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DEVELOPMENT PROPOSAL FOR A MIXED-USE PROJECT

ARLINGTON, VA

Drew T Morettini

Practicum Advisor: David Sislen

A practicum thesis submitted to Johns Hopkins University in conformity with the requirements
for the degree of Master of Science in Real Estate
Baltimore, Maryland
April 2012

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Table of Contents
Executive Summary…………………………………………………………………………..….5
Site Overview……………………………………………………………………………..………5
Ownership History………………………………………………………………………..……….6
Location Analysis……………………………………………………………………………..….8
Adjacent Properties and Land Use……………………………………………………………….10
Notable Developments Near the Subject Site……………………………………………………13
Zoning and Land Use…………………………………………………………………………….14
Clarendon Sector Plan……………………………………………………………………………15
Arlington Economic Drivers…………………………………………………………………..…18
Washington Metropolitan Area Economic Drivers……………………………………………...24
Washington Metropolitan Real Estate Forecast………………………………………………….27
Market and Feasibility Analysis……….....................................................................................28
Retail Market Analysis………………………………………………………………………....28
Arlington Retail Submarket Analysis……………………..……………………………….…….29
Office Market Analysis………………...…………………...…………………………………..32
Arlington Office Market Analysis…………………………………………..……………….…..34
Apartment Market Analysis………………………..………………………………...………..36
Northern Virginia Apartment Market Analysis……………………………………..…….…..…37
Arlington Apartment Market Analysis…………………………………………..………………38
Condominium Market Analysis………...……..……………………………….……………...47
Arlington Condominium Market Analysis…………………………….….……………………..48
Market Analysis Conclusion…………………………………………..………….……………..54
Development Options………………………………………………..…………….……………55
Return on Cost Analysis…………………………………………………..…..…………………56
Return on Equity Analysis……………………………………………..………………….……..56
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Development Potential and Site Plan……..……………………..……….…………………..57
Site Plan and Entitlements………………………………………..…………………………….58
Development Plan and Timeline………………………………….…………………………….59
Building and Site Design…………………………………………………………….…..……..62
Parking Requirements…………………...………………………….………………….………..64
Affordable Dwelling Unit Requirements………………………………………….…………….65
Financial Analysis…………………………………………………….…….…………………..66
Site Acquisition Costs………………………………………….………………….…..…………66
Real Estate Taxes…………….…………………………………………….…….………………69
Hard Costs……………...………………………………………………….….…….……………69
Soft Costs………………………………………………………………..……………………….70
Equity Terms…………………………………………………………….…………….…………71
Equity Partnership Agreement……………………………………………….….……………….72
Construction Financing………………………………………………………………..…………72
Permanent Financing……………………………….……………………………………………73
Market and Vacancy Rate…………………..……………………………………………………74
Operating Expenses………………...…………………………………..………………………..75
Reversion………………………………………………..……………………………………….76
IRR and NPV…………………………………………………..………………………………...76
Equity Partnership Returns with Cap Rate Sensitivity………………….………………………77
Disposition Strategy……………………………………...………………....….………..………78
Risks and Challenges……………………………..…………………………………...………..79
Conclusion………………………………………………….………………………………..….80
Bibliography………………………………..……………………………...……………………83
Appendices
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Appendix A: Financial Models Appendix B: Construction Budget Appendix C: Equity Partnership Returns with Cap Rate Sensitivity Appendix D: FAR and Square Foot Summary Appendix E: Return on Cost and Equity Analysis 4|Page .

The site is bounded by Washington Blvd. in 2011 for $13.000 (Deed Book / Page: 4482 / 1337). 1200 North Irving LLC has determined that a mixed-use development featuring 146 apartment units with 15. Site Overview The project site is located in Arlington.902 SF with a 3. VA at 1200 North Irving Street in the neighborhood of Clarendon.000 SF of retail would garner the least risk and greatest return from the market. The site offers frontage on Washington Boulevard with ingress and egress located on 13th Street North and North Irving Street. The site area includes 10 parcels of land totaling 51. Wilson and Clarendon Blvd. After a thorough market and financial feasibility analysis of potential uses for the site. With a site plan that is seven years old and the site available for sale.0 FAR. Arlington County Zoning Office approved ZOM Clarendon’s site plan for 155 apartment units and 18. The following proposal will describe in more detail the specific elements of this mixed-use development project.P.500. but the proposal never came to fruition due to the downturn of the market and the residual effect of the financial crisis. North Irving Street and 13th Street North with close proximity to main thoroughfares including Fairfax Drive.Executive Summary This project proposal will explore the highest and best use for a mixed-use development project located at 1200 North Irving Street Arlington. 5|Page . 1200 North Irving Development LLC is interested in purchasing and developing the land but first an analysis of the highest and best must be executed to determine the most feasible investment in the current market. In 2005. The land was recently purchased by USAA from ZOM Clarendon L. VA 22201 in Clarendon.540 SF of retail.

some of which were previous retail businesses that including: Shoe Repair Shop. SF in table 2: RPC Address Lot Size 15078004 3225 WASHINGTON BLVD 9.0: 1200 North Irving Site (Source: Google Maps) The site is currently empty with two vacant retail shops and gravel lots along Washington Blvd. and small businesses.900 6|Page . The 10 parcels are divided into individual lot addresses. retail. North Irving Street and 13th street North. The location offers prime retail frontage along Washington Blvd and is ideal for office and residential use due to its close proximity to Clarendon’s Metrorail and local restaurants.873 15078013 1228 N IRVING ST 6. Ownership History The site is made up of 10 parcels. IR Motors. Arlington Postacraft and Madhu Ban Indian Restaurant.Figure 1. Leo’s Auto. Midas Car Care.

000 $17.750 15078014 N IRVING ST 4.000 $7. ZOM Clarendon planned to develop the site following the purchase but the market fell into a recession and site plan #392 was never developed.500. Faison-Clarendon subsequently sold the multiple parcels for $17.750 15078016 N IRVING ST 5.000.565 15078003 WASHINGTON BLVD 4.750 $45.503.600 15078018 1128 N IRVING ST 4.503. In 2011 ZOM Clarendon sold the land to USAA for $13. The deed is currently in possession of USAA and the parcels remain vacant. SALES DATE 8/24/2011 12/15/2006 1/27/2006 1/1/1962 SALES PRICE GRANTEE $13.313 15078005 3217 WASHINGTON BLVD 2.214 15078023 1126 N IRVING ST 2.902 Table 2.750. before this transaction the land was owned by Lee Properties since 1962.300.15078017 1200 N IRVING ST 5.750 15078015 N IRVING ST 5.300. the 10 parcels were purchased by Faison-Clarendon LLC from Lee Properties for $7.000 to ZOM Clarendon LP.000 USAA ZOM CLARENDON LP FAISON-CLARENDON LLC LEE PROPERTIES INC 7|Page .500.0: Parcel Breakout (Source: Arlington County Land Records Division) In January 2006.187 Total 51.

600 passengers per weekday in 2010. Clarendon Blvd and Wilson Blvd.0. The Orange line begins at New Carrolton in Maryland travels through the District of Columbia and through the Rosslyn-Ballston corridor and eventually ends west of D.Location Analysis The site is conveniently located in the heart of the Rosslyn-Ballston (R-B) Corridor of Arlington and bordered by a mix of uses including many of Arlington’s most popular restaurants and bars. the Clarendon Metro station serviced an average of 8. 8|Page . office buildings. the subject site is located in close proximity from multiple bus line stops located on Washington Blvd. VA along Interstate Route 66. apartment buildings. As shown in Figure 3. in the suburbs of Vienna.1 illustrates the locations of the Clarendon Metrorail and bus stops neighboring the subject site.0: Metrorail Average Weekday Station Activity (Source: Washington Metropolitan Area Transit Authority) In addition to Metrorail. retail shops.C. Figure 3. 1200 North Irving Street is located roughly 1/5 of a mile from the Clarendon Metrorail on the Orange line. Figure 3. and Lyon Village Neighborhood.

The site is located less than a block from Wilson Boulevard that connects Arlington via the Francis Scott Key Bridge to Georgetown. Destination Reagan Airport Georgetown Dulles Airport Union Station Metro Commute Times* 20 min N/A Coming in 2016 33 min Driving Commute Time* 14 min 5 min 30 min 17 min 9|Page .1 summarizes driving and metro commute times from the subject site. George Washington Parkway is located 2 miles away from the site which connects Arlington to Reagan National Airport and Alexandria and north towards Langley and Interstate 495.1: Map of Public Transportation (Source: Google Maps) For driving commuters. Table 3. the site is conveniently located one mile from Interstate Route 66 that connects Arlington to Tyson’s Corner.Figure 3. Fairfax. To better understand the site’s proximately to notable spots in the Washington Metro area. Route 50/ Arlington Boulevard acts as a main thoroughfare connecting Arlington’s residents to towns west of the city and connects Arlington to the District of Columbia. Manassas and the Dulles Toll Road.

As seen in figure 3. residential town homes and single-family homes to the north. These properties are zoned R-5 and designated for one-family and two-family dwelling districts.Tyson’s Corner Coming in 2013 Verizon Center 26 min National Mall 18 min Bethesda 44 min Silver Springs 1 hour *Leave time Thursday 8:45am 17 min 15 min 11 min 27 min 32 min Table 3.2.2 Photo of Clarendon Presbyterian Church north of the subject property (Source: Google maps) 10 | P a g e . north of 1200 North Irving are properties owned by the Clarendon Presbyterian Church as well as singlefamily homes.1 Driving & Metro Distance from Site (Source: Google maps) Adjacent Properties and Land Use Adjacent land uses range from low-density retail shops to the west. medium and high-density apartments to the east and medium to high-density office buildings to the south and east. Figure 3.

11 | P a g e .4. the property is zoned R8-18 and designated for low density residential with 1-10 units per acre. As seen in figure 3.0 with bonus density available. along Washington Boulevard and west of the site is Red Top Cab office and parking lot that recently were rezoned C-3. Figure 3. east of North Irving Street is parking lots owned by Red Top Cab but was recently rezoned C-3 in the Clarendon Sector plan for potential redevelopment of medium density mixeduse.Northeast of the site are the Clarendon Court Apartments featuring 9 dwelling units.3.3 Photo of Red Cab parking lots east of the subject property (Source: Google maps) As seen in figure 3. According to the Clarendon Sector plan this site is designed for medium density mixed-use development with a maximum height of 110 feet and FAR of 3.

5 Photo of retail shops along Washington Boulevard (Source: Google maps) As seen in figure 3. O’Sullivan’s Irish Pub. the Clarendon Sector Plan has designated the aforementioned retail properties along Washington Boulevard as part of the “building frontage preservation zone.5. south of the site facing Washington Boulevard is Sam’s Corner Deli.” 12 | P a g e .4 Photo of Red Top office and parking lot along Washington Blvd (Source: Google maps) As seen in figure 3. Fragrance World Retail Shop and Taste of Morocco Restaurant. Figure 3.6.Figure 3.

264 SF and the Hartford Condominiums featuring 6 stories and 70 dwelling units. other notable developments followed including the Clarendon Apartments featuring 6 stories of 297 dwelling units and 4. Following the mega-development of Market Commons.232 SF mixed use with 12 floors totaling 244 luxury apartments and 38.Figure 3.6 Building Frontage Presentations (Source: Clarendon Sector Plan) Notable Developments near the Subject Site In 2001.626 SF Baptist Church located at street level. The Hartford Offices featuring 9 stories of 74. 13 | P a g e .000 SF of retail along with 300 Class A apartments. The Lyon Place at Clarendon was delivered featuring 67.000 SF of retail. 87 townhomes and 100. The Views at Clarendon located 2 blocks from the site will be delivered in 2012 featuring a unique mixed-use development project featuring 116 apartment dwelling units and a 20. and reside. a development called Market Commons featuring 240. dine. In 2010.333 of retail shops and restaurants.000 square feet of office space was delivered to Clarendon and subsequently transformed the image of the area into a lively place to shop.

1200 North Irving is zoned C-3 which is designated as medium density mixed-use. Building Preservation: Washington Blvd Retail Shops Parking Requirements: 1 parking space per dwelling unit. 14’ on North Irving St. Figure 3.3 ratio beyond 165’ from ‘RA’ and ‘12R’ zoning.1 parking space per 580 SF of non dwelling unit.7 space per guest room. Mixed Use Side Walk Width: 18’ on Washington Blvd. .Zoning and Land Use According to the 2006 Clarendon Sector Plan and the amended 2011 Arlington General Land Use Plan (GLUP). 4th or 5th floor above retail along Washington Blvd. Hotel. 20’ setback at 2nd. Commercial. 3rd. Office. coverage and height regulations for C-3 zoning are as follows: Maximum Building Height: 110 Feet Maximum Floors: 8 Maximum FAR: 3. The bulk.0 (options for addition density) Coverage Requirements: 71% maximum Use Mix: Residential. 1 parking space per 250 SF of retail space Taper Requirements: 1.7: Maximum Heights Map (Source: Clarendon Sector Plan) 14 | P a g e .

1200 North Irving is within 1. The goal of this zone is to encourage a balance of retail. The 2006 sector plan supersedes both the 1984 and 1990 sector plan and supports the Arlington Comprehensive Plan and the General 15 | P a g e . Figure 3.8: Arlington.000 feet of the Clarendon Metro station and must conform to the C-3 zone requirements.The C-3 zone is designated as the “Special Coordinated Mixed-Use District” and established to encourage medium density mixed-use development close to the Clarendon Metro station. residential and office to achieve continuous activity both day and night. VA Zoning Boundaries (Source: Arlington Virginia Zoning Administration) Clarendon Sector Plan The purpose of the Clarendon Sector Plan is to set forth guiding policies and urban design guidelines for future redevelopment in Clarendon.

Land Use Plan (GLUP). Accessible and connected places and streets. Improved housing diversity The subject site is also considered a component of the Washington Boulevard Corridor of the Clarendon Sector Plan. The goals of the Clarendon Sector plan are: Quality public realm. The site is less than a block away from the Washington-WilsonClarendon intersection that serves as the unofficial entrance to the Clarendon neighborhood and influences the urban form of the surrounding area. Centralized area of medium density mixed-use development .” The “urban village” concept represents a sense of place and distinctiveness that incorporates a high quality public environment with accessible and connected spaces where people can work. A rich mix of uses. 16 | P a g e . public spaces master plan and development close to the Clarendon Metrorail. master transportation plan. live and shop.9 illustrates the vision for the Washington Boulevard Corridor including a modification to the three-way intersection to improve the core area of Clarendon and improve traffic patterns for vehicles and pedestrians. Figure 3. The 2006 plan provides a vision for Clarendon as an “urban village.

The expansion of open spaces. buildings and open space according to the policy and objectives described above. All areas have a maximum height limit.Figure 3. frontages and facades. Figure 3. Future development in this area should comply with policies and objectives listed below: Cluster of office surrounding the metro station and Clarendon Central Park. 17 | P a g e . Preservation of specified entire buildings. The provision of well-designed sidewalks and facades. The preservation of surrounding low density residential areas with compatible development tapering up in density and height toward the metro.11 illustrates the plan for Clarendon’s streets.9 Washington Boulevard Corridor Plan Overview (Source: 2006 Clarendon Sector Plan) The subject site is also included in the delineated area known as the “Clarendon Revitalization District” designated in the 2011 GLUP.

DC.11 Concept Sketch: Central Clarendon (West View) (Source: 2006 Clarendon Sector Plan) Arlington Economic Drivers Arlington. Virginia is an urban county of about 26 miles located directly across the Potomac River and only minutes from downtown Washington. Arlington County is one of the most desirable places to live in America and continues to draw national accolades as it was recently ranked #2 among “America’s Best Cities” by Business Week. 18 | P a g e .Figure 3.

