gr iss presentation final 2009

Inside Self-Storage World Expo

Assembling a Loan Package That Attracts Dollars and Approvals

Presented by:
Georgia Ragsdale, Watermark Financial

January 26-29, 2009The Venetian Resort Hotel Casino/Sands Expo & Convention CenterLas Vegas

Agenda

Assessment of Market Conditions New Realities in UnderwritingBasic Assumptions: APOD (Annual Property Operating Data)ModelingInvestment Analysis ToolsWhat is ComingNavigating Change

National Debt Since WWII

Soaring National Debt

Equity Real Estate Prospects:
2008 vs Early 1990s

19902008Investor ExpectationsDouble-digit returns, inflation hedge, low volatilitySingle-digit core returns, inflation hedge if markets in balance, moderate volatilityLiquidityDeteriorating and no capitalDeteriorating but capital available for some strategiesInstitutional UnderwritingUndisciplinedDebt side undisciplinedEquity side disciplinedPricingSpread between NCREIF current value cap rate of 6.97% and 10-Year Treasury Yield of 8.68% =-171 Spread between NCREIF current value cap rate of 5.61% and 10-Year Treasury Yield of 4.26% =+135

Property Market ConditionsNo link between supply and demandOffice vacancy downtown: 14.0%Office vacancy suburban: 21.2%Demand and supply linkedOffice vacancy downtown: 9.6%Office vacancy suburban: 14.2%OutcomeValue decline: 32%Value Decline: 15%-20%

Source: NCREIF; Moodys Economy.com; Heitman Research

Showing Up in Huge Pull Back in
Transactions

Source: Real Capital Analytics; HeitmanResearch

Changes in Financing

What This Means To Your Loan Package

Good credit, banks dont lend to borrowers who are late on their mortgages or defaulted on their homes

Good cash, banks dont lend to borrowers who are trying to take cash out of their commercial real estate because they have financial difficulties elsewhere. **Some banks are now look at borrowers and do a global cash flow analysis, limiting the borrower to 50% debt to income keep consumer debt down.

Good experience, banks are not lending to new, inexperienced self storage operators in this market.

Lenders are seeking additional deposits in exchange for lending to you, i.e. Accounts

Lenders are asking for additional Due Diligence on Properties, Marketing Study

What This Means To Your Loan Package

Borrower Needs:

Personal Financial Statement

3 years tax returns- federal only, all schedules

Bank / Brokerage Statements to show your liquidity

List of prior projects

Property Needs: Property if in operation

Management Report

Rent Roll

Profit and Loss on the property up to 3 years and year to date

3 years tax returns -federal only, all schedules

Your Relationship to the Underwriter:

Use Accurate and To Date Information

1. Know the Current Value of Your Property

2. Refute Assumptions of Bank

Cost of FundsVaries by Region

When Underwriting Your Loan Package

For Fixed Rates:

Use 7%

For Variable Rates:

Use 8%

Leverage of Funds Varies by Region

Leverage Ranges from

High: 80% LTV

to Low: 50% LTV

Capped by DCR

Tools to Analyze Property

Ammunition You Need To Have:

Cap Rate

Debt Coverage Ratio

STATIC VS DYNAMIC

Cap Rate-A STATIC Snapshot

Cap Rate= NOI/Value

Going In Cap Rate

Exit Cap Rate

Buyers Cap Rate

Sellers Cap Rate

Brokers Cap Rate

Lender's Cap Rate

Where to Get Cap Rate

ASK: Appraiser, Self Storage in your area

ASK: Self Storage Broker in your area

From Comparables, average of last 5 sales in your area-averaged

Comps 6 months ago are worthless

Property Values are Dropping, Cap rates are rising

Ideas of values are often not accurate

Cons of Cap Rate

Only considers a snapshot in time

1. Disregards the property's expected performance over the entire holding period

2. Works with a number today

3. Only looks at one year

4. Doesn't tell you what the cap rate will be in the following years

5. Cap rates change over time-not a constant

6. Assumes data was reported accurately

Putting Pressure on Cap Rates

Source: Real Capital Analytics; Heitman Research

Cap Rates: What Goes Up...

