DOWNEY PARK APARTMENTS

TROJAN PARTNERS ACQUISITION DOWNEY, CALIFORNIA * 104 APARTMENT HOMES$11,000,000

PROPERTY PROFILE

PROPERTY FINANCES

LOCATION

MAP VIEW SATELLITE VIEW

Centrally located amid three submarkets• South Bay• East Los Angeles• North Orange CountyJobs: 6,780,000 within twenty-mile radius

Unemployment Rate: CA (12.3%)Unemployment Rate: Downey (9.8%)Employment Projection: 2015: 52,588 2010: 48,221 2000: 44,197

EMPLOYMENT

U.S. Census Bureau: LA has second largest population in the United States

Median Income: $59,955

Median Age: 31

Median House Value: $452,000

Average Household Size: 3.1 people

DEMOGRAPHICS

TRAVEL TIME TO WORK

AVERAGE COMMUTE: 25 MINUTES 75% DRIVE ALONE

TRANSACTION SUMMARY

Purchase Price: $11,000,000

Acquisition Cost: $330,000

Price Per Unit: $105,769

Total Units: 104

Price Per Square Foot: $91

Livable Square Feet: 120,700

Avg. Square Feet Per Home: 1,161

High Entry Cap Rate Valuation• 10%

Year one Cash on Cash Return • >14%

Value Add Upside • Cap Rate reduction• 10% expected rent increase

Oversized Apartment Homes:• 37% larger than East LA

submarket

Low Interest Rate Financing

RATIONALE

DOWNEY AVERAGE RENTS

AVERAGE RENT 1X1 UNITAVERAGE RENT 2X2 UNIT

ASSUMPTIONS

• Purchase Price: $11,000,000

• Acquisition Cost: $330,000

• Loan Fee: $71,500• LTV%: 65%• Loan Amount: $7,150,000• Equity: • 3,850,000• Interest Rate: • 5%

• # Units: 104• General Vacancy: 5%• Concessions: 4.17%• Non-Rev Units: 2%• Other Income: $63,267• Capital Reserves:• $300• Entry Cap:• 10%• Exit Cap:• 7%

• Value Add Cost: $700,000

• # Units Complete/yr:

24

• Renovation Term: 51 months

• Rental Increase: 10%

• Hold Period: 5 yrs.

• Hurtle Rate: 6%

PROMOTE SPLIT

Trojan Partners Initial investment: • $637,725 • 15% of Equity $4,251,500

Preference Rate: 6%

Promote Split: 70 Equity / 30 Sponsor

Acquisition Fee Charged: $110,000• Fee covers operating overhead• $10,000 bonuses awarded to each partner

PRO-FORMA VALUE ADD

Going in cap 10%

Exit cap 7%

Renovation cost $700,000 or $6,000 a door

Property leveraged IRR (65% LTV) 41%

Sponsor leveraged IRR (65% LTV) 62%

5 year sale profit $15,099,814

Returns (5 year hold with Value Add)

JUSTIFICATION

SALES COMPARABLES REPORT

Complex # Units Age Sales Price Cap Rate

Closed

Downey Park

104 1964 N/A N/A N/A

Cypress Village

88 1964 $15,000,000 5.8% 2010

Pinewood 124 1972 $20,400,000 4.8% 2010

Mariposa 286 1970 $43,000,000 4.8% 2010

VALUE ADD CAPITAL EXPENDITURES

THE CAPITAL STACK

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$7,150,000

$3,613,775.00

$637,725.00

sponsor

equity

lender

Sponsor: $637,725

Equity:$3,613,775

Lender:$7,150,000

Total Property Cost:

$11,401,500

(Property + Acquisition Cost + Loan Fee)

DEBT COVERAGE RATIO

ASSUMING 3% RENT GROWTH & 2% EXPENSE GROWTH

Year 1: 2.85Year 2: 3.11Year 3: 3.37Year 4: 3.64Year 5: 4.15

ASSUMING RENT FALLS 50%

Year 1: 1.42Year 2: 1.55Year 3: 1.69Year 4: 1.82Year 5: 2.07

Loan Terms: $7,150,000, 65% LTV, 5% FRM, 10yr., Interest Only

CASH ON CASH RETURN

PROPERTY CC ON

Year 1: 14.81%Year 2: 16.97%Year 3: 19.16%Year 4: 21.38%Year 5: 382.85%

SPONSOR CC

Year 1: 19.43%Year 2: 23.74%Year 3: 28.12%Year 4: 32.56%Year 5: 755.49%

SPONSOR CC IF RENTS DROP 50%

Year 1: 9.71%

Year 2: 11.87%

Year 3: 14.06%

Year 4: 16.28%

5 YEAR VALUE ADD SCENARIO

Year 0: -$637,725 0Year 1: $123,886 19.43% Year 2: $151,392 23.74%Year 3: $179,298 28.12%Year 4: $207,616 32.56%Year 5: $4,817,965 755.49%

CASH FLOWS CASH ON CASH

EXIT CAP COMPARISON

7 CAP

Sale: $22,337,377Net: $15,099,814IRR: 41%

8 CAP

Sale: $19,545,205Net: $12,307,642IRR: 37%

9 CAP

Sale: $17,373,515

Net: $10,135,953

IRR: 33%

10 Cap

Sale: $15,636,164

Net: $8,398,601

IRR: 29%

Assuming 5 Year hold @ 3% Growth

5 YEAR PRO-FORMA