-31		Maturity:		Date	2028-12-31
	Term:	# Years	1 year		Prepayment Penalty:		%	1.00%
					Refinancing Date:		Date	2018-12-31
	Developer Equity Contribution:	%	10.0%
	IRR Hurdle 1:	%	10.0%		Discount Rate:			BIWS: Based on sponsor's targeted unleveraged IRR for new developments. 15.0%
	Developer Cash Flow Above IRR Hurdle 1:	%	20.0%		Property Value 1 Year After Refi.:		$	BIWS: Using the Year 2 number because Year 1 includes Absorption & Turnover Vacancy, and 30% of the space is vacant in Year 1. $32,969,370
	IRR Hurdle 2:	%	20.0%		Property Value @ Refinancing:		$	BIWS: Discounting to its value at the end of the Construction Year, i.e. one year back. 28,669,018
	Developer Cash Flow Above IRR Hurdle 2:	%	30.0%		Permanent Loan Amount:		$	15,767,960

					Property Selling Costs:		%	1.50%

Sources & Uses of Funds:

	Sources of Funds:				Uses of Funds:
	Construction Loan:		$15,028,860		Land Acquisition Costs:			$12,600,000
	Developer Equity:		1,502,886		Construction Costs:			16,857,720
	Investor Equity:		13,525,974		Replacement Reserves:			600,000
	Total Sources:		$30,057,720		Total Uses:			$30,057,720

				Construction:	Operational Years:							Stabilized:
Rent Roll & Operating Assumptions:		*Units:*		FY18	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26

	Property-Wide Operating Assumptions:
	Expenses & Taxes per SF per Year:	$ / sq. ft. / Yr	2.35
	Expenses & Taxes Annual Growth Rate:	%	3.0%
	Property Management Fees % EGI:	%	3.0%

	Replacement Reserves per SF per Year:	$ / sq. ft. / Yr	$0.30
	Replacement Reserve Growth Rate:	%	3.0%

	New Lease Term (Years):	# Years	5
	Renewal Probability:	%	60.0%
	# Months of Downtime for Non-Renewal:	#	6

	Free Rent and Capital Costs:		New:	Renewal:
	# Months of Free Rent:	#	4	2
	Tenant Improvements (TIs) per RSF:	$ / sq. ft. / Yr	$1.50	1.00
	Leasing Commissions (LCs) % Total Lease Value:	%	3.0%	1.0%

	Tenant #1 - Triple Net (NNN) Lease:
	% Rentable Square Feet Occupied:	%	65.0%
	Rentable Square Feet Occupied:	sq. ft.	208,193 sq. ft.
	Lease Start Date:	Date	2018-12-31
	Lease Expiration Date:	Date	2022-12-31

	Baseline Rent per Square Foot:	$ / sq. ft. / Yr			$7.50	$7.73	$7.96	$8.20	$8.44	$8.69	$8.96	$9.22	$9.50
	Rental Growth Rate:	%				3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%

	(+) Base Rental Income:	$			$1,561,446	$1,608,290	$1,656,538	$1,706,235	$1,757,422	$1,810,144	$1,864,449	$1,920,382	$1,977,993
	(-) Absorption & Turnover Vacancy:	$			BIWS: Not counting anything here because the tenant moves in as of January 1 of this year. -	-	-	-	(351,484)	-	-	-
	(-) Concessions & Free Rent:	$			(520,482)	-	-	-	(410,065)	-	-	-
	(-) Tenant Improvements (TIs):	$			(312,289)	-	-	-	(249,831)	-	-	-
	(-) Leasing Commissions (LCs):	$			(195,975)	-	-	-	(167,947)	-	-	-

	(+) Expense Reimbursements:	$			489,253	503,931	519,049	534,620	440,527	567,179	584,194	601,720

	Tenant #2 - Triple Net (NNN) Lease:
	% Rentable Square Feet Occupied:	%	30.0%
	Rentable Square Feet Occupied:	sq. ft.	96,089 sq. ft.
	Lease Start Date:	Date	2019-12-31
	Lease Expiration Date:	Date	2023-12-31

	Baseline Rent per Square Foot:	$ / sq. ft. / Yr			$8.00	$8.24	$8.49	$8.74	$9.00	$9.27	$9.55	$9.84	$10.13	$10.44
	Rental Growth Rate:	%				3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%

