4216 61 Ave SE - Investment Analysis
($ in CAD as Stated)
Development Overview: Units:
Project Name: Name 4216 61 Ave SE
Property Type: Name Industrial
Location: Name Calgary
Construction Start Date: Date 2018-01-01
Months in Year: # 12
Number of Acres to Purchase: # Acres 18.0 Acres
Estimated Price per Acre: $ / Acre $ 700,000
Land Acquisition Costs: $ $ 12,600,000
Saleable Excess Land Percentage: % 57.0%
Construction, Financing, and Exit Assumptions: Units:
Construction Financing:
Loan-to-Cost (LTC) Ratio: % 50.0%
Interest Rate - Annual: % 6.25%
Interest Rate - Monthly: % 0.506%
Issuance Fees: % 1.00%
Amortization (Years): # Years Interest Only
Maturity: Date 2018-12-31
Term: # Years 1 year
Developer Equity Contribution: % 10.0%
IRR Hurdle 1: % 10.0%
Developer Cash Flow Above IRR Hurdle 1: % 20.0%
IRR Hurdle 2: % 20.0%
Developer Cash Flow Above IRR Hurdle 2: % 30.0%
Sources & Uses of Funds:
Sources of Funds:
Construction Loan: $ 15,028,860
Developer Equity: 1,502,886
Investor Equity: 13,525,974
Total Sources: $ 30,057,720
Units:
# Square Feet in 1 Acre: sq. ft. 43,560 sq. ft.
Total Square Feet to Purchase: sq. ft. 784,080 sq. ft.
Percentage Required for Property: % 43.0%
Gross Square Feet of Property: sq. ft. 337,154 sq. ft.
Rentable to Gross Square Feet %: % 95.0%
Rentable Square Feet: sq. ft. 320,297 sq. ft.
Construction Costs per Gross SF: $ / sq. ft. $ 50.00
Total Construction Costs: $ $ 16,857,720
Units:
Permanent Loan Refinancing & Exit:
Loan-to-Value (LTV) Ratio: % 55.0%
Interest Rate - Annual: % 4.75%
Issuance Fees: % 1.00%
Amortization (Years): # Years 30
Maturity: Date 2028-12-31
Prepayment Penalty: % 1.00%
Refinancing Date: Date 2018-12-31
Discount Rate: 15.0%
Property Value 1 Year After Refi.: $ $ 32,969,370
Property Value @ Refinancing: $ 28,669,018
Permanent Loan Amount: $ 15,767,960
Property Selling Costs: % 1.50%
Uses of Funds:
Land Acquisition Costs: $ 12,600,000
Construction Costs: 16,857,720
Replacement Reserves: 600,000
Total Uses: $ 30,057,720
 Construction: Operational Years: Stabilized:
Rent Roll & Operating Assumptions: Units: FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

Property-Wide Operating Assumptions:

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

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

Replacement Reserve Growth Rate: % 3.0%

New Lease Term (Years): # Years 5

Renewal Probability: % 60.0%
# Months of Downtime for Non-Renewal: # 6

Free Rent and Capital Costs: New: Renewal:

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

Tenant #1 - Triple Net (NNN) Lease:

% Rentable Square Feet Occupied: % 65.0%
Rentable Square Feet Occupied: sq. ft. 208,193 sq. ft.
Lease Start Date: Date 2018-12-31
Lease Expiration Date: Date 2022-12-31

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

(+) Base Rental Income: $ $ 1,561,446 $ 1,608,290 $ 1,656,538 $ 1,706,235 $ 1,757,422 $ 1,810,144 $ 1,864,449 $ 1,920,382
(-) Absorption & Turnover Vacancy: $ - - - - (351,484) - - -
(-) Concessions & Free Rent: $ (520,482) - - - (410,065) - - -
(-) Tenant Improvements (TIs): $ (312,289) - - - (249,831) - - -
(-) Leasing Commissions (LCs): $ (195,975) - - - (167,947) - - -

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

Tenant #2 - Triple Net (NNN) Lease:

% Rentable Square Feet Occupied: % 30.0%
Rentable Square Feet Occupied: sq. ft. 96,089 sq. ft.
Lease Start Date: Date 2019-12-31
Lease Expiration Date: Date 2023-12-31

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

(+) Base Rental Income: $ $ 768,712 $ 791,773 $ 815,527 $ 839,992 $ 865,192 $ 891,148 $ 917,882 $ 945,419
(-) Absorption & Turnover Vacancy: $ (768,712) - - - - (178,230) - -
(-) Concessions & Free Rent: $ - (263,924) - - - (207,935) - -
(-) Tenant Improvements (TIs): $ - (144,134) - - - (115,307) - -
(-) Leasing Commissions (LCs): $ - (99,375) - - - (85,162) - -