742 in Arlington. 86 miles of running/biking trails. The average assessed value of a housing unit in 2011 was $516. Arlington has 61 registered civic associations.441. The county offers 149 public parks. 101 athletic fields. 45 County Board Commissions.158 and condos averaged $355.402 passengers 19 | P a g e .12 Overview Map of Arlington County (Source: Washington Metropolitan Area Transit Authority) Arlington is a particularly popular destination for homeowners and renters who are seeking high quality residential neighborhoods and schools. Arlington Bus Transit offers 13 routes servicing 1. Due to the county’s ideal living conditions it is no surprise that Arlington is able to attain impressive home values and effective rents. The average rent per month is $1.Figure 3.990. 13 community centers and several theaters and libraries.957. 178 community service organizations. One of the main economic drivers of the county is Arlington’s superior public transportation system. Single family detached homes averaged $655.

the population has grown an average of 10. Forecasts predict that 19. The Metrorail is conveniently located below the Rosslyn-Ballston Corridor with five stations (Rosslyn. VA).000 passengers a week. The evolution of Arlington in recent decades is certainly consistent with the county’s vision statement as seen below: Arlington will be a world-class urban community with secure. low unemployment.5 miles from the Clarendon Metro Station the population is expected to increase 42.annually. condominium. Clarendon. Virginia Square. Arlington’s popularity has grown in recent years as it offers a unique blend of a small town coupled with a booming economy. Arlington’s attractiveness can be traced back to the decision of the county’s forefathers to construct an underground Metrorail and suggest major land use changes in the Rosslyn-Ballston and Jefferson Davis Metro Corridors.6% of jobs will be located within a quarter mile of a Metrorail station by 2040. Arlington. Court House. participating. sustainable community in which each person is important.8% of the population and 60.8% the last three decades and currently contains more jobs than the total population within a quarter mile of the Metrorail (2010 Census Highlights. and highly educated residents. Since the integration of the metro corridor. Population and employment forecasts predict that within 0 . attractive residential and commercial neighborhoods where people unite to form a caring. retail and office developments in recent years. Ballston) servicing an estimated 90. The convenience of the Metro and its connection to Metropolitan DC has spurred numerous apartment.2% and 20 | P a g e . mixed-use. learning.

with one and two person households making up three-quarters of all households in Arlington.14 illustrates the total percentage mix and size of households in Arlington.300. Figure 3. with anticipated 30 year growth of 27% along the Rosslyn-Ballston Corridor and 61.050 households.employment opportunities to increase 50. Figure 3.7% in the Clarendon neighborhood. Housing and Development Planning Division). Arlington County has a total of 98.8% (Department of Community Planning.13 Population Migration (Source: Arlington County Profile 2011) Arlington County has an estimated population of 212. 21 | P a g e .

the economy in Arlington is one of the strongest of all counties in the Metro DC area.Figure 3. Arlington residents are among the most highly educated in the nation with almost 69% of adults earning a bachelor’s degree and 35% had a graduate or professional degree.4. having one in five jobs in Northern Virginia located in Arlington. Arlington’s median household income is $103. 22 | P a g e . the unemployment rate is currently 4.1%. marking it the youngest of the counties and cities surveyed in the metro DC area.14 Household Mix and Size (Source: Arlington County 2010 Census highlights) The population is quite diverse with 64% white and 36% minority.3. According to table 3.900 which ranks slightly higher than the median household income in Washington Metropolitan area. making it considerably lower than Virginia and US averages. With one of the highest median household incomes in the entire nation. The median age in Arlington County is 33.

4 Principal Employers located in Arlington (Source: Arlington Profile 2011) 23 | P a g e .3 Comparison of Unemployment Rates (Source: Arlington Economic Development) The federal government serves as the largest single employer in Arlington. Table 3.4 lists the principal private and public employers located in Arlington County. Table 3.Table 3.

5 Major Retail Facilities in Arlington (Source: Arlington Profile 2011) In addition.With the Reagan National Airport located in its backyard. Arlington Memorial Cemetery. Arlington offers a wide range of retail shopping. Air Force Memorial and the Netherland Carillon.000 visitors on any given day. Arlington County has over 6 million SF of retail shopping with the most notable being The Fashion Center at Pentagon City. Tyson’s Corner Fashion Center is a short commute away and renowned as the 8th largest shopping center in America which offers a variety of restaurants and high-end retail shopping (CBRE). Georgetown is a vibrant neighborhood in 24 | P a g e . Arlington attracts 8. Safeway and Giant. Arlington offers a variety of options for landmark and memorial sightseeing including the Iwo Jima Memorial.5 summarizes other notable major retail facilities located in Arlington. Table 3. Georgetown is convenient enough to Arlington residents that it can also serve as a viable option for shopping and dining. Pentagon. Table 3. which is as one of the highest grossing retail centers in the country. entertainment and eateries with approximately 600 restaurants and bars and a variety of grocery stores ranging from Whole foods and Harris Teeter to Trader Joes.

the Washington Metro area ranks the 4th largest job market. The Washington metro area is the most educated metropolitan area in America with 47% of all residents have obtained a bachelor’s degree and 26% have obtained post graduate degrees.Washington. As shown in Table 3. bars and charming views of the Potomac. Table 3. making it the 7th largest metropolitan area in America. the DC metro area economy continues to recover quicker than comparable major American cities due to the Federal 25 | P a g e . restaurants.8%.6% annually (CBRE Trend lines).710 to $110. population has over 5. the unemployment rate ranks best in America at 5. In 2011. DC offering upscale retail shopping.7. Washington Metropolitan Area Economic Drivers Washington D.58 million residents.C. With 3 million payroll jobs.6 Washington Metro Area Unemployment Rate (Source: REIS) Ranked as America’s most educated and most employed. while continuing to grow 2% per year as the national average fell by 0.643 (CBRE).4% compared to the national average of 8. it is no surprise that 7 of the 10 wealthiest counties in America are located within the DC Metro area and have a median income ranging from $101.

7 Large Metro Areas: Job Change since the Start of the Recession (Source: Bureau of labor Statistics. the private sector has a major presence in the DC metro area and continues to hire during the recession. a comprehensive list of those companies are as follows: 26 | P a g e . January 2012) In addition to the Government. The DC metro area hosts several fortune 500 companies headquarters. Delta Associates. Table 3.000 new jobs during the recession (Delta Apartment Market Report).Government bolstering the economy and adding almost 16.

27 | P a g e . However. due to the advantage of having the Federal Government fuel strong unemployment rates. job hiring.. DC economy is closely correlated with federal spending and the direction of the real estate markets will move as the federal government does (Colliers office report Q4 2011). These factors can directly impact federal spending. and long-term housing plan decisions by government agencies. in future years DC should be prepared for a potential recession due to the upcoming presidential election and subsequent federal budget cuts. Metro Area (Source: CBRE) Washington Metropolitan Real Estate Forecast The Washington.C.S. even during the recession.8 2010 Fortune 500 Companies in the Washington.Table 3. D. The Washington. DC real estate market continues to outperform other major cities in the U.

Retail sales activity of 15.20 per SF.275. VA is not included on this list. the Washington retail market did not experience much change in the retail markets. Arlington. 1.7% and positive net absorption at 389. Rental rates decreased from the third quarter of 2011 to $23. The market analysis will analyze the financial and market feasibility of the specific uses and conclude with a highest and best use for the site as well as comparable assumptions for the pro forma section of the analysis. retail and office. Table 3. By the end of the year. Retail Market Analysis According to the 2011 CoStar report.17% during that same period in 2010.000 SF or larger in the Washington Metro area is on the rise compared as the DC metro are saw 35 retail transactions with a total sales of 538 million.Market and Feasibility Analysis The purpose of the market analysis is to evaluate the uses for the proposed development permitted by Arlington zoning laws. Cap rates in 2011 were lower compared to 2010 which is a good sign for the retail markets as cap rates are currently averaging 7. The vacancy rate went from 4. 28 | P a g e .8 to 4.9 ranks the markets with the greatest amount of retail currently under construction and the other charts show recent and future deliveries in the DC metro area. The subject site is zoned C-3 which allows for medium density mixed-use residential.03% compared to 8.3 million SF of new retail was built in the Washington Area.

68 per SF.737. In 2011.9 Construction Activity and Recent/Future Retail Deliveries in Metro DC (Source: 2011 Costar Retail Report) Arlington Retail Submarket Analysis The Rosslyn-Ballston Corridor’s retail market continues to outperform other submarkets in the DC Metro area as rental rates continue to climb to an average rate of $31.13 per SF. This new space provided comparable retail leases that can be used in the pro forma.208 SF of space was absorbed as new deliveries were stagnant in 2011.387 SF offices and retail 29 | P a g e . prime retail space was delivered in close proximity to1200 North Irving Street and the Clarendon Metrorail. The first comparable property is a mixed use 108. According to CoStar the Clarendon/Courthouse retail submarket is favorable for investors as the vacancy rate remains low at 3.6% with 72. 12.429 SF of space available out of 2.663 SF.Table 3. In 2010. The vacancy rate along the corridor remains low at 2.6% with average rental rates achieving $30.

11 lists the ground floor retail spaces that were 100% preleased at Clarendon Center South.10 lists the ground floor retail spaces that were 100% pre-leased at Clarendon Center North. Table 3. it is also located directly across the street from Clarendon Metrorail and offers prime retail frontage. 30 | P a g e . The four retail spaces are NNN and average rent of $49.10 Comparable Retail Leases #1 in Clarendon (Source: CBRE) The second comparable property is a mixed use 104. it is located directly across the street from Clarendon Metrorail and offers prime retail frontage. The four retail spaces are NNN and average rent of $61.property called Clarendon Center North.25 per SF. Table 3.50 per SF. Table 3.918 SF residential and retail property called Clarendon Center South.

11 Comparable Retail Leases #2 in Clarendon (Source: CBRE) The third comparable property is a mixed use 139.12 Comparable Retail Leases #3 in Clarendon (Source: CBRE) The map below presents the locations of the retail spaces in proximity to the subject site. Table 3. it is located 3 blocks from the Clarendon Metrorail.699 SF residential and retail property called Zoso Flat.12 lists the ground floor retail spaces that are currently in lease up.Table 3. 31 | P a g e . The four retail spaces are NNN and average rent of $33 per SF. Table 3.

CBRE predicts that Washington.. and total employment stands at 2. Job stability and hiring within the federal government jobs and private sector jobs linked to the federal government continues to boost the Washington. DC should grow at an average annual rate of 1. 32 | P a g e . Over the last five years while the rest of America was in a recession. with 5. DC economy and continues to outperform the national employment average.Clarendon Center North Clarendon Center South Subject Site Zoso Figure3.S. according to CBRE. DC’s growth rate increased at an annual average rate of . Washington.5% for the next five years with the professional and business services sector expected to post the most growth followed by hospitality and leisure (CBRE Office Outlook 4th Qtr 2011).125.99 million workers. DC market is the 6th largest population in the U.07%. which is an impressive 42% above the national average.15 Proximity of Retail Spaces (Source: Google Maps) Office Market Analysis The Washington.01% while across America employment declined at an average annual rate of . The DC market boasts an average per capita income of $59.72 million people.

958 SF in 1.56.The Washington.808 SF in 9.477.9 billion compared to 62 office sales transactions and $2.5% and suburban markets reported 14.900 SF.885 buildings.7% in Washington metro area. This trend shows that tenants are taking advantage of compressed rental rates in class A space and upgrading from inferior space (Delta Associates Trendlines). Notable 2011 deliveries are as follows: Square 54: 432.05 compared to 2010 at $302. Specifically Class A properties reported a vacancy rate of 14.81 SF at end of 2011 (CoStar Office Report). 33 | P a g e . The average rental rate for all classes of office space was $33. The DC office market ended 2011 with a vacancy rate of 13.3 million for class B and C properties. the DC Central Business District reported 10.277 buildings with positive absorption of 2.353. total office buildings sales were up from 2010 with 91 office sales transactions with a total volume of $4.961 SF of new office space was delivered to the Washington market.000 SF.36.982. Moore Street: 580.3 million in 2011 compared to a negative 1.141 SF of office space under construction. 100% vacant By the end of 2011 there was 4.2% in the 3rd quarter. Class A office buildings consisted of 241.253.5% (COSTAR office report). DC office market inventory amounted to 458.20 and the average rental rate in the CBD was $48. In 2011 an estimated 2.749 SF. Class A space was $38. 7% pre-leased space NPR HQ at 1111 Capitol Street. 450.3% which is slightly raised from 13.000 SF building.6 billion respectively. NE. 100% leased In the first three quarters of 2011. The price per SF in 2011 was $356. 92% occupied 1015 Half Street SE: 390. Notable projects underway include: 1812 N.

Lower cap rates are a good sign for investors looking to enter the market.13 R-B Corridor Office Market Report (COSTAR office report 4Q 2011) According to table 3.01. vacancy rate at 12. Table 3.1%.84% compared to 2010 when they averaged 7.13 will be used in the return on cost and return on equity analysis in the Development Options Section.31% for the same time period.401 SF and average asking lease rate of $41. The vacancy rate and average rate for Clarendon in table 3. negative absorption at 23. the subject site is located in a strong submarket with the second highest average rental rate as shown in the Clarendon/Courthouse submarket. Arlington Office Market Analysis As shown in table 3.13.Cap rates contracted in 2011 averaging 6. 34 | P a g e . in the Rosslyn-Ballston corridor submarket there is 177 office properties consisting of 24 million SF of space.13.

Currently there is 2. Two notable Arlington properties are planned to be delivered to the R-B corridor.3 million SF of office space currently under construction. Vacancy and Rental Rates (Source: Arlington Economic Development) One notable transaction in the Rosslyn-Ballston Corridor was the 1. 1812 North Moore Street: 538.14 Arlington Office Market.895 SF of office planned for Q1 of 2012 with Accenture as the lead tenant In November of 2011. one notable “trophy property” was delivered to the R-B corridor named Founder Square.111 SF of office planned to be delivered in Q3 of 2013 with no lead tenant 800 North Glebe Road: 301.3 million SF of office space under construction in Northern Virginia with 46% of if happening in the Rosslyn-Ballston Corridor. 35 | P a g e .25 billion sale of 10 properties totaling 3 million SF owned by Lehman Brothers Joint Venture Holdings in Rosslyn.740 SF of building space.Availability. the building is 100% leased and the lead tenant is Darpa (Colliers International Office Q4 2011).Table 3. Founders Square is located at 675 North Randolph Street offering 352. The Rosslyn-Ballston corridor has 1.

The apartment market in Metro DC is moving from “recovery” to “expansion” in the market cycle.15 Office Sales Transactions in Arlington (Source: Arlington Economic Development) Table 3. In addition to favorable economics.16 Net Office Absorption in Arlington (Source: Arlington Economic Development) Apartment Market Analysis At a macro level. By third quarter of 2011 the homeownership rate fell to 66% nationwide while rental properties grew at a favorable rate (Cassidy Turner Commercial Real Estate Services. In 2010.Table 3. 3rd Qtr 2011). steady rent growth and favorable supply/demand bumped the Metro DC area to the top of the market rankings. Washington. low vacancy rates. DC is perennially a top five multi-housing market in the America. Class A 36 | P a g e . DC area residents are renters by choice due to high home costs and the transient nature of the population.

January 2012) 37 | P a g e . During the worst period of the recession. Northern Virginia Apartment Analysis As a submarket of the Metro DC area. Table 3. After a period of inactivity. vacancies continued to slip under 5% while rents have gained momentum since the recession and continue to show positive growth. Due to the economic bubble in the DC metro area the multifamily market continues to attract investors and buyers.rents are up 6. Northern Virginia barely reached 6% vacancy rates while the national average was rising to 9% (January 2012 REIS Apartment Reports). Northern Virginia continues to be a major player and positive force in the apartment market.9% during the last 12 months and all investment grade apartment rents grew 7.17.8% (CBRE). In 2011. construction is on the rise again as supply and vacancy rates return to prerecession levels. As shown in table 3. Northern Virginia has perennially outperformed the South Atlantic and National vacancy rate averages.17 Apartment Vacancy Trends (Source: REIS Observer.

January 2012) Arlington Apartment Analysis The Rosslyn-Ballston (R-B) corridor continues to be Arlington’s busiest submarket for apartment construction and rentals due to the R-B corridor transient oriented development plan and strong demographics. A low average cap rate of 5% is a good sign for investors looking to enter the market.2% in 2011.896 per month.946 units with 692 new units delivered to the market. Northern Virginia saw a net absorption of 1.18 Apartment Cap Rate Trends (Source: REIS Observer. According to REIS average cap rates have been as low as 4.S.REIS predict that vacancy rates will fall below 4% for the foreseeable future as the market returns to pre-recession form. average of 6.431 apartment units with an average asking rent of $1.5% the market is outperforming comparable metropolitan areas. According to REIS. Of the total apartment units in the R-B 38 | P a g e .18 shows the apartment cap rate trends for Northern Virginia. Table 3. the R-B corridor has a total of 16. compared to the U. In 2011.S. Table 3. South Atlantic and U.