	(+) Base Rental Income:	$			$768,712	$791,773	$815,527	$839,992	$865,192	$891,148	$917,882	$945,419	$973,781	$1,002,995
	(-) Absorption & Turnover Vacancy:	$			BIWS: It takes a year to find the tenant, so we're deducting the entire Base Rental Income here. (768,712)	-	-	-	-	(178,230)	-	-
	(-) Concessions & Free Rent:	$			-	(263,924)	-	-	-	(207,935)	-	-
	(-) Tenant Improvements (TIs):	$			-	(144,134)	-	-	-	(115,307)	-	-
	(-) Leasing Commissions (LCs):	$			-	(99,375)	-	-	-	(85,162)	-	-

	(+) Expense Reimbursements:	$			BIWS: No tenant move-in yet, so no expense reimbursements. -	232,583	239,561	246,748	254,150	209,420	269,628	277,717

	Annual Capital Costs:	$			(508,265)	(243,508)	-	-	(417,778)	(200,469)	-	-
	Replacement Reserve Amount:	$		600,000	187,824	43,288	145,229	250,228	-	-	114,735	232,913

	Numerical Year:	*Year*		2018	2019	2020	2021	2022	2023	2024	2025	2026

				Construction:	Operational Years:							Stabilized:
Property Pro-Forma:		*Units:*		FY18	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26

	Revenue:
	(+) Base Rental Income:	$			$2,450,270	$2,523,778	$2,599,491	$2,677,476	$2,757,800	$2,840,534	$2,925,750	$3,013,523
	(-) Absorption & Turnover Vacancy:	$			(768,712)	-	-	-	(351,484)	(178,230)	-	-
	(-) Concessions & Free Rent:	$			(520,482)	(263,924)	-	-	(410,065)	(207,935)	-	-
	(+) Expense Reimbursements:	$			489,253	736,514	758,610	781,368	694,677	776,598	853,822	879,436
	Potential Gross Revenue:	$			1,650,329	2,996,367	3,358,101	3,458,844	2,690,928	3,230,968	3,779,572	3,892,959
	(-) General Vacancy:	$			(120,111)	(123,715)	(127,426)	(131,249)	(135,186)	(139,242)	(143,419)	(147,722)
	Effective Gross Income (EGI):	$			1,530,217	2,872,653	3,230,675	3,327,595	2,555,742	3,091,726	3,636,153	3,745,237

	Operating Expenses:
	(-) Recoverable Expenses:	$			(752,697)	(775,278)	(798,536)	(822,493)	(847,167)	(872,582)	(898,760)	(925,723)
	(-) Management Fee:	$			(45,907)	(86,180)	(96,920)	(99,828)	(76,672)	(92,752)	(109,085)	(112,357)
	(-) CapEx, TI, and LC Reserves:	$			(96,089)	(98,972)	(101,941)	(104,999)	(108,149)	(111,393)	(114,735)	(118,177)
	Total Operating Expenses:	$			(894,693)	(960,429)	(997,398)	(1,027,319)	(1,031,989)	(1,076,728)	(1,122,580)	(1,156,257)

	Net Operating Income (NOI):	$			635,525	1,912,223	2,233,277	2,300,275	1,523,753	2,014,999	2,513,573	2,588,980
	NOI Margin:	%			41.5%	66.6%	69.1%	69.1%	59.6%	65.2%	69.1%	69.1%

	(-) CapEx, TIs, and LCs:	$			(508,265)	(243,508)	-	-	(417,778)	(200,469)	-	-
	(+) Capital Costs Paid from Reserves:	$			508,265	243,508	-	-	358,377	111,393	-	-

	Adjusted Net Operating Income:	$			635,525	1,912,223	2,233,277	2,300,275	1,464,352	1,925,923	2,513,573	2,588,980
	Adjusted NOI Margin:	%			41.5%	66.6%	69.1%	69.1%	57.3%	62.3%	69.1%	69.1%

	(-) Interest Expense on Permanent Loan:	$			(748,978)	(737,212)	(724,887)	(711,977)	(698,453)	(684,287)	(669,448)
	(-) Permanent Loan Principal Repayment:	$			(247,706)	(259,472)	(271,797)	(284,707)	(298,231)	(312,397)	(327,236)

	Cash Flow to Equity Investors:	$			(361,159)	915,539	1,236,593	1,303,591	467,667	929,239	1,516,889