2003 through the end of 2007:

a historic period marked by an abundance of capital at extremely low interest rates, cap rates for self-storage properties dropped from an average of 9.5% to 7.2%

Cap Rate Effect on Value and Loan Amount

DCR

DYNAMIC Evaluation Indicators

Income

Expenses

NOI

Accurate Property Operating Data

Lenders are Scrutinizing and Questioning Every Detail, Often Opting for Most Conservative Numbers

Annual Property Operating Data (APOD)

APOD (part 2)

Average Occupancy Per Region

Occupancy Trends

Income

Raise Rents

Maximize revenue streams

Operational systems in place, automated

Management Expertise, training

Add new revenue generators

Expenses as Related to Income

2008 National Operating Expense Averages

Expense/Income Ratio: 38.5%

$/SF Change from 2007: +7.2%

Total Expenses:

$/SF Low: $0.13 $/SF High: $17.20

$/SF Average: $4.09

Current Trends Summation

Industry Consolidation, larger portfolio transactions, fewer single asset transactions

More Disciplined Investing: Discounted Cash Flow, Target IRR 10.5% (unlevered)

Use of Market Study Required by Lenders

Lender Demand for Banking Relationship (Deposits) and Multiple Sources of Repayment (cash flow from other existing businesses)

Values based on Existing Cash Flow, Trailing Income NOT Pro-forma

Continuing pressures: Over-supply and lack of credit

Housing crisis will help or hurt SS? Data is inconclusive

Positive Summation

Fundamentals Remain Strong

15% Vacancy Rate Both in Bull and Bear Cycles

Trade Area Remains Constant: 3.25 radial miles from location, Average 6.52 feet per person, Change from 2007 (+6.45%)

Asset class remains lowest in bank defaults of all commercial property types

Growing Sophistication and Due Diligence by Borrowers

How It Has Been in Self Storage: Pooch

How It Is Now: Coyote

Watermark Financial

Georgia Ragsdale, CEO11150 W. Olympic Blvd. #150Los Angeles, CA 90046Gragsdale@watermarkfinancialgroup.comwww.watermarkfinancialgroup.comOffice: 310-479-1260

Property Name Annual Property Operating DataLocationType of PropertyPurchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial InvestmentSize of Property(Sq. Ft./Units)0 Purpose of analysis0 0 Assessed/Appraised ValuesLand015%Improvements085%AmortLoanPersonal Property00% BalancePeriodic PmtPmts/YrInterestPeriodTermTotal0100%1st Please enter this mortgage information on the Cash Flows worksheet.

$0 Please enter this mortgage information on the Cash Flows worksheet.

$0 Please enter this mortage information on the Cash Flows worksheet.

12 Please enter this mortage information on the Cash Flows worksheet.

0.%Please enter this mortage information on the Cash Flows worksheet.


02ndPlease enter this mortage information on the Cash Flows worksheet.






0Adjusted Basis as of:24-Nov-08$0 $/SQ FT%ALL FIGURES ARE ANNUALor $/Unitof GOICOMMENTS/FOOTNOTES1 POTENTIAL RENTAL INCOME0 2 Less: Vacancy & Cr. Losses( 7.% of PRI ) 3 EFFECTIVE RENTAL INCOME 4 Plus: Other Income (collectable) 5 GROSS OPERATING INCOME0 OPERATING EXPENSES:6 Real Estate Taxes07 Personal Property Taxes008 Property Insurance09 Off Site Management010 Payroll011 Expenses/Benefits012 Taxes/Worker's Compensation013 Repairs and Maintenance014 Utilities:015016017018019 Accounting and Legal020 Licenses/Permits021 Advertising022 Supplies023 Miscellaneous Contract Services:024025026027028029 TOTAL OPERATING EXPENSES0 30 NET OPERATING INCOME0 31 Less: Annual Debt Service0 32 Less: Participation Payments (from Assumptions) - 33 Less: Leasing Commissions0 34 Less: Funded Reserves0 35 CASH FLOW BEFORE TAXES$0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute Prepared for:The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.Prepared by:

Cash Flow Analysis Worksheet.Property Name0Purchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial Investment0Prepared For00Prepared By00Date Prepared24-Nov-0800Mortgage DataCost Recovery Data1st Mortgage2nd MortgageImprovementsPersonal PropertyAmount Value0Interest Rate C. R. MethodSLAmortization Period Useful Life39Loan Term0 Years0 Years In Service DateJanuary-05Payments/Year12 12 Date of SaleDecember-14Periodic Payment - - RecaptureAnnual Debt Service - - Investment Tax Loan Fees/Costs Credit ($$ or %)Taxable IncomeYear :1234567891011th Year1 Potential Rental Income0 0 0 0 0 0 0 0 0 0 0 2-Vacancy & Credit Losses0 0 0 0 0 0 0 0 0 0 0 3=Effective Rental Income0 0 0 0 0 0 0 0 0 0 0 4+Other Income (collectable)0 0 0 0 0 0 0 0 0 0 0 5=Gross Operating Income0 0 0 0 0 0 0 0 0 0 0 6-Operating Expenses0 0 0 0 0 0 0 0 0 0 0 7=NET OPERATING INCOME0 0 0 0 0 0 0 0 0 0 0 8-Interest - 1st Mortgage0 0000000009-Interest - 2nd Mortgage0 00000000010-Participation Payments0 0 0 0 0 0 0 0 0 0 11-Cost Recovery - Improvements0 0 0 0 0 0 0 0 0 0 12-Cost Recovery - Personal Property13-Amortization of Loan Fees/Costs0 0 0 0 0 0 0 0 0 0 14-Leasing Commissions0 0 0 0 0 0 0 0 0 0 15=Real Estate Taxable Income0 0 0 0 0 0 0 0 0 0 16Tax Liability (Savings) @ 35.00%0 0 0 0 0 0 0 0 0 0 Cash Flow17 NET OPERATING INCOME (Line 7)0 0 0 0 0 0 0 0 0 0 18 -Annual Debt Service0 0 0 0 0 0 0 0 0 0 19-Participation Payments0 0 0 0 0 0 0 0 0 0 20 -Leasing Commissions0 0 0 0 0 0 0 0 0 0 21 -Funded Reserves0 0 0 0 0 0 0 0 0 0 22 =CASH FLOW BEFORE TAXES0 0 0 0 0 0 0 0 0 0 23 -Tax Liability (Savings) (Line 16)0 0 0 0 0 0 0 0 0 0 24 =CASH FLOW AFTER TAXES$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.