(+) Expense Reimbursements: $ - 232,583 239,561 246,748 254,150 209,420 269,628 277,717

Annual Capital Costs: $ (508,265) (243,508) - - (417,778) (200,469) - -

Replacement Reserve Amount: $ 600,000 187,824 43,288 145,229 250,228 - - 114,735 232,913

Numerical Year: Year 2018 2019 2020 2021 2022 2023 2024 2025 2026
 Construction: Operational Years: Stabilized:
Property Pro-Forma: Units: FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

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

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

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

(-) CapEx, TIs, and LCs: $ (508,265) (243,508) - - (417,778) (200,469) - -

(+) Capital Costs Paid from Reserves: $ 508,265 243,508 - - 358,377 111,393 - -

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

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

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

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

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

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

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

Construction: Operational Years: Stabilized:

Returns to All Equity Investors: Units: FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

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

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

Applicable Cap Rate: % 5.80% 5.70% 5.60% 5.50% 5.60% 5.70% 5.75%
Implied Property Value: $ 32,969,370 39,180,300 41,076,347 27,704,600 35,982,120 44,097,773 45,025,743

(-) Equity Draws: $ (15,028,860) - - - - - - -

(+) Permanent Loan Issued: $ 15,767,960 - - - - - - -
(-) Permanent Loan Financing Fees: $ (157,680) - - - - - - -
(-) Construction Loan Refinanced: $ (15,583,300) - - - - - - -
(+) Cash Flow to Equity Investors: $ - (361,159) 915,539 1,236,593 1,303,591 467,667 929,239 1,516,889
(+) Proceeds from Sale of Excess Land: $ - - - - 8,325,906 - - -
(+) Proceeds from Sale of Property: $ - - - - - - - 45,025,743
(-) Selling Costs: $ - - - - - - - (675,386)
(-) Repayment of Permanent Loan: $ - - - - - - - (13,766,414)
(-) Prepayment Penalty on Permanent Loan: $ - - - - - - - (137,664)
Total Cash Flows to Equity Investors: $ (15,001,880) (361,159) 915,539 1,236,593 9,629,498 467,667 929,239 31,963,169

Internal Rate of Return (IRR): % 20.2%

Total Returns to Equity: $ 44,807,525

Invested Equity: $ 15,028,860
Cash-on-Cash Multiple: x 3.0 x
Annual Yield on Initial Investment: % (2.4%) 6.1% 8.2% 64.1% 3.1% 6.2% 212.7%
 Construction: Operational Years: Stabilized:
Waterfall Returns Schedule: Units: FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

Tier 1 IRR - Up to 10.0%:

Leveraged IRR to All Equity Investors:
Beginning Balance: (15,001,880) (16,863,228) (17,634,011) (18,160,819) (10,347,404) (10,914,477) (11,076,685)
Returns Accrual: 10.0% (1,500,188) (1,686,323) (1,763,401) (1,816,082) (1,034,740) (1,091,448) (1,107,668)
Repayment: 100.0% (361,159) 915,539 1,236,593 9,629,498 467,667 929,239 12,184,353
Ending Balance: (15,001,880) (16,863,228) (17,634,011) (18,160,819) (10,347,404) (10,914,477) (11,076,685) -

Limited Partners (LPs):

Beginning Balance: (13,501,692) (15,176,905) (15,870,610) (16,344,737) (9,312,663) (9,823,029) (9,969,016)
Returns Accrual: 10.0% (1,350,169) (1,517,691) (1,587,061) (1,634,474) (931,266) (982,303) (996,902)
Repayment: 90.0% (325,044) 823,985 1,112,934 8,666,548 420,901 836,315 10,965,918
Ending Balance: (13,501,692) (15,176,905) (15,870,610) (16,344,737) (9,312,663) (9,823,029) (9,969,016) -

Developer:
Beginning Balance: (1,500,188) (1,686,323) (1,763,401) (1,816,082) (1,034,740) (1,091,448) (1,107,668)
Returns Accrual: 10.0% (150,019) (168,632) (176,340) (181,608) (103,474) (109,145) (110,767)
Repayment: 10.0% (36,116) 91,554 123,659 962,950 46,767 92,924 1,218,435
Ending Balance: (1,500,188) (1,686,323) (1,763,401) (1,816,082) (1,034,740) (1,091,448) (1,107,668) -

Cash Flow Available for Tier 2 Distribution: - - - - - - 19,778,815

Tier 2 IRR - Up to 20.0%:

Leveraged IRR to All Equity Investors:
Beginning Balance: (15,001,880) (18,363,416) (21,120,560) (24,108,079) (19,300,197) (22,692,569) (26,301,843)
Returns Accrual: 20.0% (3,000,376) (3,672,683) (4,224,112) (4,821,616) (3,860,039) (4,538,514) (5,260,369)
Repayment: 100.0% (361,159) 915,539 1,236,593 9,629,498 467,667 929,239 31,562,212
Ending Balance: (15,001,880) (18,363,416) (21,120,560) (24,108,079) (19,300,197) (22,692,569) (26,301,843) -