	Ending Permanent Loan Balance:	$		15,767,960	15,520,254	15,260,782	14,988,985	14,704,277	14,406,046	14,093,649	13,766,414

	Debt Yield:	%			4.0%	12.1%	14.2%	14.6%	9.7%	12.8%	15.9%

	Interest Coverage Ratio - NOI:	x			0.85 x	2.59 x	3.08 x	3.23 x	2.18 x	2.94 x	3.75 x
	Interest Coverage Ratio - Adjusted NOI:	x			0.85 x	2.59 x	3.08 x	3.23 x	2.10 x	2.81 x	3.75 x

	Debt Service Coverage Ratio (DSCR) - NOI:	x			0.64 x	1.92 x	2.24 x	2.31 x	1.53 x	2.02 x	2.52 x
	Debt Service Coverage Ratio (DSCR) - Adj. NOI:	x			0.64 x	1.92 x	2.24 x	2.31 x	1.47 x	1.93 x	2.52 x

				Construction:	Operational Years:							Stabilized:
Returns to All Equity Investors:		*Units:*		FY18	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26

	Value of Excess Land:	$	$7,182,000	$7,397,460	$7,619,384	$7,847,965	$8,083,404	$8,325,906	$8,575,684	$8,832,954	$9,097,943
	Annual Growth Rate in Land Value:	%		3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%	3.0%

	Forward NOI:	$			1,912,223	2,233,277	2,300,275	1,523,753	2,014,999	2,513,573	2,588,980
	Applicable Cap Rate:	%			5.80%	5.70%	5.60%	5.50%	5.60%	5.70%	5.75%
	Implied Property Value:	$			32,969,370	39,180,300	41,076,347	27,704,600	35,982,120	44,097,773	45,025,743

	(-) Equity Draws:	$		(15,028,860)	BIWS: No equity draws after construction finishes. -	-	-	-	-	-	-
	(+) Permanent Loan Issued:	$		15,767,960	BIWS: Only happens once. -	-	-	-	-	-	-
	(-) Permanent Loan Financing Fees:	$		(157,680)	BIWS: Only happens once. -	-	-	-	-	-	-
	(-) Construction Loan Refinanced:	$		(15,583,300)	BIWS: Only happens once. -	-	-	-	-	-	-
	(+) Cash Flow to Equity Investors:	$		-	(361,159)	915,539	1,236,593	1,303,591	467,667	929,239	1,516,889
	(+) Proceeds from Sale of Excess Land:	$		-	-	-	-	8,325,906	-	-	-
	(+) Proceeds from Sale of Property:	$		-	-	-	-	-	-	-	45,025,743
	(-) Selling Costs:	$		-	-	-	-	-	-	-	(675,386)
	(-) Repayment of Permanent Loan:	$		-	-	-	-	-	-	-	(13,766,414)
	(-) Prepayment Penalty on Permanent Loan:	$		-	-	-	-	-	-	-	(137,664)
	Total Cash Flows to Equity Investors:	$		(15,001,880)	(361,159)	915,539	1,236,593	9,629,498	467,667	929,239	31,963,169

	Internal Rate of Return (IRR):	%		20.2%

	Total Returns to Equity:	$		44,807,525
	Invested Equity:	$		15,028,860
	Cash-on-Cash Multiple:	x		3.0 x
	Annual Yield on Initial Investment:	%			(2.4%)	6.1%	8.2%	64.1%	3.1%	6.2%	212.7%

				Construction:	Operational Years:							Stabilized:
Waterfall Returns Schedule:		*Units:*		FY18	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26		Lesson Notes:

	Tier 1 IRR - Up to 10.0%:													The setup is very similar to what we saw in the last case study - calculate how much we "should" earn in a given year based on the IRR hurdle
	Leveraged IRR to All Equity Investors:													we're at, such as 10% in Level 1. Then, "repay" however much we can based on the Cash Flow to Equity Investors.
	Beginning Balance:				(15,001,880)	(16,863,228)	(17,634,011)	(18,160,819)	(10,347,404)	(10,914,477)	(11,076,685)
	Returns Accrual:	10.0%			(1,500,188)	(1,686,323)	(1,763,401)	(1,816,082)	(1,034,740)	(1,091,448)	(1,107,668)			And we keep splitting this differently depending on the level we're in - 90/10 initially, then 80/20, and then 70/30.
	Repayment:	100.0%			(361,159)	915,539	1,236,593	9,629,498	467,667	929,239	12,184,353
	Ending Balance:			(15,001,880)	(16,863,228)	(17,634,011)	(18,160,819)	(10,347,404)	(10,914,477)	(11,076,685)	-			DIFFERENCES: We now have multiple tiers, and we're looking at the project-level IRR - not the leveraged IRR to just the LPs! There's no "right" or
														"wrong" way to set this up, just different ways. We're looking at a variation here.
	Limited Partners (LPs):
	Beginning Balance:				(13,501,692)	(15,176,905)	(15,870,610)	(16,344,737)	(9,312,663)	(9,823,029)	(9,969,016)			Also, you must be VERY careful with the Initial Equity Contributed. Not just equal to the Equity Draws!
	Returns Accrual:	10.0%			(1,350,169)	(1,517,691)	(1,587,061)	(1,634,474)	(931,266)	(982,303)	(996,902)
	Repayment:	90.0%			(325,044)	823,985	1,112,934	8,666,548	420,901	836,315	10,965,918			The issue is that we assume a Construction Loan refinancing and Permanent Loan at the end of the Construction Year, so that changes things and
	Ending Balance:			(13,501,692)	(15,176,905)	(15,870,610)	(16,344,737)	(9,312,663)	(9,823,029)	(9,969,016)	-			boosts the proceeds to equity investors.

	Developer:													So… when we look at the "Ending Balance," we need to factor that in. Assume a proportional 90/10 split since we have no other information.
	Beginning Balance:				(1,500,188)	(1,686,323)	(1,763,401)	(1,816,082)	(1,034,740)	(1,091,448)	(1,107,668)
	Returns Accrual:	10.0%			(150,019)	(168,632)	(176,340)	(181,608)	(103,474)	(109,145)	(110,767)			Cash Flow Available for Tier 2 Distribution: Cash Flow to Equity Investors (overall) minus Total Repayment in this tier.
	Repayment:	10.0%			(36,116)	91,554	123,659	962,950	46,767	92,924	1,218,435
	Ending Balance:			(1,500,188)	(1,686,323)	(1,763,401)	(1,816,082)	(1,034,740)	(1,091,448)	(1,107,668)	-			Tier 2 is largely the same - we just calculate everything based on a 20% IRR instead. Don't bother to split the cash flows up at this stage since
														it's easier just to calculate what the cash flows "should be" at this 20% IRR level first.
	Cash Flow Available for Tier 2 Distribution:				-	-	-	-	-	-	19,778,815
														Cash Flow Available for Tier 3 Distribution: Cash Flow to Equity Investors (overall) minus Total Repayment in this tier. Do NOT have to subtract
	Tier 2 IRR - Up to 20.0%:													the Tier 1 Distributions since Tier 2 included everything up to a 20% IRR.
	Leveraged IRR to All Equity Investors:
	Beginning Balance:				(15,001,880)	(18,363,416)	(21,120,560)	(24,108,079)	(19,300,197)	(22,692,569)	(26,301,843)			Waterfall Returns Distributions by Investor Group and IRR Tier: The only tricky part here is that we must get only the cash flows that correspond
	Returns Accrual:	20.0%			(3,000,376)	(3,672,683)	(4,224,112)	(4,821,616)	(3,860,039)	(4,538,514)	(5,260,369)			to the Tier 2 IRR - so we take the Tier 3 Availability and subtract the Tier 2 Availability, and then multiply by the split percentage.
	Repayment:	100.0%			(361,159)	915,539	1,236,593	9,629,498	467,667	929,239	31,562,212
	Ending Balance:			(15,001,880)	(18,363,416)	(21,120,560)	(24,108,079)	(19,300,197)	(22,692,569)	(26,301,843)	-			Tier 1 and Tier 3 are easy and exactly what you'd expect.