According to Table 3. Favorable rental conditions along the corridor can be attributed to the rising population.Corridor. 2011) Also shown in Table 3.19. The apartment market in the R-B corridor remains favorable for investors and landlords as the average rent rate rose 4.6% in 2011 and the vacancy rate was the lowest of the five submarket surveyed in Northern Virginia at 3. Table 3. Per table 3.20. vacancy rates in R-B corridor could rise above 6% as new development is delivered and new supply catches demand. 65% are considered Class A Apartments.6% .306 per month.1% as a percentage of face rent. concessions in the R-B corridor are the lowest of the other five submarkets with 2. 39 | P a g e . strong unemployment rates.19 Key Market Indicators for Mid and High Rise Apartments (Source: Delta Associates Q4. 0% inventory growth and a younger population in favor of renting. high median income. the Rosslyn-Ballston corridor effective rent rate including concessions for Class A mid and high rise apartments is $2.19.

As seen in Table 3.5% annually in the next five years. 2011) According to REIS.Table 3.471 units 40 | P a g e . the average 2011 rent growth rate in the R-B corridor was 3. there was no change in supply delivered to the R-B market. Construction commenced in September 2010 Rosslyn Commons located at Clarendon Boulevard and 16th Road North offers 262 units with 208 market-rate units 11 Other planned projects to be delivered after 2012 totaling 2. Absorption & Vacancy Rates (Source: REIS Apartment 4Q. Construction commenced October 2009 Buckingham Village Project located at 4401 4th street North offers 272-units with 120 market-rate units. REIS forecasts that properties in the R-B corridor will grow 2.20 R-B Corridor Construction. however four projects totaling 523 market rate units are under construction and set to be delivered in 2012. Lists of those projects are as follows: The Views at Clarendon located at 1210 N.5% which is superior compared to the national average growth rate at 2%. Highland Street offers 114 units with 46 market-rate units.20. Construction commenced October 2010 Garfield Park at Clarendon Village located at 2900 10th street North offers 149 units.

this is a feasible assumption considering older and less comparable mid rise apartments in Arlington leased up an average of 14 units per month.21 Arlington Absorption Summary 228 14 (Source: Mid-Atlantic Class A Apartment Market Report. Note: The development project at 1200 North Irving Street would be considered mid-rise and will assume 12 units lease up per month.21 shows the absorption summary per month for low to high-rise apartments. The average absorption of units per month is 14 but can range from 8 to 18 depending on the size and location.Table 3. Mid-Year 2010) 41 | P a g e . Absorption Summary from 2007 to 2010 1 2 3 4 5 6 7 8 9 10 11 12 13 Apartment Name Bennet Park Lo Piazza Gramercy at Metro Park Camden Potomac Yards Liberty Tower Parc Rosslyn Zoso Flats Palatine Vista on Courthouse Halstead Madison at Ballston Station The Amelia Gables Date Date Stabilized Delivered 2/9 9/7 8/8 9/7 Lease up per Month 8 18 City Arlington Arlington Type High-Rise High-Rise Units 210 226 Arlington High-Rise 379 8/9 10/7 15 Arlington Arlington Arlington Arlington Arlington High-Rise High-Rise High-Rise Mid-Rise High-Rise 378 236 231 114 250 11/9 8/9 8/9 5/9 11/9 9/7 3/8 6/8 7/8 7/8 13 12 18 10 14 Arlington Arlington High-Rise Mid-Rise 191 269 5/10 5/10 11/8 1/9 9 14 Arlington Arlington Arlington Low-Rise Mid-Rise Low-Rise 234 108 132 2/10 11/9 11/9 3/9 7/9 6/9 16 14 18 Total Table 3.

all of the apartments are located less than two miles from the subject site.92 $2.22 Rent Comparable Summary 2001 2002 219 300 $2.aptguide.76 $2. The oldest apartment surveyed is Courthouse Plaza delivered in 1989 which posted the lowest comparable rent at $2.23 $3. A map of the apartments surveyed in relation to the subject site is shown in Figure 3. 42 | P a g e .27 on the high end. Table 3.57 1993 2000 718 273 $2. the average rental rate per SF ranged from $2.com) Of the apartments surveyed.16.27 2201 Wilson (Archstone) Arlington Residences at Market Arlington Commons Meridian at Courthouse Arlington Prime at Arlington Arlington Courthouse Average Rent/SF All Units Table 3.49 on the low end to $3.80 (Source: www. Rent Comparable Summary Apartment Name City Year Built # of Units Courthouse Plaza (Archstone) The Clarendon Apartment Lyon Place Clarendon Arlington 1989 396 Average Rent PER SQUARE FOOT $2.In order to determine a feasible rental rate for a development in Clarendon.80 $2.49 while the newest apartment surveyed is Lyon Place in Clarendon delivered in 2010 and posted the highest rent at $3.27. several comparable apartments in the area were surveyed.49 Arlington Arlington 2006 2010 300 244 $3.22 lists properties that were surveyed.

The Clarendon
Subject
Site
Lyon Place at
Clarendon

Figure 3.16. Rent Comparable Map
(Source: Google Maps)
The Clarendon and Lyon Place at Clarendon are the most comparable of the properties
surveyed due to their age, location, proximity to Clarendon Metrorail and amenities offered.

43 | P a g e

Figure 3.17 Photo of the Lyon Place at Clarendon
(Source: www.apartmentshowcase.com)
Lyon Place at Clarendon is considered a high-end luxury apartment building and is
noticeably superior to its peers in Clarendon. The apartment offers amenities similar to a luxury
hotel such as fountains and courtyards, art deco-inspired lobby with fireplace and seating areas,
indoor pool, state-of-the-art fitness center, stainless steel appliances and premium features and
finishes in every room. Its luxury amenities combined with its central location to Arlington’s
nightlife, dining, retail and Metrorail attracts consistent demand and 100% occupancy. If the
proposed development at 1200 North Irving offered comparable luxury amenities, Lyon Place at
Clarendon would still remain superior due to its central location, and therefore an average market
rent of $3.27 per square foot is not a feasible.

44 | P a g e

Figure 3.18 Photos of Clarendon Apartments
(Source: http://www.equityapartments.com/bbrochure.aspx?PropertyId=4009)
The Clarendon Apartment Building is located closer to the subject site than Lyon Place
and considered more comparable to the proposed development. Built in 2006, the Clarendon
Apartments are more comparable because of its size, location and comparable amenities such as
an outdoor swimming pool, fitness center, concierge, clubhouse, business center, standard
appliance and balconies. The Clarendon Apartments average close to 3% vacancy and post
average market rates of $3.23 per square foot. It is feasible to assume that 1200 North Irving is
most comparable to Clarendon Apartments and should attract similar market rates. To account
for a possible drop in demand from new competition and unforeseen market trends, a
conservative market rental rate of $2.97 per square foot will be assumed for the property.
As shown in table 3.23, a unit mix analysis was completed to show the percentage
breakdown of efficiency/studio, one-bedroom, and two-bedroom in comparable properties. The

45 | P a g e

Comparable Unit Size Summary (Averages) Apartment Name City Eff.table shows that 70% of all units are one-bedroom or studio and 28% are two-bedroom and 2% are three-bedroom.aptguide. one and two bedroom units that would be used in the proposed apartment at 1200 North Irving Street.24. The unit mix at 1200 North Irving Street apartments would have comparable breakouts.com) As shown in Table 3. 1B 1BR + 2BR 2BR + 3BD MPD 46 | P a g e .23 Comparable Unit Mix Summary 2BR 78 20% 86 39% 99 33% 79 29% 154 27% 220 31% 149 26% 865 28% 28% 2BR + D 0 0% 0 0% 2 1% 0 0% 0 0% 0 0% 0 0% 2 0% 3B D 0 0% 0 0% 2 1% 10 4% 0 0% 0 0% 42 7% 54 2% 2% MPDU Total 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0% 396 100% 219 100% 300 100% 273 100% 564 100% 718 100% 571 100% 3041 100% 100% (Source: www. a comparable unit size analysis was completed for the same set of apartments to determine the average size of the studio. Comparable Unit Mix Summary Apartment Name Courthouse Plaza City Eff 1BR Arlington 2201 Wilson Arlington Market Commons Arlington The Prime at Courthouse Courthouse Place Arlington Meridian at Courthouse Courtland Towers Arlington 0 0% 0 0% 19 6% 32 12% 0 0% 124 17% 0 0% 175 6% 299 76% 133 61% 152 51% 128 47% 329 58% 374 52% 380 67% 1795 59% Arlington Arlington Total 1BR + D 19 5% 0 0% 26 9% 24 9% 79 14% 0 0% 0 0% 148 5% Group Totals 70% Table 3.

only 2. there were 19 new projects that had begun sales with the average size project offering 53 units and 2. According to McWilliams Ballard it is not due to lack of demand but the scarcity of quality new condominiums on the market. In 2011. 47 | P a g e . CEO of Delta Associates.1. According to Greg Leisch.039 condominiums sold in the Washington Metro area. the DC condo market is picking up and he expects condo prices and new supply to increase in 2012. newly built condominium market offered little supply as developers remain risk adverse following the 2008 financial crisis.24 Comparable Unit Size Summary (Source: www. DC Metro area maintains one of the strongest condominium markets in the country.aptguide.Courthouse Plaza Arlington 0 R 698 D 0 1091 D 0 0 U 0 2201 Wilson Arlington 0 693 0 1125 0 0 0 Market Commons Arlington 601 736 884 1376 1565 1765 0 Courthouse Place Meridian at Courthouse Lyon Place at Clarendon The Clarendon Apartments Average SF Arlington Arlington Arlington 525 599 485 742 790 663 902 930 927 1126 1124 1098 0 0 1247 0 0 1356 0 0 0 Arlington 0 654 942 1124 1307 0 0 553 711 917 1152 1373 1561 Table 3. In 2011. VA ranked lowest for new condominium sales at 0% and Prince William County ranked the highest at 94%. As shown in figure 2.com) Condominium Market Analysis The Washington. Arlington.1 years of supply on the market. In 2011. marking a 23% decline from 2010 and 85% decline from 2005. 2011 marked the lowest yearly sales volume in almost a decade.

For the fourth quarter in a row Arlington and Washington. Arlington Condominium Market Analysis The county of Arlington is experiencing a major shortage in supplies as only 147 total units were sold in 2011 which is a 51% decrease from 2010. New supplies have basically dried up with 69% of all sales attributed to two developments that 48 | P a g e . McWilliams Ballard forecasts that markets closest to the district will face a supply shortage for the next 18 months while construction begins.25 Yearly New Condominium Sales (Source: McWilliams Ballard 2011 Year-End Report) The Washington metro area has reached a point where supplies are dwindling with little quality condominiums in attractive markets such as Arlington and Bethesda. Furthermore. Arlington had 296 units available and representing 7% of the Washington areas total supply of condominiums for sale. DC failed to represent 50% of the sales in the area and further demonstrating that a lack of supply is to blame as historically these submarkets drive condominium sales in the metro area. which explains the shortage of supply in the short term.Table 3. At the end of 2011.

Arlington’s lack of supplies coupled with a strong market.1% marking an average price of resale at $370.26 New Condominium Sales and Remaining Inventory % change in Arlington.C in average resale price within the past three years. Table 3.27 illustrates.were delivered in 2010. Arlington ranks second only to D. VA (Source: McWilliams Ballard 2011 Year End Report) As table 3. new and used condominium prices continues to rise.26 illustrates the low percentages of new condo sales and remaining inventory in the county of Arlington. Average resale price increased by 3. Table 3. 49 | P a g e . these variables make Arlington one of the strongest performers in the Washington metro area for condominium sales.205 with an average of 64 days on the market.

Table 3. Of the eight developments there are approximately 898 apartment 50 | P a g e .100 units in near term while another 1.28 are eight multi-family development projects ranging from apartments to condominiums that are planned. Listed in Table 3. Only recently have developers began building condominiums again. under construction or recently delivered in the Clarendon/Courthouse area.320 rental and condo units are in the projected long term pipeline.27 Average Resale Price in Metro Washington Submarkets (Source: McWIlliams Ballard 2011 Year End Report) Since 2008. condominium development in the R-B corridor slowed down with the rest of Arlington as developers are skeptical following the aftermath of the financial crisis with years of foreclosures. Several projects are in the development pipeline as the corridor expects 2.

Arlington.4 miles Project type: Apartment Status: Under Construction Units: 191 2001 Clarendon Boulevard Arlington. VA Neighborhood: Clarendon Distance From Site: 0. there is a possibility that the market will swing back in favor of condominiums. VA Neighborhood: Lyon Park/Rt. To conclude.50 Distance From Site: 1. Of the 175 total condominiums. 1900 Wilson Boulevard Arlington.units and 175 condominium units that are planned or under construction in the delineated area.6 miles Project type: Condo Status: Under Construction Units: 13 51 | P a g e .2 miles Project type: Apartment Status: Under Construction Units: 188 The Court at Lyon Village Arlington.1 miles Project type: Condo Status: Planned Units: 154 2201 North Pershing Dr. VA Neighborhood: Courthouse Distance From Site: 1. only 21 of those units are currently being constructed while the remaining 154 are still in early planning stage. VA Neighborhood: Courthouse Distance From Site: 1. with minimal supply of condominiums and the possibility of an oversupply of apartments.

urbanturf. average price per SF and average SF per unit. Leasing Up Units: 116 Table 3. table 3.Garfield Park at Clarendon Arlington. VA Neighborhood: Lyon Village Distance From Site: 0. comparable properties along the R-B Corridor were used to determine the average resale price.2 miles Project type: Apartment Status: Under Planned Units: 254 vPoint Arlington. VA Neighborhood: Clarendon Distance From Site: 0.28 Multi-family Development Projects (Source: dc. these averages should be comparable to the prices that the development could achieve if condominiums were the highest and best use. 52 | P a g e . unit mix. VA Neighborhood: Courthouse Distance From Site: 1.com) In order to determine accurate assumptions for the financial analysis.2 miles Project type: Condo Status: Under Construction Units: 8 The Tellus Arlington.29 lists the properties.527 or $526 per square foot. VA Neighborhood: Clarendon Distance From Site: 0.3 miles Project type: Apartment Status: Delivered. The average 2011 resale price of the seven properties surveyed is $466.5 miles Project type: Apartment Status: Under Construction Units: 149 Lyon Pointe Arlington.

30 shows that 1BR units provide the best return for a owner as they achieve the greatest quantity of sales.1 shows the comparison between condominiums 53 | P a g e .29 shows the average square feet per unit that will be taken into consideration for the unit mix breakout featured in the financial analysis. Table 1.30 Condominium Unit Types in Arlington.Table 3. Table 3.29 Comparable Condominium units for sale along the R-B Corridor (Source: McWIlliams Ballard 2011 Year End Report) Table 3. there are positive trends for newer condominiums for the top zip codes in the DC Metro area. Table 3. VA (Source: McWIlliams Ballard 2011 Year End Report) According to McWilliams Ballard. highest average resale price per SF and percentage change in resale price.

re-sales “built since 2000” verses “built before 2000”. After 2000 (Source: McWilliams Ballard 2011 Year End Report) Market Analysis Conclusion To conclude. Table 3.31 Product Built Before 2000 vs. McWilliams Ballard believes that the positive trends for new condominiums indicate that the Washington Metro area will show strong demand for new condominiums and new product will continue to deliver without enough supply to satisfy the market. Condominium and Apartments shows that there is opportunity for investment in the Arlington area. Office. The market variables are favorable in Arlington and with the right timing and capital structure any of the four building uses could be market feasible. Evidence in Arlington fully supports McWilliams Ballard’s forecast of strong demand for new condominiums as a property called 1221 Quinn Street featuring 13 new condominiums in 2011 successfully sold 85% of its inventory in one month.32 shows a summary of the market variables in Clarendon for each building use: 54 | P a g e . the market analysis of Retail. the comparison indicated that newer condominiums had fewer negative trends compared to older condominiums. Table 3.

49 – 3.5 FAR.Apartment Condominium Class A Office Retail $/SF $2.5 FAR which would maximize the gross square feet as permitted by the C-3 zoning guidelines. The development would not include the ADU bonus densities of 1.5 FAR.31% 6. Scenario 3: Develop the site as apartments with retail on the base floor. 55 | P a g e . The following scenarios will be considered in the return on cost and return on equity analysis: Scenario 1: Develop the site as condominiums with retail on the base floor.15 FAR for meeting LEED requirements. A reduction in FAR would reduce the size of the building and subsequently reduce the cost of construction parking which may result in less risk and a better return. The total FAR will be 4. The development would reflect the bonus density awarded from ADU cash contributions of 1.7.208 Neutral - Positive 2. The development would reflect the bonus density awarded from ADU cash contributions of 1. but it will include the bonus density of .6 – 4% Cap Rate 5. The total FAR will be 4.32 2011 Summary of Clarendon Market Analysis Development Options The subject site is designated medium density mixed-use of the Clarendon Revitalization District which allows for several development options for the site including residential.8 – 7% Absorption 37 (23. commercial or mixed-use.5% 6.5 FAR.401) 12.84% .66 Vacancy Rate 3% 11 – 12% 2. Scenario 2: Develop the site as condominiums with retail on the base floor.039 (DC metro Total) Forecast Positive Positive Table 3.5 FAR which would maximize the gross square feet as permitted by the C-3 zoning guidelines. retail.27 $450 – 744 $39 – 41 $30 .