Limited Partners (LPs):

Beginning Balance: (13,501,692) (16,490,958) (19,056,719) (21,878,788) (18,550,947) (21,887,003) (25,521,012)
Returns Accrual: 20.0% (2,700,338) (3,298,192) (3,811,344) (4,375,758) (3,710,189) (4,377,401) (5,104,202)
Repayment: 80.0% (288,928) 732,431 989,274 7,703,598 374,134 743,391 25,570,535
Ending Balance: (13,501,692) (16,490,958) (19,056,719) (21,878,788) (18,550,947) (21,887,003) (25,521,012) (5,054,679)

Developer:
Beginning Balance: (1,500,188) (1,872,458) (2,063,841) (2,229,291) (749,249) (805,566) (780,831)
Returns Accrual: 20.0% (300,038) (374,492) (412,768) (445,858) (149,850) (161,113) (156,166)
Repayment: 20.0% (72,232) 183,108 247,319 1,925,900 93,533 185,848 936,997
Ending Balance: (1,500,188) (1,872,458) (2,063,841) (2,229,291) (749,249) (805,566) (780,831) -

Cash Flow Available for Tier 3 Distribution: - - - - - - 400,957

Waterfall Returns Distributions by Investor Group and IRR Tier:

Tier 1 IRR - Up to 10.0%:

Limited Partners (LPs): 90.0% (325,044) 823,985 1,112,934 8,666,548 420,901 836,315 10,965,918
Developers: 10.0% (36,116) 91,554 123,659 962,950 46,767 92,924 1,218,435

Tier 2 IRR - Up to 20.0%:

Limited Partners (LPs): 80.0% - - - - - - 15,502,287
Developers: 20.0% - - - - - - 3,875,572

Tier 3 IRR - 20.0% or Above:

Limited Partners (LPs): 70.0% - - - - - - 280,670
Developers: 30.0% - - - - - - 120,287

Returns Analysis by Investor Group:

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

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

Debt and Equity Draws: Units: January February March April May June July August September October November December Total

Percentage of Land Acquisition Costs: % 20.0% - - - - 80.0% - - - - - - 100.0%

Percentage of Construction Costs: % 20.0% 10.0% 10.0% 5.0% 5.0% 5.0% 10.0% 10.0% 5.0% 10.0% 5.0% 5.0% 100.0%
Percentage of Replacement Reserves: % - - - - - - - - - - - 100.0% 100.0%

(+) Land Acquisition Costs: $ $ 2,520,000 $ - $ - $ - $ - $ 10,080,000 $ - $ - $ - $ - $ - $ - $ 12,600,000

(+) Construction Costs: $ 3,371,544 1,685,772 1,685,772 842,886 842,886 842,886 1,685,772 1,685,772 842,886 1,685,772 842,886 842,886 16,857,720
(+) Replacement Reserves: $ - - - - - - - - - - - 600,000 600,000
Total Development Costs: $ $ 5,891,544 $ 1,685,772 $ 1,685,772 $ 842,886 $ 842,886 $ 10,922,886 $ 1,685,772 $ 1,685,772 $ 842,886 $ 1,685,772 $ 842,886 $ 1,442,886 $ 30,057,720

Maximum Equity Draw: $ 15,028,860

Equity Draw: $ $ 5,891,544 $ 1,685,772 $ 1,685,772 $ 842,886 $ 842,886 $ 4,080,000 $ - $ - $ - $ - $ - $ -

Construction Loan Draw: $ - - - - - 6,842,886 1,685,772 1,685,772 842,886 1,685,772 842,886 1,442,886

Cumulative Equity Balance: $ - 5,891,544 7,577,316 9,263,088 10,105,974 10,948,860 15,028,860 15,028,860 15,028,860 15,028,860 15,028,860 15,028,860 15,028,860

Beginning Debt Balance: $ - - - - - - 6,911,315 8,648,949 10,395,384 11,299,350 13,059,209 13,976,667 15,504,771
Ending Debt Balance: $ - - - - - - 6,946,320 8,692,755 10,448,035 11,356,580 13,125,352 14,047,456 15,583,300

Monthly Interest Rate on Debt: % 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51%

Additions to Debt Balance:

(+) Capitalized Loan Fees: $ - - - - - 68,429 16,858 16,858 8,429 16,858 8,429 14,429
(+) Capitalized Interest: $ - - - - - 35,005 43,806 52,651 57,229 66,143 70,790 78,529
Total Additions to Debt Balance: $ $ - $ - $ - $ - $ - $ 103,434 $ 60,663 $ 69,509 $ 65,658 $ 83,000 $ 79,218 $ 92,958