	Limited Partners (LPs):													Returns Analysis by Investor Group: Also fairly straightforward - just add together everything in the area above, and use the IRR function, or
	Beginning Balance:				(13,501,692)	(16,490,958)	(19,056,719)	(21,878,788)	(18,550,947)	(21,887,003)	(25,521,012)			calculate the multiple(s) manually, or calculate the annual yield.
	Returns Accrual:	20.0%			(2,700,338)	(3,298,192)	(3,811,344)	(4,375,758)	(3,710,189)	(4,377,401)	(5,104,202)
	Repayment:	80.0%			(288,928)	732,431	989,274	7,703,598	374,134	743,391	25,570,535			Case Study Answers:
	Ending Balance:			(13,501,692)	(16,490,958)	(19,056,719)	(21,878,788)	(18,550,947)	(21,887,003)	(25,521,012)	(5,054,679)
														No, we would not do the deal with the current terms because the LP IRR is below 20%, and the excess land assumption in the beginning makes no
	Developer:													sense to us. Issues with the Permanent Loan refinancing, waterfall structure, and lack of data on other scenario as well.
	Beginning Balance:				(1,500,188)	(1,872,458)	(2,063,841)	(2,229,291)	(749,249)	(805,566)	(780,831)
	Returns Accrual:	20.0%			(300,038)	(374,492)	(412,768)	(445,858)	(149,850)	(161,113)	(156,166)			Biggest issue with the Permanent Loan is Year 1 - we recommend pushing back the refinancing a year so that the property has truly "stabilized."
	Repayment:	20.0%			(72,232)	183,108	247,319	1,925,900	93,533	185,848	936,997			Construction Loan repayment would be higher, but we would also be able to use a bigger Permanent Loan balance and possibly even push for
	Ending Balance:			(1,500,188)	(1,872,458)	(2,063,841)	(2,229,291)	(749,249)	(805,566)	(780,831)	-			a higher LTV with different amortization/interest assumptions.

	Cash Flow Available for Tier 3 Distribution:				-	-	-	-	-	-	400,957			Approximate IRRs - You can calculate both of these in Excel with XIRR or IRR. Different from the interest rates due to compounding and loan
														fees for the Construction Loan, and Loan Fees/Prepayment Penalty/Early Repayment for the Permanent Loan.
	Waterfall Returns Distributions by Investor Group and IRR Tier:
														Much bigger difference for the Construction Loan, which reflects reality - higher risk/potential reward and much shorter time frame.
	Tier 1 IRR - Up to 10.0%:
	Limited Partners (LPs):	90.0%			(325,044)	823,985	1,112,934	8,666,548	420,901	836,315	10,965,918			Lender would stress test this very heavily and look at cases where the Downtime between tenants goes up to 12 months, where the rent increases
	Developers:	10.0%			(36,116)	91,554	123,659	962,950	46,767	92,924	1,218,435			are negative or much lower, where the renewal probabilities are lower, etc., and see just how bad things get under those assumptions.

	Tier 2 IRR - Up to 20.0%:													"Cash Flow Armageddon" - Worst-case scenario analysis. Won't necessarily say "no" if the numbers look terrible in this case, but might change the
	Limited Partners (LPs):	80.0%			-	-	-	-	-	-	15,502,287			terms of the loan.
	Developers:	20.0%			-	-	-	-	-	-	3,875,572
														Operating assumptions seem realistic based on the market figures provided in the document - rent, free rent/TIs, and so on. But we question the value
	Tier 3 IRR - 20.0% or Above:													of the excess land - why buy it if we're not going ot use it? We're also a bit skeptical of the Cap Rate trend and the General Vacancy number since 5%
	Limited Partners (LPs):	70.0%			-	-	-	-	-	-	280,670			is very low, even in Calgary. We also can't assess the construction costs, operating expenses, or property taxes.
	Developers:	30.0%			-	-	-	-	-	-	120,287
														More time and resources - sensitivities and scenarios. What happens when the Cap Rate changes by 1-2% in absolute terms? What about when the
	Returns Analysis by Investor Group:													Downtime Months change or when the TIs/LCs/rent changes? What happens if it takes more or less time to find tenants?

	Limited Partners (LP) - Leveraged Returns:	$		(13,501,692)	(325,044)	823,985	1,112,934	8,666,548	420,901	836,315	26,748,875
	Internal Rate of Return (IRR):	%		19.3%
	Cash-on-Cash Multiple:	x		2.8 x
	Annual Yield on Initial Investment:	%			(2.4%)	6.1%	8.2%	64.2%	3.1%	6.2%	198.1%

	Developers - Leveraged Returns:	$		(1,500,188)	(36,116)	91,554	123,659	962,950	46,767	92,924	5,214,294
	Internal Rate of Return (IRR):	%		26.6%
	Cash-on-Cash Multiple:	x		4.3 x
	Annual Yield on Initial Investment:	%			(2.4%)	6.1%	8.2%	64.2%	3.1%	6.2%	347.6%

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