Appraisal Project Assignment

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Base-10

Water's Edge Apartments: Capital Budgeting in Real Estate Development
Exhibit 1:
Part 1. Input Data Ten Year Life
Acquisition costs
Acquisition cost (total)
Acquisition cost (equity)
Acquisition cost (balloon loan)
Additional construction costs
Total Acquisition value
Revenues 2008 2009
Rental rate/unit/month
Anticipated occupancy rate
Internet/Cable/Phone rate/unit/month
Utilization rate for Internet/cable/phone
Costs 2008 2009
Employee costs incl benefits/month
Maintenance
Insurance
Internet/Cable/Phone rate/unit/month
Anticipated growth rates
Rental revenue
Internet/Cable/Phone service
Employee costs
Annual maintenance increase
Insurance
Market (resale) value of property
Part 2. Projected Cash Flows 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0 1 2 3 4 5 6 7 8 9 10
Acquisition cost (total) $ - 0
Additional construction costs $ - 0
Operating Cash Flows
Rental units complete 30 99 132 132 132 132 132 132 132 132 132
Rental Revenue 0 0 0 0 0 0 0 0 0 0 0
Internet/Cable/Phone Revenue 0 0 0 0 0 0 0 0 0 0 0
Total Revenue $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0
Costs
Employees 0 0 0 0 0 0 0 0 0 0 0
Maintenance 0 0 0 0 0 0 0 0 0 0 0
Insurance 0 0 0 0 0 0 0 0 0 0 0
Internet/Cable/Phone costs 0 0 0 0 0 0 0 0 0 0 0
Depreciation 0 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Earnings Before Tax 0 -750,000 -750,000 -750,000 -750,000 -750,000 -750,000 -750,000 -750,000 -750,000 -750,000
Taxes (from PTP sheet) 74,997 99,996 72,600 83,853 96,050 109,257 123,544 138,987 155,666 173,664 193,074
Earnings After Tax -74,997 -849,996 -822,600 -833,853 -846,050 -859,257 -873,544 -888,987 -905,666 -923,664 -943,074
Terminal Year Cash Flows
Sale of Property $ - 0
Less book value of property $ (7,500,000)
Gain (Loss) on sale $ 7,500,000
Taxes on gain (loss) on sale (40%) $ 3,000,000
Balloon payment on loan $ - 0
Net terminal year cash flow $ (3,000,000)
Net Project Cash Flows -74,997 -99,996 -72,600 -83,853 -96,050 -109,257 -123,544 -138,987 -155,666 -173,664 -3,193,074
Part 3. Project Evaluation
Discount rate (cost of capital)
Net Present Value
Internal Rate of Return

Pilot Tax Program

Pilot Tax Program 2008 2009 2010+
Tax assessment/month $ 6,248 $ 8,333
At full assessment $ 1,100 per unit per year
Tax assessment growth rate 5% per year after 2010
Pilot Tax Program (PTP) credit 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Tax assessment $ 74,997 $ 99,996 $ 145,200 $ 152,460 $ 160,083 $ 168,087 $ 176,492 $ 185,316 $ 194,582 $ 204,311 $ 214,527 $ 225,253 $ 236,515 $ 248,341 $ 260,758 $ 273,796 $ 287,486 $ 301,860 $ 316,953 $ 332,801 $ 349,441
PTP Credit 0 0 $ (72,600) $ (68,607) $ (64,033) $ (58,831) $ (52,947) $ (46,329) $ (38,916) $ (30,647) $ (21,453) $ (11,263) $ (0) $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0 $ - 0
Net Tax Assessment $ 74,997 $ 99,996 $ 72,600 $ 83,853 $ 96,050 $ 109,257 $ 123,544 $ 138,987 $ 155,666 $ 173,664 $ 193,074 $ 213,990 $ 236,515 $ 248,341 $ 260,758 $ 273,796 $ 287,486 $ 301,860 $ 316,953 $ 332,801 $ 349,441