The table 3. This scenario will test the financial feasibility of building office over multifamily use. a return on cost analysis was performed to compare the five scenarios. Reference Appendix E . The total allowable FAR for office according to zoning guidelines is 3.Return on Cost and Equity Analysis 56 | P a g e .15 FAR. The development would not include the ADU bonus densities of 1. Return on Cost Analysis In order to test the financial feasibility of each scenario.15 FAR for meeting LEED requirements.5% and vacancy rate of 3%. cap rates of 5. Table 3. A reduction in FAR would reduce the size of the building and subsequently reduce the cost of construction and required parking which may result in less risk and a better return.0 with a potential LEED bonus density of . Apartments provide the greatest return on cost due to favorable lending terms and low cap rates.15 FAR.Scenario 4: Develop the site as apartments with retail on the base floor. Scenario 5: Develop the site as office with retail on the base floor. but it will include the bonus density of . for a total of 3. Apartments on the other hand provide a competitive return on cost due to lower construction costs. Condominiums could ultimately offer the highest returns but investors and developers are skeptical to build large condominium projects and carry the risk of foreclosures.5 FAR.33 Return on Cost Summary From this analysis it is apparent that office use does not pass the return on cost test due to the high cost of construction and parking requirements coupled with a high vacancy rate of 11% and cap rate of 7%.33 is a summary of the return on cost analysis. high market rent.

Apartments pose the least risk to lenders and therefore receive the most attractive terms. According to Jon Mullen of Philips Reality Capital.Return on Equity Analysis Return on equity is the next analysis that will test the financial feasibility of the five scenarios. The additional risk of building a larger apartment building due to the additional construction 57 | P a g e . To conclude. the loan to cost for condominiums and office is 60-65% and apartments are 70-75%. Table 3. Condominiums pose the greatest risk due to the risk of foreclosures and therefore most condominium developments are small in size to reduce the risk.34 the apartment development is the most feasible of the uses analyzed. The apartment and condominium scenarios both provide a return on equity that is substantial enough for most investors.34 Return on Equity Summary Based on the projected equity return in table 3. From this analysis it is clear that office can be eliminated from consideration because of its high cost of construction due to a larger parking garage requirement along with unfavorable loan to cost options and high vacancy rates. In order to make this analysis work it is assumed that the apartment and office building will be sold once stabilization is reached. it is financially feasible to develop both apartment options with retail.

the square feet 58 | P a g e . In speaking with Tom Miller. a new site plan will be required to be submitted if the design and footprint differs from the original submission.35 Development Potential Site Plan and Entitlements The existing site plan that was submitted by ZOM Clarendon in 2005 and approved by the Arlington County Planning Commission remains valid. Arlington Planning Division Supervisor.costs and equity requirement is not advisable. the analysis will focus on the development of a five-level stick built apartment building with retail. Table 3. which has changed from two separate buildings to one large “L” shaped building. Reference Appendix E .35.902 total square feet for a mixeduse apartment/retail development is shown in table 3. However. Moving forward. the design of the new proposal project has changed significantly since the plan was submitted seven years ago. The most notable change from the original site plan submitted seven years ago is the footprint of the building.Return on Cost and Equity Analysis Development Potential and Site Plan The development potential for the site with a floor plate of 51.

of retail was reduced from 18.Apartments/Retail 1/1/2015 Close Permanent Loan Reversion Finish 9/1/2012 12/1/2012 6/1/2013 6/1/2013 12/1/2014 1/1/2015 12/1/2015 1/1/2016 1/1/2021 Table 3. the FAR was reduced from 4. the height was reduced from 125’ to 55’.37.36 Entitlement Timeline Development Plan and Timeline After consulting with Mr. The entitlement schedule is outlined in table 3.000.15 and the total number of dwelling units were reduced from 155 to 146. The time frame to prepare and file the preliminary site plan and final site plan will take approximately a year but could take less because the new site plan will not require a rezoning hearing. 1200 North Irving Development Timeline Start Contract Ratification 5/1/2012 Feasibility/Due Diligence/Partnership Agreement 9/1/2012 Entitlements: Rezoning/Site Plan/Construction Plans 12/1/2012 Close Development/Construction Loan Construction – Apartments 7/1/2013 Delivery – Apartments Stabilization .00 to 3.299 to 15. Due to these major changes the site plan approval process will have to start over again. a timeline with key milestone dates and durations through completion of the project is outlined in table 3. John Bornholdt who has several years of construction management experience.36. Table 3.37 Development Timeline 59 | P a g e .

1200 North Irving Development LLC will hire experienced consultants from the Washington Metro area for the design. The firm was honored with the Award of Merit in 2009 by Arlington County for the design excellence of the The Wooster and the Mercer Loft condominiums located in Rosslyn. Bornholdt advised that the construction of comparable-sized buildings will take about 18-24 months. 60 | P a g e . DC area that specializes in residential mixed use architectural design. Mr. Through recommendations from Mr. The construction loan will be closed as soon as the Planning Commission approves the site plan. The firm’s approach is to achieve excellence through rigorous attention to detail and to discover the qualities unique to each specific project with the goal of enriching the local environment. The firm has experience designing comparable apartments with neoclassical Virginia architecture. construction and execution of the project. early completion will be contingent on favorable weather patterns and the absence of construction contingencies. Bornholdt. the following consultants have been identified for the development: Architect and Design: The development team has chosen Cunningham & Quill PLLC to design the project.The process of searching and choosing a construction lender will begin once the site plan is submitted to the Planning Commission. Cunningham & Quill PLLC is a well-respected firm in the Washington.

mixed-use and interior construction projects for corporate headquarters. Kinney. The firm represents developers and property owners during the construction process. VA. government agencies. Engineering New record recently named Davis #133 in the top 400 contractors in the country and #35 as a top green contractor. restaurants. zoning and local government matters. Bean. hotels and LEED construction. Kinney. Davis has provided superior construction services to Northern Virginia area since 1966. conference facilities.Permits and Approvals: Bean. special exception and use permit processes. & Korman have over three decades worth of experience in Northern Virginia’s land use. Construction: The development will work with James G. 61 | P a g e . including the site plan. They have experience constructing multi-family residential buildings. The American subcontractors association of Metro Washington named Davis the General Contractor of the years 4 of the last 5 years. residential and LEED projects in Arlington. law firms. retail. They are knowledgeable in all aspects of the development process. variance and subdivision approvals. & Korman’s experience and strong reputation in Arlington have enabled them to become the premier real estate law firm in the region. zoning. Davis has extensive experience in the role as general contractor of several office. telecommunications firms. and is experienced in construction and development coordination and facilitation. schools. Davis Construction Corporation as the General Contractor for the Project. technology companies.

The firm is consistently ranked in the top 5 of national firms associated with multi-family sales. The firm is one of the most successful real estate marketing firms on the East Coast and has sold more homes than any other firm in the MidAtlantic Region. Bozzuto was honored as a two-time NAHB Best Property Management Company. McWilliams Ballard is based in Alexandria. integrated real estate services organization that began in 1988. the development team has contracted with McWilliams Ballard to lead the sales and marketing of the property.Management: The Bozzuto Group is a privately held. 62 | P a g e . maximizing return while minimizing risk. Bozzuto will manage and lease the building until the time of reversion. Reversion Sales: If the property is sold soon after stabilization. Bozzuto manages multiple properties in Arlington with the most notable being the Clarendon Market Commons. Bozzuto has over 20 years of experience and an extensive portfolio in the local market and has become a leading real estate firm in the Arlington area. VA and has over 15 years of experience specializing in sales and marketing of condominiums and townhouses. McWilliams Ballard prides itself on finding the perfect combination of sales pace and price.

The mixed-use building will feature 5 floors and 163. ten foot ceilings. Building and Site Design The 1200 North Irving Apartment will be designed to emphasize Neoclassical Virginia Architecture that is commonly found in Arlington and Alexandria. property management. It should be noted that if the building exceeded five floors then the cost of construction would be significantly more 63 | P a g e . medium finishes including crown molding in all rooms. Maryland and Virginia. tenant representation. full size washer and dryer. business center. and generous sized balconies.C. The building will be slightly unique as it will be positioned in an “L” shape along Washington Boulevard and North Irving Street. The apartments will offer open and spacious floor plans. clubhouse. VA and offers the most expertise of the retail market in Northern Virginia. granite counter tops. ceramic tile flooring in the kitchen and bathroom.Retail Leasing and Sales: For more than 25 years. new carpeting. area with real estate services focusing on retail properties. the Rappaport Companies has provided the Washington D.C. receivership. This type of design features traditional red and tan brick with punch windows. and development services for space in shopping center and missed-use properties throughout Washington D. fitness center.242 of residential space.491 GSF of space with 15.. a sound retardant floor system. The residential part of the building will feature 146 apartment units plus the common area that includes the lobby. leasing office. The building structure will be four levels of stick build wood framing above one level of podium on the base floor and a two-level below-ground parking garage. The entrance of the apartments and ingress and egress to the parking will be located on North Irving Street. stainless steel appliances. and swimming pool. The firm provides retail leasing.000 SF designated for ground floor retail use and 148. Rappaport manages several properties in Arlington.

The total height of the building will be 55’. textures. The façade should utilize human-scaled architectural elements such as cornice lines and include three-dimensional detailing such as belt courses. bay windows. on the back end of the building along 13th Street North the façade will be tapered 25’ on the 3rd and 4th floors and 50’ on the 5th floor to meet the taper requirements for buildings within 165’ of residential neighborhoods. awnings and blade signs. colors. Each of the four residential floors will be 10’ floor to floor and the first floor will be 15’ floor to floor. and 30’ on the 5th floor. The exterior façade of the residential spaces are required to incorporate materials. and transparent windows. Furthermore. patterns.expensive due to additional structural requirements including an infinity hybrid system or concrete structure rather than the cheaper stick build that is currently being used. window moldings. entries to individual tenant retail spaces should be spaced no more than 50 feet apart and minimum structure clear heights of 15 feet with the only permitted projections being signs. In order to meet the setback and taper requirements set forth in the Clarendon Sector. 64 | P a g e . The design of the building will be compatible with the following guidelines set forth in the Clarendon Sector plan: The design of the retail space along Washington Boulevard is required to follow specific guidelines including 75% façade transparency (windows). natural clay brick. 20’ on the 4th floor. and details to reduce the perceived mass of large buildings. the building will be tapered back above the retail on Washington Boulevard setback 10’ on the 3rd floor.

and seven tenths (. bicycle storage and racks. adhesives/sealants and carpeting. energy star appliances.7) parking spaces for each guest room.000) square feet of floor area per main building.” 65 | P a g e .15 bonus density it is required that the building earns a LEED score of at least 26 credits. In order for the building to obtain a . storm water management system. low emitting paints.A landscape architect will design the outdoor spaces and incorporate a mixture of bushes. grass. local and regional construction materials.” The following guidelines for retail space are as follows: “One (1) space for each two hundred fifty (250) square feet of floor area on the first floor in a building…to encourage and promote pedestrian-related commercial activity in Metro Station areas… no parking shall be required for retail and service uses for the first five thousand (5. The design and construction of the building will incorporate LEED credits by investing in sustainable elements including a green roof. and flowers. Parking Requirements According to the Arlington Zoning Ordinance (Section 33). the following parking guidelines for all multi-family dwellings in the Clarendon Revitalization District are as follows: “ One (1) parking space for each dwelling unit and one (1) parking space for each five hundred eighty (580) square feet of gross floor area not part of a dwelling unit. and water efficient landscaping. trees. composite wood.

the total gross square footage of which ADU’s shall be 7.50 per square foot of GFA for the first 1.0 FAR in commerical projects. and 28. o $8.0 FAR o $4. The applicant shall make a cash contribution to the Affordable Housing Investment Fund calculated as follows for each fo the described tiers.Table 3. ADU’s shall be provided off-site near the site plan project.0 FAR for residential projects and $4. 66 | P a g e .38 shows the parking requirements based on the guidelines described in this section for the proposed development based on 146 dwelling units with 29 guest rooms. 15. the following options are available: on-site ADU’s.00 per square foot of all GFA above 1.0 FAR for residential projects.38 Proposed Development Parking Requirements Affordable Dwelling Unit Requirements (ADU) Per the affordable housing requirements set forth in Section 36 of Arlington’s Zoning Commission. the total gross square footage of which shall be 5% of the GFA above 1. o $1.00 per square foot of GFA above 3.00 per square foot of GFA from 1.0 FAR.384 of gross floor area of common space.7 space/rooms Total Parking Spaces 40 146 21 207 Table 3. 15.000 SF excluded) @ 1 space per 250 SF 146 Dwelling Units @ 1 space/unit 30 Guest Rooms @ 0.5% of the GFA of the site plan project above 1.0 FAR.000 retail space. off-site ADU’s or a cash contribution to the Affordable Housing Investment Fund.0 FAR to 3. Below is an outline of the basic requirements for ADU’s: ADU’s shall be provided on-site as part of the site plan project.000 SF Retail (5.

608.0 $1.39 Affordable Housing Investment Fund Contribution Financial Analysis Site Acquisition Costs In order to determine the site acquisition costs the market value of the land has to be determined.00 51.853.00 7.Table 3.d (6) of the zoning ordinance. The decision to contribute to the fund was due to the significan loss in market rent units that are not achievable if ADU’s are provided. the formula in determining the land value is based on the following factors: 67 | P a g e . The market value is determined by two approaches: 1) Land value appraisal provided by the Arlington County Department of Real Estate Assessment.00 51.902 2. SF FAR Rate Total 51.15 $8.15 $555.491 3.00 $207.00 $62.40 Table 3.902 1.In exchange for meeting the ADU provision the county board may permit up to an additional 1.351.351.282.39 shows how the calculation was derived.0 $4.17.40 163.5 FAR in bonus density. the proposed development has decided to contribute to the Affordable Housing Investment Fund in the amount of $555. however the building height must not exceed maximum height limits provided in section 31. Beginning with the appraisal of the property.50 $77.902 3.785 0.00 $207.608.0 $4.A. 2) Comparable land sales in Arlington. Based on the guidelines outlined above.

400.00 504.900 4.40.750 4.400. the total value of the site is the total value of the ten land parcels listed in Table 3.00 1. store.00 1. The cost per buildable square feet at 163.Sales Comparison Approach: properties that have recently been sold that are comparable to the property.900.721.058.00 992.00 1.600 5.00 1.058.323. Cost Approach: cost to replace your property with one similar at current material and labor costs.491 square feet total is $83.323. or factory. RPC 15078003 15078004 15078005 15078013 15078014 15078015 15078016 15078017 15078018 15078023 Address 3217 WASHINGTON BLVD 3225 WASHINGTON BLVD WASHINGTON BLVD 1228 N IRVING ST N IRVING ST N IRVING ST N IRVING ST 1200 N IRVING ST 1128 N IRVING ST 1126 N IRVING ST Total Lot Size Value 2.600. Current rate of interest charged for borrowing money to buy or build comparable properties.902 $ 13.92 per square foot and 68 | P a g e .00 1.214 9. Income Approach: how much income a property would produce if it were rented as an apartment.588.565 2.721. According to Arlington County’s appraisal.313 6.500.900.600. etc.00 4.800.547.00 1.700.750 5.873 4.187 $ $ $ $ $ $ $ $ $ $ 1.700 as of January 2012.323.750 5.00 51.00 Table 3.200.600.021. house.40 1200 North Irving Property Value According to Arlington County’s appraisal the land is worth $13.

136.500.the cost per unit is $93.592 $ 81.41 Arlington Land Sale Comparables from 2007 to Present (Source: ARA National Land Services Group) The average price per square foot at 1200 North Irving is $83.24 at 146 dwelling units. 69 | P a g e . Table 3. Quincy June-11 Street 651 N.216.000 from ZOM Clarendon.00 $ 43.000.29 $14.000.00 Price/Unit $117. when USAA purchased the land for $13.674. This appraisal is consistent with the price paid by USAA in 2011.000.00 64.41 lists recent land sales in Arlington from 2007 to present.56 $ 6.000.800.000.00 450.000.000 $ 123.00 Table 3.00 Buildable SF Price/SF $11.984.000.000.000.721.00 $21.800 $ 95.224.53.00 137.000 $ 105.07 $ 4.17 $12. Date Sold Property Name July-12 2636 Wilson 650 N.000.000.374 $ 85.67 $ 80.00 225.00 36. Glebe April-11 Road Fairfax Drive and August-10 North Quincy Rolfe Street June-10 Apartments 1776 Wilson May-10 Boulevard 841 N.337.700.000 $ 74.92 which is slightly higher than comparable land in Arlington at $81. Lincoln April-10 Street North Pershing March-10 Drive November.86 194.968.53 $12.93 $10.518.800.675 North 09 Randolph Street 900 North Glebe July-08 Road 1916 Wilson April-08 Boulevard November07 Wundoria Hill Average # of Units 85 Price $7.00 140.600.11 $12.935.000.500.00 183 $7.43 $34.000 $ 75.00 135. After comparing the appraisal value to the land sales it is safe to assume that $13.935. The next step is to analyze sales in Arlington to compare the market value of recent sales to the appraisal value.700 is the accurate market value of the site.00 175.000 $ 55.750 $ 36.000 $ 111.000.000.00 352.00 230.000.90 $12.000 $ 52.

Buildings above four levels of stick build require a concrete or hybrid structural system that costs $3.700. Mr.0958/$100 of general assessed value. Inc was consulted for the conceptual estimate of the proposed development.42 shows the 2012 tax amount for 1200 North Irving Street.838 per space or $52.42 1200 North Irving Tax on Land Value Hard Costs John Bornholdt of AvalonBay Communities.88 Table 3. Unfortunately. Tax Rate X Assessment $0. It should be noted that the majority of the site was demolished back in 2005 and only minor site work is needed. Site work costs were estimated to be approximately $3. Stick build is substantially less expensive due to structural requirements and fire/safety guidelines and life cycle costs. the 2012 general tax rate for multi-use properties is $.Bornholdt also advised that the construction of this building would be cheaper if the shape of the building was a typical square or rectangle shape rather than the “L” shape that it currently is designed as. the natural shape of the site does not allow for the less 70 | P a g e . According to the Arlington County website.Bornholdt recommends the structure to be constructed of stick build wood framing above one level of podium.453. The construction cost for the building is estimated at $115. Mr.00 per square for general site work. Table 3.00 to $5. The cost for the parking includes a below grade parking structure offering two floors of 207 parking spaces with a cost of $25.Real Estate Taxes A uniform tax rate for real property located in Arlington is set by the Arlington County Tax Board.00958 $ 13.721.00 = Tax $131.00 more per square foot than stick build.12 per square foot.12 per square foot.958/100 or .

legal. insurance.793. A 5% soft cost contingency fee has also been added to cover unforeseen expenses and emergencies and a general contractor fee (development fee) of 4%.570 $7.12 $128.146 Table 3.584 $178. organizational overhead. Soft costs include expenses associated with marketing. Table 3.256 Parking Structure Building 5% Contingency Total Reference Appendix B – Construction Budget Soft Costs The soft costs cover construction expenses that do not include the typical “bricks and mortar” line items. Mr.346 $115.12 $36. engineering.756 $52.44 summarizes the soft costs included in the proposed development.348. architectural fees.43 summarizes the hard costs included in the proposed development. taxes.costly square shape. permits and fees.Bornholdt recommended a hard cost contingency of 5% for apartments to cover unforeseen changes in construction prices and design modifications.723 $18. 71 | P a g e . closing costs and environmental. Table 3.436 $1.633 $5.863.43 Hard Cost Summary $25. utility connection fees. Hard Costs Sitework Cost Cost/Unit Cost/GSF $3.354 $489.231.00 $177.00 $3.54 $ 8.

44 Total Soft Costs Equity terms The equity requirement was calculated by rolling up the development costs and interest costs from the construction loan and multiplying it by the loan-to-cost ratio of 75%.526. Development Costs + Interest $47. The remaining 25% is the total equity requirement.632 Table 3.Table 3.881.45. which is shown in table 3.75) = $11.528 X Loan-to-cost ratio = Equity Requirement 75% (1-.45 Equity Requirement 72 | P a g e .

Mr. Joint Venture Percentage funded Equity Required Reversion Payout Non-Managing Equity Partner 90% $10.47. Mr.163 25% Total 100% $11. Mullen recommends that we use a regional bank such as BB&T for a construction loan of this amount as construction/permanent lenders are not an option for a loan of this size. Mullen did mention that life insurance companies or pension funds could be a viable option for a construction loan but usually regional banks are more favorable 73 | P a g e .632 100% Table 3. 1st Distribution 2nd Distribution Reversion Non-Managing Partner 8% Preferred return 90% 75% Managing Partner 0% 10% 25% Table 3.881.188.469 75% 1200 North Irving Development 10% $1.693.46.47 Joint Venture Distribution of Cash Flows Construction Financing 1200 North Irving LLC consulted Jon Mullen at Phillips Reality Capital for the apartment construction loan terms.46 Joint Venture Equity Contribution The distribution agreement of cash flows for the life of the investment is shown in table 3. However. The equity contribution by each partner is shown in table 3.Equity Partnership Agreement 1200 North Irving Development has entered into a joint venture with a non-managing equity partner who has agreed to fund 90% of the equity requirement while 1200 North Irving Development LLC will fund the remaining 10%.

25X Financing Fee: 1% 74 | P a g e . pension funds. As the construction nears completion and lease up begins. Mullen also mentioned that the banks will require a personal recourse on the construction loan due to the absence of cash flows during construction. the recourse terms will be reduced and eventually eliminated. The terms of the permanent loan are as follows: LTV: 70% Term: 10 years Interest Rate: 5% DCR: 1.250 bps) Amortization: 30 years Mr. Freddie Mac and FNMA or regional banks. a permanent loan can be closed.because they provide the most competitive terms. Mr. Reference Appendix A – Assumptions Permanent Financing Once the construction is complete and stabilization is reached. The entire term of the construction loan is interest only. The permanent financing will be nonrecourse and will be taken out as soon as the development qualifies. The terms for the construction loan from a regional bank are as follows: LTC: 75% Term: 24 months Rate: floating at labor (+/. Mullen mentioned that a permanent loan of this size is typically offered by life insurance companies.

The market rates will escalate at a rate of 3% annually. an average market rental rate of $2. 75 | P a g e . the vacancy rate of 3% is a feasible assumption that will be used in the financial analysis. However. Based on comparable apartments in Arlington and market reports by REIS and Delta Associates.97 will be used in the financial analysis. the favorable economy of Arlington coupled with the ideal location of 1200 North Irving should outperform these projections for future years.Amortization: 30 years Reference Appendix A – Assumptions Market & Vacancy Rate Based on comparable apartments discussed in the market analysis.

the utilities for the dwelling units will be paid individually by the tenants.48 Expense Comparable Summary (Source: Delta Associates Q4. which is not the case in the proposed apartment building.38. As seen in table 4. The proposed development is considered mid-rise elevator style and will use the average expense cost per square foot from the 37 elevator style apartments in the pro forma. the utilities for the common areas and dwelling units are included in the 46.7% expense ratio of GPI.48 shows the expense comparable summary for apartment buildings in the Washington Metro area separated by low-rise garden style and mid/high-rise elevator style.Operating Expenses Table 3. 2011) Table 3. which would result in a 76 | P a g e . In the proposed apartment building.

discount rate of 12%.122.581.761. The ten-year unleveraged internal rate of return for the developer is 9. The development will require an equity requirement of $11. The reversion value after five-years of stabilization is estimated to be $74. ten-year cash flow and reversion value. The reversion value after five years of stabilization was calculated by dividing the net operating income after the sixth year by the terminal cap rate of 6%.562. Net proceeds were estimated by subtracting the reversion value from the 2% closing cost and the debt repayment.24%.608 was estimated using the equity requirement.969.881.19%. The five-year unleveraged internal rate of return for the developer is 13. and leveraged internal rate of return is 23. Reference Appendix A – Mixed Use Cash Flows IRR and NPV In order to calculate the IRR and NPV.173.48 at 3% but this will be offset by the higher taxes in Arlington. and leveraged internal rate of return is 19.472. The net present value of +$6.505 77 | P a g e . The reversion value after ten years of stabilization is estimated to be $86. Net proceeds after five years is $26.214. Reversion In order to calculate the value of the property a cash flow analysis was completed with income and expenses escalated at a constant growth of 3% through year 2026. the five and ten-year cash flows and reversion mentioned in the previous section were used. The net present value of +$8.02%.lower expense ratio closer to 33%.10%. The operating expenses will be escalated at a rate of 3% per year. The reversion value after ten-years of stabilization was calculated by dividing the net operating income in the eleventh year by the terminal cap rate of 6%. The management fee will be lower than the comparative assumptions in table 3.632 from the developer.024.868 and after ten years is $43.

78 | P a g e . five-year cash flow and reversion value.6% to 27. the IRR for the preferred equity partner for a 10 year holding period ranges from 19% to 16%.50%.00%. Table 3.1%. As shown in table 3.00% and 6. The terminal cap rate used in the pro forma is 50 basis points above the “going in” cap rate at 6.50. The three cap rates used were 5. 6. Reversion and IRR As shown in table 3.50%. which is recommended by Jon Mullen of Philips Reality Capital. the IRR for 1200 North Irving Development for a 10-year holding period ranges from 30. The other two cap rates used are 50 basis points higher and lower than the base rate.49 Preferred Equity Partner Cash Flow.was estimated using the equity requirement. Reference Appendix A – Mixed Use Cash Flows Equity Partnership Returns with Cap Rate Sensitivity The IRR returns for the joint venture between the Preferred Equity Partner and 1200 North Irving Development vary based on three different terminal cap rates.49. discount rate of 12%.

the IRR in the shorter term offers a more attractive return than what can be achieved in the longer term of ten years. Reference Appendix A – Mixed Use Cash Flow 79 | P a g e .Table 3.50 1200 North Irving Development IRR. Reversion and Cash Flow Reference Appendix C – Equity Partnership Returns with Cap Rate Sensitivity Disposition Strategy It is recommended that the owner sells the property within five years of stabilization. This strategy will reduce risk and maximize returns on the property. As previously noted in the IRR analysis.

it is difficult to predict events such as 9/11 or the financial crisis of 2008. returns and risk are all contingent on the developer’s ability to deliver the project on time. Several new apartments will be delivered to the Arlington area in 2012 and 2013. design and construction modifications and contractor delays/errors. which poses the risk of losing potential tenants and being forced to lower market rents and increase concessions. Both events had a direct impact on the economy and consumer spending which will subsequently impact the real estate market and potential cash flows. Financial incentives will be built into the developer’s contract to encourage on time or early delivery Market Risks: While the market in Arlington is currently favorable for apartments. entitlement delays. project stabilization. Another part of market risk is new competition that can alter risk and return. 80 | P a g e .Risks and Challenges Timing: Timing will be a major challenge for the development team as unforeseen events are tough to predict such as poor weather. Construction costs.

it is difficult to predict interest rate trends 3 years from now and there is always a risk of interest rates rising before the permanent loan is closed. oil is the main source of energy used to produce and transport cement. apartments are the desirable class for construction and permanent financing. An increase in construction cost should be expected due to recent spikes in the cost for oil. it is no surprise that lenders are looking to enter the DC metro real estate market. which is good news for developers. Based on the evidence in this paper. if another financial crisis occurs similar to 2008. Finance Risk: As of today. If additional equity is required it may be difficult to find new investors and the deal may no longer be feasible. Factors that are vital to the success of the project are 81 | P a g e . however. VA. brick. Construction costs are correlated with oil prices. Construction Cost Risk: The cost of construction represents the majority of initial expenses that will be endured by the developer. However. a mixed-use building with apartments and street-level retail is the highest and best use for the subject site located in Arlington.Interest Rate Risks: Mortgage interest rates are extremely low in the lending market and. coupled with the favorable economy. the lending market can easily turn hostile and cause the loan-to-value ratio to compress which reduces the amount of debt available and increases the equity requirement. steel and other materials used in the construction of the building. Interest rates for construction loans will remain favorable in the short term. Increases in construction costs will have a substantial impact on the returns from the development. Conclusion The conclusion is that 1200 North Irving LLC will be developed as a mixed-use building featuring apartment dwelling units and street-level retail bays.

The timing of the development is ideal for Arlington as the market is currently yielding some of the highest returns for both retail and apartments in the entire county.hard and soft costs. market demand/supply. financial markets and county/local support. The proposed development will contribute to the revitalization of Clarendon and will surely compliment the vision that is outlined in the Clarendon Sector Plan. 82 | P a g e . The success of this development is contingent on these factors and if they were to change the project would need to be reevaluated.

24.com. 25.deltaassociates. CBRE. J. 15. 2012). Retrieved from www. Arlington County Planning Commission (2006).com.com. (2012). (January 2012). Retrieved from www. Colliers International. 4th Qtr 2011: MetroTrend Futures. 4. Retrieved from www.com.mcwilliamsballard. Northern Virginia Land Sale Comparables. Retrieved from www. 22. (2012). 9. (2010). Retrieved from www. Retrieved from www. D. 20.arlingtonva. 5. 7. REIS. 2012). Virginia. Grubb & Ellis. 17. (2012). REIS Observer – Northern Virginia Apartment Market. 4th Qtr 2011: Rosslyn/Ballston Submarket Trend and Forecast.com. J. Washington. Va. (2012). (2012). Delta Associates. 83 | P a g e . Retrieved from www. Washington Metropolitan Retail Rent Comparables. REIS. (April 2011). Personal communication.C. 2.com. 2010 Mid-Atlantic Class A Apartment Market Report. Google Maps. REIS. Retrieved from http://www. (2011). (March 25.C.reis. The CoStar Office Report Year End Report 2011. (2011). (December 2009). Delta Associates.com. Clarendon Sector Plan. 26. Real Estate Business Intelligence. 14. Skanska Retail Report: 1776 Wilson Boulevard. REIS. CoStar. Arlington County Zoning Ordinance.us. Retrieved from www. Retrieved from www. Office Trends Report – Fourth Quarter 2011: Washington DC Metro. Bornholdt. 19. Retrieved from www. (2010). CBRE. (2012). 6.costar. Northern Virginian Condominium Report: February 2012. 10. 11. Virginia General Land Use Plan. (2012). (2012). Retrieved from http://www. 13. Bornholdt.arlingtonva. Personal communication.costar. 18. Apartment Subtrend Futures – Bethesda/Chevy Chase Submarket.grubb-ellis. 2010 Washington/Baltimore Condominium Market Report. Delta Associates. (2011). Retrieved from www. Personal communication.cbre. J. Office Outlook-Washington DC: 4th Qtr 2011.com. 2011 Year-End Washington Metro Area Condominium Market Overview. Retrieved from www.com. Washington.us. 3. 2011 Year End Northern Virginia Key Market Indicators: Class A Apartmens. Arlington County Comprehensive Plan: 2011 Arlington. 12.com.reis. (March 29.com. Census Highlights 2010: Arlington County. Retrieved from www. (2012). Miller. (2011).reis.colliers.googlemaps. (2012). Arlington County Planning Commission (2011).deltaassociates. 12 Trends for 2012. 16. 2012). Office Market. The CoStar Retail Report Year End Report 2011. (March 3. T. Mullen. CoStar. 8.com. Retrieved from www. Arlington Profile 2011.com. (April 3.com. 2012).com. Retail Market.Bibliography 1. Arlington County. CBRE. (2012).cbre.Retrieved from www.cbre.deltaassociates. (2010). ARA National Land Services Group. D. McWilliams Ballard. 23. 21. Personal communication.

reis. 84 | P a g e .27. (2012). 4th Qtr 2011: Retail Asset Advisor: Submarket: Arlington. REIS. Retrieved from www.com.

00% 3% 12% .00% 14.00% 4.607 ############### 30 21 207 #/Units $/Month 167 40 146 Annual $100 $200.619 $11.629.650 88% 3% 3% 3% % of EGI 4.00% $1.485 5.491 71.00% 10.5% $70.00% 2.252 20.539 $496.00% 1.080 Total Other Income Investment Structure Partnership Structure Share of Equity Equity $ Preferred Return Residual 4/16/2012 4/16/2012 1% $32.0% 163.00% $1.790 7.82% 3.78% 1.298 Owner Partner 10.899.589.96% 30 75% 25% $265.29% 2.629.73% 6. # of Units Floor Plates Retail Retail Space excluded from parking Number of Stories Average Floor Plate Building Efficiency Parking Retail ParkingNeeded Residential Per Unit Parking Needed SF/Parking Space Cost/Parking Space Guest Room Per Unit Guest Room Parking Needed Total Parking Required Other Income Type Parking .632 0.47% 3.732 70% $49.73% % of EGI 2.000 5 32.15 163.881.00% 2.899.163 $10.000 5.182.850 3. Permanent Loan Stabalized NOI Capatilization Rate Capatilization Value Loan to Value Loan Amount 10 Year Treasury Basis Points Over 10 Year Interest Rate Amortization Period Loan to Cost Investor Equity Monthly Payment Annual Payment Financing Fees 1 space per 250 40 1 146 375 $29.188.469 8% 8% 25% 75% $270.212 $3.00% 0.812 1.400 $0 $0 $40 $70.04% $3.480 Residual Value Calculation Terminal Cap Rate Cost of Sale Discount Rate Growth Assumptions Rental Growth Other Inome Growth Expense Growth Controllable Expenses Payroll General and Administrative Traffic Demand Management Fee Marketing Utilities (Common Area) Repairs and Maintenance Contract Services and Other Turnover Other taxes & Fees Total Controllable OpEx Fixed Expenses Insurance Real Estate Taxes Management Fees Total Fixed OpEx Total OpEx Financing Construction Loan Loan Amount Investor Equity 90 Day LIBOR as of: Basis Points Over LIBOR Interest Rate Interest Only Monthly IO Payment Yield on Cost 51.252 148.902 36.000 15.00% 32.00% 90.481 $135.72% 18.693.Appendix A Assumptions 1200 North Irving Street Muti-family/Retail-Office Lot Size (sf) Buildable Lot Size FAR GFA Coverage Net Buildable Area Multi-Family Multi-Family Common Area Average Unit Size Est.00% 3.12% 0.Retail Misc.168 877 146 22.96% 3.Residential Parking .00% 5.

116.719 $264.436.931.436.436.567 $1.790 $135.790 $135.567 $1.719 $264.700 $25.790 $135.567 $1.436.436.567 $1.567 $1.848 $1.790 $135.436.848 $1.790 $135.547.848 $1.745 $1.719 $264.790 $135.073.701.929 $128.015.700 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1.629 $43.929 $128.790 $135.929 $128.790 $135.719 $264.436.790 $135.701.436.701.790 $135.721.790 $135.436.790 $135.567 $1. Costs Total Yr End Costs $23.790 $135.867.929 $128.528 .701.436.848 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $128.790 $135.790 $135.Appendix A Construction Loan Draw Schedule Constuction Loan Draw Schedule Month Land Hard Costs Soft Costs Int.790 $135.848 $1.701.721.719 Total $13.567 $1.929 $128.701.436.256 $3.790 $135.436.567 $1.848 $1.436.436.526.436.567 $1.719 $264.870 $4.702 $47.929 $128.929 $128.929 $128.929 $128.790 $135.790 $135.526.929 $128.567 $1.701.359 $814.826 $4.929 $128.790 $135.929 $135.929 $128.848 $1.176.848 $1.848 $1.719 $264.629.481 $19.100 $18.701.929 $128.863.790 $135.436.645.436.629.929 $128.929 $128.790 $135.701.790 $135.701.567 $1.701.701.848 $1.929 $128.848 $1.719 $264.790 $135.848 $1.929 $128.702 $47.567 $1.790 $135.701.567 $1.929 $128.226 $1.929 $128.436.701.701. Exp Total Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 $13.567 $264.423.790 $15.929 $128.929 $128.452.929 $128.567 $1.929 $128.790 $135.719 $264.701.790 $135.790 $135.929 $128.719 $264.929 $128.929 $128.929 $128.567 $1.701.567 $1.848 $1.148 $1.929 $128.929 $128.073.848 $1.267 $1.790 $135.528 Yr End Dev.481 $3. Costs Yr End Int.848 $1.740 $23.719 $264.848 $1.848 $1.719 $264.848 $1.

117.841 $49.260 $47.447.377 $203.327 $66.377 Principle $60.864 $202.336 $198.619 $48.509.617 $49.787 $48.450 Interest $205.117.917.737 $49.158 $198.638.408 $48.955.303.348 $202.764 $48.701 $199.088 $201.111 $49.326.574.212 $3.183.829.172 $48.574.782 $197.051.968 $47.427 $47.638.787 $48.137 $203.117.398 $47.601 $66.354 $2.201 $49.782.450 $47.765.249.941 $48.573 $60.510.414 $49.702.737 $49.414 $49.189 $48.892.265.314.507 .388.941 $48.036 $49.448.941 $48.944 $49.660 $196.617 $49.028 $47.232 $48.038 $200.090 Amortization Chart .123 $63.914 $48.347 $62.080.368.773 $200.989 $68.Appendix A Permanent Loan Amortization Loan Principal Interest Rate Amort Period Monthly Payment Annual Payment $49.172 $48.141 $48.647.631 $203.812 $49.619 $48.249.054 $66.354 $48.265.829.517 $48.705 $64.892.295 $48.028 $47.647.970 $199.629.700 $48.142.384 $63.984.764 $48.892.509.506 $200.174 $64.275 $814.444.605 $62.823 $61.611 $198.141 $48.812 4.607 $202.379.232 $48.271 $47.580 $61.018 $49.018 $49.295 $2.295 2017 $48.408 $48.715.152 $67.827 $201.850.715.074 $61.782.295 $48.629.354 2018 $48.002 $47.022 $737.510.002 $47.709 $67.204.511 $65.850.700 $48.159 $48.598 $774.017.388.059 $197.159 $48.058 $48.058 $48.569.398 $47.509.241 $65.407.615 2019 $47.117.841 $49.327 $61.876 $67.080.090 $2.270 $68.017.503 $197.075 $60.96% 30 $265.427 $47.303.326.812 $2.885 $198.441.984.864 $63.892.565 $201.201 $49.646 $63.444.782 $66.702.323 $60.888 $204.204.909 $64.379.914 $48.121 $202.539 Beginning Balance Interest Principal Ending Balance 2016 $49.389 $204.551 $47.957 $855.439 $64.142.973 $65.182.314.448.111 $49.Permanent Loan Jan-16 Jan-17 Jan-18 Month M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M13 M14 M15 M16 M17 M18 M19 M20 M21 M22 M23 M24 M25 M26 M27 M28 M29 M30 M31 M32 M33 M34 Balance $49.036 $49.183.955.639 $204.917.552 $68.445.302 $201.091 $62.583 $46.579.968 $47.629.835 $62.765.835 Ending Balance $49.223 $196.551 $47.885 $203.271 $47.260 $47.354 $48.051.942 $196.579.189 $48.264 $47.137 $204.239 $199.430 $199.944 $49.326.509.430 $67.569.

886 $43.685 $75.229 $73.520.226.441.516 $80.994 $181.267 $187.737.410 $44.531 $73.951.987 $186.488 $44.665.764.374.593.120 $69.022.951.303.588 $46.284 $191.980 $70.519 $81.278.394.339 $186.389 $46.420 $46.154 $46.835 $74.061 $46.844.181 $192.584 $188.376 $191.238.772 $46.975 $44.721 $45.013 $185.852 $71.439 $71.927 $73.398 $47.593.806 $195.449 $44.269 $70.078.067 $193.928.570 $45.949 $187.231 $194.737.849 $81.196.174 $44.148 $47.736 $46.394.777.389 $46.588 $46.471.303 $45.923.809.678 $182.279 $46.312 $76.818 $45.495 $47.903 $78.447.983 $191.398 $47.441.417 $47.046 $45.213 $188.027 $184.305 $180.975 $44.570 $45.765 $190.520.064 $75.947 $196.701.780.625.615 $47.686 $185.630 $187.947.093.755 $75.045 $44.894 $44.809.736 $46.163.780.747 $46.300.225 $78.309 $186.316.523.107 $43.664 $186.534 $82.238.942 $194.899 $188.325 $46.853.625.764.078.328 $72.434 $46.405 $69.510 $45.137 $45.507 $45.457 $190.410 $44.003.944 $77.200 $43.680 $191.603.448 $45.360 $194.565 $45.747 $46.372.154 $46.278.627 $72.595 $44.092 $195.519 $195.886 $43.592 $46.923.183 $81.372.665.668 $43.374.862 $44.880.880.030.692 $69.565 $45.526 $189.133 $45.958 $180.434 $46.772 $46.360.998 $76.872 $79.090 $47.345 .548 $78.907 $84.163.507 $46.343 $44.760 $44.912 $46.560 $70.160.357 $185.471.526 $79.174 $44.160.684.894 $44.022.090 $47.279 $46.507 $46.441.303 $45.777.650 $181.701.148 $189.947 $43.448 $45.233.030.855 $80.548.548.148 $47.928.912 $46.144 $71.133 $45.303.029 $183.818 $45.668 $43.693 $183.773 $193.947.003.003.595 $44.721 $45.447.875 $83.262 $77.199 $79.495 $47.884 $192.003.082.561 $83.760 $44.294 $44.196.113.337 $181.137 $45.046 $45.217 $83.696 $184.602 $47.450 $45.853.856 $82.185 $80.030 $72.152.864.864.838 $189.582 $77.113.585 $192.071 $190.200 $43.082.226.734 $72.363 $184.594 $45.594 $45.356 $183.107 $43.523.343 $44.061 $46.610 $69.194 $82.316.478 $193.695.603.140 $74.045 $44.233.450 $45.652 $194.684.Jan-19 Jan-20 Jan-21 Jan-22 M35 M36 M37 M38 M39 M40 M41 M42 M43 M44 M45 M46 M47 M48 M49 M50 M51 M52 M53 M54 M55 M56 M57 M58 M59 M60 M61 M62 M63 M64 M65 M66 M67 M68 M69 M70 M71 M72 M73 M74 M75 M76 M77 M78 M79 M80 M81 M82 M83 M84 $47.488 $44.592 $46.325 $46.300.628 $76.844.510 $45.253 $84.862 $44.360.294 $44.417 $47.374 $75.420 $46.611.152.447 $74.507 $45.093.695.018 $182.449 $44.

795 $41.394 $43.190.179 $94.751.317 $175.904.538 $42.394 $43.095.156 .091 $43.655 $86.999.806 $171.436 $43.335 $172.801 $88.269.711.058 $41.834.659.027.320 $40.019 $42.918 $41.711.877 $92.843.023 $41.873 $167.191 $171.499 $91.441.432 $42.273 $167.909 $179.000 $40.792 $94.722 $87.000 $40.713 $173.320 $40.341 $43.122 $91.859 $40.009 $86.659.479.959 $95.032 $170.537 $42.843.419.921.190.164 $88.095.209.098 $40.419.847 $178.284.472.021 $93.096.955 $172.638 $93.938 $97.096.183.745.746 $40.526.918 $41.631 $90.741 $98.066 $84.921.662 $41.657.568.466 $169.378.745.950 $175.805 $41.611.261 $42.118.389.568 $94.807.294 $41.597 $41.269.805 $41.479.339 $97.043 $40.163 $42.345 $43.381 $40.672 $168.951 $85.538 $42.614.002 $41.378.341 $43.374 $90.070 $168.260 $179.299.472.465 $174.355.257 $92.597 $41.999.355.683 $176.262 $89.526.904.252 $169.416 $42.019 $42.169 $42.517.566.210 $174.098 $40.142 $96.935.859 $40.895 $89.795 $41.326 $42.529 $88.574 $172.581 $175.303 $85.058 $41.643 $170.772 $177.389.294 $41.118.080 $87.301 $180.746 $96.002 $90.657.626 $41.746 $40.441.751.566.440 $87.935.436 $43.089 $173.365 $86.855 $42.855 $42.410 $177.047 $176.427 $43.132 $177.299.321.009.169 $42.420 $171.821 $42.261 $42.614.284.202 $178.352 $95.145 $43.163 $42.062 $43.470 $167.807.091 $43.557 $179.023 $41.027.537 $42.821 $42.432 $42.568.Jan-23 Jan-24 Jan-25 M85 M86 M87 M88 M89 M90 M91 M92 M93 M94 M95 M96 M97 M98 M99 M100 M101 M102 M103 M104 M105 M106 M107 M108 M109 M110 M111 M112 M113 M114 M115 M116 M117 M118 M119 M120 $43.002 $41.209.626 $41.381 $40.183.490 $178.838 $174.747 $91.416 $42.326 $42.405 $93.539 $96.009.517.062 $43.043 $40.860 $169.427 $43.301 $40.662 $41.834.

rtization 2020 $46.568.151.998 $45.705 $1.086.472.548.441 $40.447.156 .507 $2.189.549 $43.991 $992.345 2023 $43.472.914 $42.603.611.894 $2.432 2024 $42.510 2021 $45.542 $898.042.345 $2.626 $1.510 $2.237.597 2025 $41.894 2022 $44.095.031.835 $41.548.568.321.611.283.139.099 $1.616 $44.603.924 $944.432 $2.597 $2.

.

.

00% $55 $2.978.062.156 $2.906 $7.042 $716.420 $3.539) $0 $0 $0 ($3.351 $1.079 $124.353.182.182.391.872.00% $94 $3.709 Yr 2 $781.954 $190.00% $100 $3.967 $110.509.147 1.428 $856.642 $6.71 3.821 $7.899.689 $433.140 $49.995 $2.361.337 $2.669 $2.172.128.510 $155.743 $4.207 $6.740 $1.351 Yr 9 $1.539) $0 $0 $0 ($3.689 $4.107 $806.72 2.199.507.629 $4.160 $6.755 $5.900 Yr 1 $671.10% ($11.97% .229.826 $2.440.887.795 $139.182.357.298 $295.581 $1.259.562.826) 13.351 $1.266 $6.335 $208.451 $33.124 $115.240 $2.992.802 $775.523 $3.19% ($148.059 $47.581 $1.332 $3.854.950 $3.385 $1.156 $4.534 $34.081 $174.491 Vacancy Loss Residential Vacancy Loss Retail Vacancy Loss Total Vacancy Loss $1.345 $385.102 $2.636 $117.988 $839.504 $5.700) ($9.745) $1.433 $2.505 $893.009.546 $1.400 $2.537.488 $702.302 $4.012 $1.469 $41.318 $502.00 2.280 $4.100 ($814.04 3.425 Other Income Res.656 $114.417.00% Retail TI's and LC's $435.015 $4.879.00% $103 $3.924 $4.242.616 $48.735 $42.485.145 $150.600.539) $0 $1.180.64 2.182.435 $4.541 $227.120 $4.296 $396.500 $5.465 $421.311.054.388.195 $147.603 $186.645 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3.015.594 $95.770 $35.868 $363.794 $6.853 $5.668 $90.539) $0 $0 $0 ($3.481) $0 $3.342.980 $46.116.192.740 1.113 $4.673 $4.763 Yr 6 $1.02% ($11.737 $4.391 $675.850 $4.412 $2.279 $2.689.324.385 Yr 7 $1.30 7.241.868.124.632) 23.452.025 $322.539) $0 $0 $0 ($3.581 Yr 5 $75.401.853 $125.790 $220.009.440 $37.182.377.668 $270.547. .063 $7.985 $2.002.242 $2.581 Yr 5 $1.40 3.49 12.217.00% $89 $3.337 $790.323 $6.083.985 $2.503 $124.145 $2.818 $5.018.792 Effective Gross Income Operating Expenses Residential Retail Total OpEx Net Operating Income Cap Ex Reserves Residential Retail Retail .640.763 $1.308 $51.512 $5.377.430 $460.626.905 $1.147 $893.783.709 $781.60 3.398 $6.207 $2.955 $181.255 $6.952 $473.23 5.560.613.50% 1.826) 9.359) ($18.14% Cash on Cash $671.762 $313.071 $31.473.666 $342.539 $143.Reimbursements Total Other Income $94.248 $3.009 $446.113 $730.61 45.630 $203.539) $0 $0 ($3.749 $46.085 $4.908 $136.321.53 13.744.147 Yr 3 $893.463.821 $151.433.015.075 $286.224 $3.960.507.676 $4.648.734 $43.408 $128.740 Yr 4 $1.148) Cash Flow Before Debt ($23.00% - $2.546 $1.Appendix A Mixed Use Cash Flow 1200 North Irving Projected Market Rents (Per Unit) Market Rent $ (Per SF) Rent Growth Rate Whole $ Growth $2.905 $44.609 $2.343.823 $132.889.629 ($1.26 6.24% $6.220 $159.547.391 $4.885.799 $2.15 3.309 $233.116 $164.659) $0 ($18.629.182.740) $0 $0 $19.334 $2.377.837 $745.894.914 $1.539) $0 $0 $0 ($3.838 $1.862.978 $671.000 $3.673 $0.548.480 $92. Total Reserves 1.981 $6.Parking Retail .063.015.905 Yr 10 $87.50% 1.802.969.009.657 $550.881.836.066 $352.251.817.488 $129.621 $0.394 $53.581 Yr 1 $671.270 $822.039 $3.952 $98.162 $47.726 $1.92 3.507.554 $5.097 $2.963.018.750 $1.091 $6.484 $4.988 $164.264.00 2.024.041) 1.237 $40.173.539) $0 $0 $0 ($3.226 ($1.332.176.182.481 $374.858 $0 ($3.426.632 $8.656 $332.57% $ $ $ $ Yr 0 ($43.946 $1.890 $4.185 $2.13 3.44 26.358 $5.132 $2.881.27 3.869 $179.455 $169.585 $4.623.726 $1.555 $30.748 $202.720.481) Debt Financing Loan Draws/(Paydown) Construction Loan Interest Permanent Loan Debt Loan Fees/Closing Costs CFBT $0 ($496.270 $5.036 $43.128.00% $112 Approvals 2012 Construction 2013 Construction/Lease Up 2014 Lease Up 2015 Stabalized 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Gross Income Gross Residential Income Gross Retail Income Total Gross Income $2.319 Acquisition/Residual Purchase Price Development Costs ($13.69% ($403.81 3.641.318 $688.780 $2.00% $52 $2.483.250 $3.248 $4.581 $28.33 8.709 Yr 2 $781.674 $159.Replacement Res.394.298) $0 $2.721.758 $5.161.010.00% $109 $3.870 $6.445 $4.321 $3.723 $32.408.841 $3.214.251.515 $32.511.50 3.00% $83 $2.952 $7.700 $363.295 $3.194.823.580.188.640.699 $7.385 $1.900.00% $106 $3.155 $4.636 $4.278 $7.761.581 $488.645.975 Debt Coverage Ratio 21.254.579 $2.740 $1.456 $6.251.428 $104.782 $1.073.163 $35.076.617 $2.878 $2.864 $3.485 $4.476 $155.539) $0 $0 $0 ($3.798 $4.791 $671.709 Residual Value Debt Repayment Sales Costs Net Proceeds 10 year Unleveraged IRR Leveraged IRR NPV 5 year Unleveraged IRR Leveraged IRR NPV $781.335 $408.182.125 $23.547.604 $2.786 $2.632) 19.265 $191.560.00% $53 $2.913.461.718 $36.388 $3.445 $2.59% $86.571 $56.537.412) 1.124.321.534 $4.433 $30.387.506 $4.482 $54.561 $101.324 $1.750 $19.122.182.902 $45.098.624 $6.41 10.180 $278.128.740 $2.539) $0 $0 $0 ($3.781 $3.182.581.744.260 $196.135.147 Yr 3 $893.940 $197.796 $2.374 $44.00% $91 $3.363 $6.65% 1.218.00% $86 $3.333 $38.944.709 $781.45 11.147 $893.825 $36.701.092 $240.013.629.472 $40.196 $159.315 $5.009.009.065 $1.560 $107.31 3.044.452.468 $13.165 $5.817.745) $0 ($1.341 $3.58 14.601 $7.53 1.740 Yr 4 $1.687 $6.00% $97 $3.81% $0 1.084 $374.000 $184.593.931.130 $3.091 $5.763 $1.640.778.110 $50.52% 1.223 $50.37 9.663 $57.047 $7.352 $760.098 $119.448 $2.915 $120.546 Yr 8 $1.055 $214.608 Yr 0 ($43.22 3.825 $185.568 $38.53% 74.857 $2.686 $4.169.857 $304.

Appendix A

Residential Cash Flows
1200 North Irving

Projected Market Rents (Per Unit)
Market Rent $ (Per SF)
Rent Growth Rate
Whole $ Growth

$2,621
$0.00
2.00%
-

$2,673
$0.00
2.00%
$52

$2,726
$0.67
2.00%
$53

$2,781
$2.05
3.00%
$55

Approvals
2012

Construction
2013

Construction/Lease Up
2014

Lease Up
2015

$2,864
$2.74
3.00%
$83

$2,950
$2.82
3.00%
$86

$3,039
$2.90
3.00%
$89

$3,130
$2.99
3.00%
$91

$3,224
$3.08
3.00%
$94

$3,321
$3.17
3.00%
$97

$3,420
$3.27
3.00%
$100

$3,523
$3.37
3.00%
$103

$3,629
$3.47
3.00%
$106

Stabalized
2016

2017

2018

2019

2020

2021

2022

2023

2024

$3,737
$3.57
3.00%
$109

$3,850
$3.68
3.00%
$112

2025

2026

Gross Income
Rental Income
Vacancy %
Vacancy $
Net Rental Income

\
$2,388,391
50%
$1,194,196
$1,194,196

$4,872,318
25%
$1,218,079
$3,654,238

$5,018,488
3%
$150,555
$4,867,933

$5,169,042
3%
$155,071
$5,013,971

$5,324,113
3%
$159,723
$5,164,390

$5,483,837
3%
$164,515
$5,319,322

$5,648,352
3%
$169,451
$5,478,901

$5,817,802
3%
$174,534
$5,643,268

$5,992,337
3%
$179,770
$5,812,566

$6,172,107
3%
$185,163
$5,986,943

$6,357,270
3%
$190,718
$6,166,552

$6,547,988
3%
$196,440
$6,351,548

$6,744,428
3%
$202,333
$6,542,095

Other Income
Effective Gross Income

$135,240
$1,329,436

$202,860
$3,857,098

$270,480
$5,138,413

$278,594
$5,292,565

$286,952
$5,451,342

$295,561
$5,614,883

$304,428
$5,783,329

$313,560
$5,956,829

$322,967
$6,135,534

$332,656
$6,319,600

$342,636
$6,509,188

$352,915
$6,704,463

$363,503
$6,905,597

Controllable Expenses
Payroll
General and Administrative
Traffic Demand Management Fee
Marketing
Utilities (Common Area)
Repairs and Maintenance
Contract Services and Other
Turnover
Other taxes & Fees
Total Controllable OpEx

$53,177
$26,589
$10,901
$39,883
$43,738
$26,589
$23,664
$14,890
$9,572
$249,003

$154,284
$77,142
$31,628
$115,713
$126,899
$77,142
$68,656
$43,200
$27,771
$722,435

$205,537
$102,768
$42,135
$154,152
$169,054
$102,768
$91,464
$57,550
$36,997
$962,425

$211,703
$105,851
$43,399
$158,777
$174,125
$105,851
$94,208
$59,277
$38,106
$991,297

$218,054
$109,027
$44,701
$163,540
$179,349
$109,027
$97,034
$61,055
$39,250
$1,021,036

$224,595
$112,298
$46,042
$168,446
$184,730
$112,298
$99,945
$62,887
$40,427
$1,051,667

$231,333
$115,667
$47,423
$173,500
$190,272
$115,667
$102,943
$64,773
$41,640
$1,083,218

$238,273
$119,137
$48,846
$178,705
$195,980
$119,137
$106,032
$66,716
$42,889
$1,115,714

$245,421
$122,711
$50,311
$184,066
$201,859
$122,711
$109,213
$68,718
$44,176
$1,149,185

$252,784
$126,392
$51,821
$189,588
$207,915
$126,392
$112,489
$70,780
$45,501
$1,183,661

$260,368
$130,184
$53,375
$195,276
$214,152
$130,184
$115,864
$72,903
$46,866
$1,219,171

$268,179
$134,089
$54,977
$201,134
$220,577
$134,089
$119,339
$75,090
$48,272
$1,255,746

$276,224
$138,112
$56,626
$207,168
$227,194
$138,112
$122,920
$77,343
$49,720
$1,293,418

Fixed Expenses
Insurance
Real Estate Taxes
Management Fees
Total Fixed Expenses

$26,589
$132,944
$26,589
$186,121

$77,142
$385,710
$77,142
$694,663

$102,768
$513,841
$102,768
$925,428

$105,851
$529,257
$105,851
$953,191

$109,027
$545,134
$109,027
$981,787

$112,298
$561,488
$112,298
$1,011,240

$115,667
$578,333
$115,667
$1,041,578

$119,137
$595,683
$119,137
$1,072,825

$122,711
$613,553
$122,711
$1,105,010

$126,392
$631,960
$126,392
$1,138,160

$130,184
$650,919
$130,184
$1,172,305

$134,089
$670,446
$134,089
$1,207,474

$138,112
$690,560
$138,112
$1,243,698

Total Operating Expenses

$435,124

$1,417,098

$1,887,853

$1,944,488

$2,002,823

$2,062,908

$2,124,795

$2,188,539

$2,254,195

$2,321,821

$2,391,476

$2,463,220

$2,537,116

Per Unit

$1,490

$2,427

$388

$400

$412

$424

$437

$450

$463

$477

$491

$506

$521

OpEx Ratio

33%

37%

37%

37%

37%

37%

37%

37%

37%

37%

37%

37%

Net Operating Income
Cap Ex Reserves
Cummulative Reserve

Cash Flow Before Debt

1.00%

$0

$0

37%

$894,311

$2,440,000

$3,250,560

$3,348,077

$3,448,519

$3,551,975

$3,658,534

$3,768,290

$3,881,339

$3,997,779

$4,117,712

$4,241,244

$4,368,481

$8,943

$24,400

$32,506

$33,481

$34,485

$35,520

$36,585

$37,683

$38,813

$39,978

$41,177

$42,412

$43,685

$8,943

$33,343

$56,906

$90,386

$124,872

$160,391

$196,977

$234,660

$273,473

$313,451

$354,628

$397,040

$440,725

$885,368

$2,415,600

$3,218,054

$3,314,596

$3,414,034

$3,516,455

$3,621,949

$3,730,607

$3,842,525

$3,957,801

$4,076,535

$4,198,831

$4,324,796

Appendix A Retail Assumptions
1200 North Irving Street Ground Floor Retail Assumptions
Operating Expenses
Gross SF
Parking Ratio/Space
Vacancy
Credit Loss of EGI
Management of EGI
Expense Reimbursement / SF
Insurance / SF
Rental Rate Growth
Expense Growth
Capital Reserves
Projected Tenant Retention
Leasing Commission - New Tenant
Leasing Commission - Existing Tenant
Blended LCs
Tenant Improvements - Initial shell build out
Tenant Improvements - New Tenant
Tenant Improvement - Existing Tenant
Blended TIs
Replacement Reserve / SF
CapEx Reserves / SF
Tenant Improvement Growth Rate

15,000
250
5.00%
1.00%
3.00%
$6.00
$0.50
2.00%
3.00%

75.00%
6.00%
3.00%
3.75%
$50.00
$45.00
$15.00
$22.50
$0.25
$0.15
3.00%

Appendix A

Retail Cash Flows
1200 North Irving Retail

Approvals Construction
Construction/LeaseLease
Up Up
2012
2013
2014
2015
Revenue
Rent Roll
Reimbursements
Potential Gross Income

Stabalized
2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

$675,000
$90,000
$765,000

$688,500
$92,700
$781,200

$702,270
$95,481
$797,751

$716,315
$98,345
$814,661

$730,642
$101,296
$831,938

$745,255
$104,335
$849,589

$760,160
$107,465
$867,624

$775,363
$110,689
$886,051

$790,870
$114,009
$904,879

$806,687
$117,430
$924,117

$822,821
$120,952
$943,774

$839,278
$124,581
$963,859

$856,063
$128,318
$984,382

Vacancy %
Vacancy $
Credit Loss

20.00%
$153,000
$6,750

15.00%
$117,180
$6,885

3.00%
$23,933
$7,023

3.00%
$24,440
$7,163

3.00%
$24,958
$7,306

3.00%
$25,488
$7,453

3.00%
$26,029
$7,602

3.00%
$26,582
$7,754

3.00%
$27,146
$7,909

3.00%
$27,724
$8,067

3.00%
$28,313
$8,228

3.00%
$28,916
$8,393

3.00%
$29,531
$8,561

Sub Total

$159,750

$124,065

$30,955

$31,603

$32,265

$32,940

$33,630

$34,335

$35,055

$35,790

$36,541

$37,309

$38,092

EGI

$605,250

$657,135

$766,796

$783,058

$799,673

$816,649

$833,994

$851,716

$869,824

$888,327

$907,232

$926,550

$946,290

$18,157
$90,000
$7,500

$19,714
$92,700
$7,500

$23,004
$95,481
$7,500

$23,492
$98,345
$7,500

$23,990
$101,296
$7,500

$24,499
$104,335
$7,500

$25,020
$107,465
$7,500

$25,551
$110,689
$7,500

$26,095
$114,009
$7,500

$26,650
$117,430
$7,500

$27,217
$120,952
$7,500

$27,797
$124,581
$7,500

$28,389
$128,318
$7,500

Operating Expenses
Management
Operating Expenses
Insurance

$115,657

$119,914

$125,985

$129,337

$132,786

$136,334

$139,985

$143,740

$147,604

$151,579

$155,669

$159,878

$164,207

Net Operating Income

Total Op Ex

$489,592

$537,221

$640,811

$653,721

$666,887

$680,315

$694,009

$707,976

$722,220

$736,747

$751,563

$766,673

$782,082

CapEx Reserves
Replacement Reserves

$2,250
$3,750

$2,295
$3,825

$2,341
$3,902

$2,388
$3,980

$2,435
$4,059

$2,484
$4,140

$2,534
$4,223

$2,585
$4,308

$2,636
$4,394

$2,689
$4,482

$2,743
$4,571

$2,798
$4,663

$2,854
$4,756

Total Reserves

$6,000

$6,120

$6,242

$6,367

$6,495

$6,624

$6,757

$6,892

$7,030

$7,171

$7,314

$7,460

$7,609

TI's
LC's

$0
$0

$0
$0

$0
$0

$0
$0

($182,660)
($34,249)

$0
$0

$0
$0

$0
$0

$0
$0

$0
$0

$403,344
$0

$0
$0

$0
$0

Subtotal

$0

$0

$0

$0

($216,909)

$0

$0

$0

$0

$0

$403,344

$0

$0

$483,592

$531,101

$634,568

$647,353

$673,690

$687,252

$701,084

$715,190

$729,577

$340,905

$759,212

$774,473

Cash Flow Before Debt

$443,483

89 $27.750 15.841 $775.50 $22.85 $26.718 $197.124 $0 $0 $17.672 $806.870 2023 $201.016 $214.819 $209.84 Tenant Tenant 1-TBD Tenant 2-TBD Tenant 3-TBD Tenant 4-TBD 2014 $0 $0 $0 $0 2015 $0 $0 $0 $0 2016 $0 $0 $0 $0 2017 $0 $0 $0 $0 Total $0 $0 $0 $0 Rent Roll Tenant 1-TBD Tenant 2-TBD Tenant 3-TBD Tenant 4-TBD Total / Average Projected Retail Rental Income 2018 2019 2020 $182.765 Tenant Tenant 1-TBD Tenant 2-TBD Tenant 3-TBD Tenant 4-TBD Total 2014 $168.Appendix A Retail Rent Roll 1200 North Irving Street Total Square Feet 15.568 $175.819 $209.00% 2.00 $45.841 $193.500 2016 $175.344 $0 $0 $25.079 $179.34 $25.079 $179.750 $675.568 $175.278 2026 $214.687 2024 $205.718 $197.314 $190.750 0 0 3.705 $205.125 $172.750 $168. Lease Total w/ Annual Esc.568 $702.000 10 10 5 5 2.160 2021 $193.847.125 $172.95 $23.660 $186.750 15.705 $205.765 $1.88 $24.314 $190.750 $168.819 $209.765 $1.642 $745.718 $790.270 2017 $179.040 $730.821 2025 $209.016 $214.847.41 $23.315 Tenant Tenant 1-TBD Tenant 2-TBD Tenant 3-TBD Tenant 4-TBD Total Rollover 2014 0 0 0 0 0 2015 0 0 0 0 0 2016 0 0 0 0 0 2017 0 0 0 0 0 Tenant Tenant 1-TBD Tenant 2-TBD Tenant 3-TBD Tenant 4-TBD 2014 $0 $0 $0 $0 2015 $0 $0 $0 $0 2016 $0 $0 $0 $0 2017 $0 $0 $0 $0 Total $0 $0 $0 $0 $182.568 $175.040 $182.750 $168.705 $205.330 $0 $0 $91.43 $27.124 $0 $0 $34.750 3.660 $186.718 $197. 3.836 $100.750 3.672 $201.079 $716.750 3.00 $45.000 2015 $172.00 $45.255 $760.330 $0 $0 2021 $0 $0 $0 $0 2022 $0 $0 $0 $0 2023 $0 $0 $0 $0 2024 $100.016 $214.54 2021 $0 $0 $0 $0 2022 $0 $0 $0 $0 2023 $0 $0 $0 $0 2024 $76 $76 $76 $76 2025 $0 $0 $0 $0 2026 $0 $0 $0 $0 $0 $0 $0 $303 $0 $0 Projected Leasing Commission Schedule 2018 2019 2020 $0 $0 $0 $0 $0 $0 $17.660 $186.847.00 $45.660 $0 Market Rate $22.500 0 0 2021 0 0 0 0 0 2022 0 0 0 0 0 2023 0 0 0 0 0 2024 3.125 $688.00% 2.000 NNN NNN NNN NNN $45.125 $172.750 $168.847.000 NSF Lease Type Rate Base Total Lease Term Annual Esc.00% $1.000 2025 0 0 0 0 0 2026 0 0 0 0 0 Projected Tenant Improvement Schedule 2018 2019 2020 $0 $0 $0 $0 $0 $0 $91.672 $201.750 $675.841 $193.750 3.841 $193.36 $26.00 $168.836 $100.35 $24.819 $839.660 $186.040 $182.00% 2.040 $182.672 $201.750 $168.016 $856.079 $179.836 $100.249 $0 $0 .750 $168.750 0 0 7.705 $822.363 2022 $197.836 2025 $0 $0 $0 $0 2026 $0 $0 $0 $0 $0 $0 $0 $0 $403.98 $28.314 $190.063 Projected Retail Tenant Rollver Schedule 2018 2019 2020 0 0 0 0 0 0 3.765 $1.314 $190.750 3.750 3.

Appendix A A B C D E Unit Type Live/Work (MPDU) 1 Bed/1 Bath (MPDU) 1 Bed/ 1 Bath + Den (MPDU) Studio (MPDU) 2 Bedroom/ 2 Bath (MPDU) Total/Average Market Rate MPDU Units Residential Unit Breakdown and Rent Matrix # of Units 1200 North Irving Apartments Unit Breakdown and Rent Matrix Net Square Footage % of Units Average Total $ / Unit 12 8% 1.248 $0 $0 $2.690 $0 $0 $3.15 $2.346 0 0% 0 0 30 21% 1.608 $2.192 $155.621 $382.342 $100.650 $43.711 $13.848 0 0% 0 0 71 49% 707 50.254 $0 $0 $1.133 33.60 $3.983 0 0% 0 0 146 100% 877 128.97 .95 $2.611 $0 $0 $2.706 0 0% 0 0 8 5% 543 4.10 $3.805 $0 $0 $2.404 16.080 146 100% 0 0% Monthly Market Rent (2012) Total $ $ / SF $3.05 $3.770 $69.197 0 0% 0 0 25 17% 908 22.

000 $200.573 $150.863.000 $150.354 $157.000 $180.10 $0.528 $325.92 $1.76 $3.17 $0.068 $2.45 $0.58 Development Fee Soft Cost Contingency Total Soft Costs Total Costs before Debt Total Construction Costs Per SQF Per SQF Per SQF $ Per Unit $ Per Net SF $93.Appendix B Land Cost Hard Costs Vertical Construction Parking (Below Grade) Site Work Subtotal Hard Costs Hard Cost Contingecy Total Hard Costs Total Hard Costs & Land Soft Costs General Conditions Impact Fees General Liability Builder's Risk Insurance Gross Receipts Tax Site Utilities/Connection Fees Marketing / Sales Office Legal Architectural Engineering Permits & Fees Affordable Housing Investment Fund Closing Costs Insurance Organization Overhead Real Estate Taxes Subtotal Soft Costs Hard and Soft Cost Analysis Hard and Soft Cost Analysis Total $13.71 $0.233 $900 $14.00% 5.672 $1.867.000 $555.233 $1.419 $10.027 $1.96% $3.526.26 $0.086 $924 $6.05 5% .570 $5.702 $27.81 $12.027 $1.700 $18.00 $2.838 $268 Interest $4.027 $1.584 $25.702 $27.453 $2.370 $1.027 $1.12 $32.48 Cost of Debt $4.870 $36.351 $100.92 $1.793.464 $9.92 $1.94 4.12 $43.804 $685 $1.740 $794 $193 $292 $1.530 $134.899 $235 $1.000 $115.10 $1.00 $151 $7.169 $42.902 $27.256 $39.984 $84.000 $150.231.01 $3.130 $3.23 $0.921 $7.000 $180.00% $1.631.436 $115.000 $150.348.073.873 $28.902 $27.40 $0.000 $165.61 $0.48 $47.54 $251.939 $33.756 $24.346 $489.000 $131.915 $8.698.91 14.524 $320.034.826 $288.452.584.723 $25.073.000 $400.721.470.956 $128.34 $0.837 $3.92 $0.

535.138 $125.351 12.50% 6.126.531 $950.832 Return of Capital .033 $28.876 $112.015 $556.838 $10.356.240 $32.50% 6.531 $950.735 YR 9 $164.640.791 $1.015.321.246 $1.971 Backend Promote .163) YR 1 $67.00% 10.531 $950.115 $78.295 Backend Promote .507.820 $690.449. Reversion and IRR Cash Flow YR 5.469 $1.546 11. Reversion and IRR 5.57% Reversion Payout 75.115 $78.709 2017 $781.531 $950.693.188.476.50% 2021 $1.374 $89.205 ($2.735 $150.281.188.887 $1.693.188.147 Projected Return Actual Cash Yield 8% Preferred Return Variance 5.407.139 Unpaid Pref Capitalization Rate Gross Sales Proceeds Sales Costs Debt Payoff Net Sales Proceeds 6.378 $33.366 YR 4 $908.469) ($10.707.6% 28.531 ($278.170.693.351 $2.156) $50.091 $164.Investor I Unpaid Preferred Return .625) ($46.032 YR 3 $804.246 $1.Investor II Remaining Sales Proceeds $10.016) $37.996) ($445.281.163 ($2.115 YR 3 $89.790) $59.163 ($2.822) ($169.945) ($267.791 $1.00% 25.376 $43.138 YR 7 $137.054.50% 6.185.797.623 $908.623 $908.324 Preferred Equity Partner Cash Flow.958 $100.374 $89.156) ($40.703.854 $427.693.581 $1.00% 100.827 $9.015.905 13.016) $44.016.59% 2023 $1.625) ($46.1% .Investor I Return of Capital .Investor II Unpaid Preferred Return .469) ($10.878 $86.958 YR 5 $112.156 $1.693.8% 27.778.156) $36.163) ($1.382.531 $950.97% $950.00% 1200 North Irving Reversion Computation 5.321.188.122.346) ($2.881.469 $1.469 $1.693.141 $460.53% 2022 $1.950.531 $950.239.480.00% $93.844.469) YR 1 $604.876 YR 6 $125.887 $1.216) ($40.188.009.531 $950.894 $27.52% 8.091 YR 10 $13.472 ($2.00% 100.246 YR 7 $1.50% YR 0 ($1.538 $604.188.815 $1.832 IRR 19% 17% 16% 1200 North Irving Cash Flow.616 $1.00% 6.580.377.163 ($2.319 14.Appendix C Joint Venture IRR Sensitivity & Cash Flow Partnership Breakdown Equity Partner 1200 North Irving Development Total Equity Equity Contribution 90.171 $67.666.347.140 IRR 30.735 $150.531 $950.763 7.374 YR 4 $100.032 $703.050 $178.385 10.788 ($448.755 $137.251.138 $125.016) $51.623 YR 5 $1.708.239.476.163) ($1.011 $9.459 $11.Investor II $12.126.815 $1.958 $100.216.801.713) $33.232 $300.791 YR 8 $1.356.375 $827.044 $10.091 $164.50% $79.755 YR 8 $150.65% Property Cash Flow Series 2018 2019 2020 $893.734) ($40.188.276 $11.740 $1.531 $950.50% 9.851.887 YR 6 $1.126.128.082.538 YR 2 $703.876 $112.632 2016 $671.321.977 $1.616 YR 9 $1.356.693.163 $11.581 6.366 $804.366 $804.625) ($46.50% Cash Flow YR YR 0 ($10.00% 6.581.69% 2024 $1.Investor I $38.171 $67.538 $604.616 $1.162.815.476.755 $137.171 YR 2 $78.015.469 $1.384) ($56.81% 2025 $1.206) ($504.239.032 $703.00% $10.815 YR 10 $38.024.281.

084 APARTMENT MIX: Studio or Efficiency 2 2 2 2 8 5% 5% SF 1 BR 543 545 542 543 543 21 18 18 14 71 49% SF 1BR+Den 7 5 6 7 25 707 17% 66% 707.500 SF/Floor 36. Bathrooms.487 34 27.00 Feet Tall BUILDING SUMMARY: Floor A P P R O X I M A T E S.825 26.404.428 39 28.00 707.15 FAR 163.00 55.475 6.000 SF 125.00 929.00 10.129 1. Stairs.00 10.: Setback 1 2 3 4 5 4.490 27.076 146 1.848 12 32. F.00 SF 901.162 20.850.187 28 128.00 Total Height P R O P O S E D F. Corridors.000 128. A. R.140 Total SF Total Units Retail 16.00 10.850 32.00 Feet Tall 15. 110.000 4.00 10.00 908 Live/Work 12 12 8% 8% Parking Spaces SF 1.491 Total SF Max. Elevators. FAR & SF Summary Project Type: Setbacks calculated based on: Front Entrance is on: Rear is on: Apartments with Retail Bldg Coverage: Allowable 1st Floor Cov'g: Site Area (from above): Floor Area Ratio: Allowable Maximum SF: Building Height Allowed w/o penthouse: Retail SF Proposed: Building Height Allowed w/penthouse: North Irving Street Alley face 51.404.00 2BR SF - 9 9 7 5 30 21% 21% 1.000 16.252 Total SF Remarks (if any): xxx xxx xxx xxx xxx Height to the next floor slab 15.133 100% Residential 1 bedroom 40 40 Residential 2 bedroom 12 39 34 33 28 146 Total 0 6 6 5 4 21 52 39 34 33 28 207 .699 3.850 36.126 33 23.188 15.025 10.422 3.132 1.00 707.00 707.902 SF Site 3.168 Space Remaining (for aprtmts or offices) 15.428 28.375 30.Appendix D Residential & Retail Mix.15 Lobby.00 902.126 23.130 1.885 3.350 163.902 SF Site Area 71% Allowable Lot Coverage 36. etc @ 12% core factor Retail 5. FAR & SF Summary 1200 North Irving Residential & Retail Mix. 3.00 901.42 SF 1st Floor Max 51.00 1.850 32.

208 $ (191.417.009 $ 71.00 Retail Vacancy @ 4% Expenses @ 35% NOI Retail Value (Cap rate @ 7.391 64.250) $ 411.750 $ 5.230.5%) Cost of Sale @ 2% Apartment Proceeds Retail 15.5 FAR Revenue SF Price/SF Apartment 165.20 Apartment Vacancy @ 3% Expenses @ 35% NOI Apartment Value (Cap rate @ 5.764.Appendix E Return on Cost Analysis Apartment Scenerio with 4.995 $ 3.952.211.873 8.000 $ 45.854.973) $ 3.346 $ 11.955 10.490.5%) Cost of Sale @ 2% Retail Proceeds Net Proceeds Costs Land Site Work Hard Cost Parking Subtotal Costs Soft Costs @ 20% Total Costs Total profit Return on Cost Total $ 6.287.468 17.800) $ 5.000) $ (236.226) $ (2.380.797.814 $ 13.200 $ 75.614 $ 675.022.700 $ 789.094) $ 70.000 $ (27.721.863 $ $ $ $ $ 31.36% .374.821.437.708 $ (1.586.000 $ (109.519 53.

100.059 600.000) (210.00 Retail Vacancy @ 4% Expenses @ 35% NOI Retail Value (Cap Rate @ 7.000) 366.880.995.700 $ 789.316) 81.00 Cost of Sales @ 7% Condomiumium Proceeds Retail 15.934 $ 13.945 12.529.000 $ 40.829.995 $ 525.519 60.5 %) Cost of Sale @ 2% Retail Proceeds Total Proceeds Costs Land Site Work Hard Cost Parking Subtotal Costs Soft Costs @ 20% Total Costs Total profit Return on Cost Total $ $ $ $ $ $ $ $ $ $ $ 87.459 $ 13.600) 4.525 18.782.193.400 85.Appendix E Return on Cost Analysis Condominium Scenerio with 4.375 (6.000 (97.863 $ $ $ $ $ 37.105.721.989 72.022.863 8.635.000 (24.5 FAR Revenue SF Price/SF Condominium Sales 165.16% .147.047.000 4.

478.54% .374.250) $ 411.895.800) $ 5.654 $ (8.000 $ (109.721.520 12.380.838.700.750 $ 5.139 $ (810.000 $ (27.700 $ 600.537) -15.223) $ 39.658 44.5%) Cost of Sale @ 2% Retail Proceeds Net Proceeds Costs Land Site Work Hard Cost @ $140/SF Parking Subtotal Costs Soft Costs @ 20% Total Costs Total profit Return on Cost Total $ 5.659) $ (1.000 $ 45.990.00 Retail Vacancy @ 4% Expenses @ 35% NOI Retail Value (Cap rate @ 7.000 $ $ $ $ $ 17.776 53.084 $ 41.000) $ (236.166.835.Appendix E Return on Cost Analysis Office Scenerio with 3.490.251.15 FAR Revenue SF Price/SF Office 128.005) $ 2.878 8.00 Apartment Vacancy @ 11% Expenses @ 35% NOI Office Value (Cap rate @ 7%) Cost of Sale @ 2% Office Proceeds Retail 15.293.200 $ 45.780 $ 40.511.917 $ 675.081.117 $ 13.444 $ (577.

189 $ 675.792.721.490.084 $ 3.5%) Cost of Sale @ 2% Apartment Proceeds Retail 15.461 38.205 46.715.604.800) $ 5.348.000) $ (236.00 Retail Vacancy @ 4% Expenses @ 35% NOI Retail Value (Cap rate @ 7.20 Apartment Vacancy @ 3% Expenses @ 35% NOI Apartment Value (Cap rate @ 5.424 $ 55.5%) Cost of Sale @ 2% Retail Proceeds Net Proceeds Costs Land Site Work Hard Cost Parking Subtotal Costs Soft Costs @ 20% Total Costs Total profit Return on Cost Total $ 4.111.250) $ 411.913 5.380.049.881) $ 54.335.426.721.750 $ 5.161 29.108.449) $ 3.070 $ (1.918.50% .15 FAR Revenue SF Price/SF Apartment 128.685.426 $ (147.949 $ $ $ $ $ 18.444.000 $ (27.700 $ 562.Appendix E Return on Cost Analysis Apartment Scenerio with 3.000 $ 45.389 $ 13.228 $ 13.200 $ 59.000 $ (109.553) $ (1.023 7.

917.380.537.000 $ 45.461 45.309 $ $ $ $ $ 26.275 9.836.5 %) $ Cost of Sale @ 2% $ Retail Proceeds $ Total Proceeds $ Costs Land Site Work Hard Cost Parking Subtotal Costs Soft Costs @ 20% Total Costs Total profit Return on Cost 67.213 $ 13.200 67.707.087) 62.491 SF) Revenue SF Price/SF Total Condominium Sales 128.013 675.15 FAR (163.805 5.000 (109.348.00 $ Cost of Sales @ 7% $ Condomiumium Proceeds $ Retail 15.Appendix E Return on Cost Analysis Condominium Scenerio with 3.800) 5.00 $ Retail Vacancy @ 4% $ Expenses @ 35% $ NOI $ Retail Value (Cap Rate @ 7.683 23.48% .167.255 55.913.244.750 5.700 $ 564.000) (236.201.100 (4.000 (27.530 $ 12.003.490.084 $ 525.721.250) 411.