Alternative Cash Sales WorksheetMortgage BalancesYear:12345Principal Balance - 1st Mortgage0 0000Principal Balance - 2nd Mortgage0 0000TOTAL UNPAID BALANCE$0 $0 $0 $0 $0 6789100000000000$0 $0 $0 $0 $0 Calculation of Sale ProceedsPROJECTED SALES PRICE$0 $0 $0 (At 9.% cap)(At 10.% cap)(At 11.% cap)CALCULATION OF ADJUSTED BASIS:1 Basis at Acquisition$0 $0 $0 2 +Capital Additions3 -Cost Recovery (Depreciation) Taken0 0 0 4 -Basis in Partial Sales5 =Adjusted Basis at Sale0 0 0 CALCULATION OF CAPITAL GAIN ON SALE:Red Cells contain protected formulas6 Sale Price0 0 0 7 -Costs of Sale0 0 0 8 -Adjusted Basis at Sale (Line 5)0 0 0 9 -Participation Payment on Sale0 0 0 10 =Gain or (Loss)0 0 0 11 -Straight Line Cost Recovery (limited to gain)0 0 0 12 -Suspended Losses13 =Capital Gain from Appreciation0 0 0 ITEMS TAXED AS ORDINARY INCOME:14 Unamortized Loan Fees/Costs (negative)0 0 0 15 +16 =Ordinary Taxable Income0 0 0 CALCULATION OF SALES PROCEEDS AFTER TAX:17 Sale Price 0 0 0 18 -Cost of Sale0 0 0 19 -Participaiton Payments on Sale0 0 0 20 -Mortgage Balance(s)0 0 0 21 +Balance of Funded Reserves0 0 0 22 =SALE PROCEEDS BEFORE TAX0 0 0 23 -Tax (Savings): Ordinary Income at 35% (Line 16)0 0 0 24 -Tax: Straight Line Recapture at 25% (Line 11)0 0 0 25 -Tax on Capital Gains at 15% (Line 13)0 0 0 26 =SALE PROCEEDS AFTER TAX$0 $0 $0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.

BEFORE TAXNAlternative 1Alternative 2Alternative 3IRn$n$n$NU00 00 00 TT10 10 10 EE20 20 20 RR30 30 30 N0 40 40 40 A50 50 50 L60 60 60 F70 70 70 O80 80 80 R90 90 90 A10 + 10 + 10 + TIRR=.0%IRR=.0%IRR=.0%ESNPV=$0 NPV=$0 NPV=$0 SE@0.%@0.%@0.%TARAFTER TAXAlternative 1Alternative 2Alternative 3On$n$n$FL00 00 00 A10 10 10 N20 20 20 R30 30 30 RE40 40 40 ET50 50 50 TN60 60 60 UI70 70 70 R80 80 80 N90 90 90 10 + 5 + 5 + IRR=.0%IRR=.0%IRR=.0%NPV=$0 NPV=$0 NPV=$0 @0.%@0.%@0.%Cap rate used on Sale = 9.%Cap rate on Sale = 10.%Cap rate on Sale = 11.%Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.Alternative 1Alternative 2Alternative 3n0(0) 0(0)0(0)10 10 10 20 20 20 30 30 30 40 40 40 50 50 5 0 60 60 6 0 70 70 7 0 80 80 8 0 90 90 9 0 10 010 010 0IRR=0.00%IRR=0.00%0.00%0(0)0(0)0(0)10 10 10 20 20 20 30 30 30 40 40 40 50 505060 60 60 70 70 70 80 80 80 90 90 90 10 010 010 0IRR=0.00%IRR=0.00%IRR=0.00%

Ordinary Income Tax Bracket35%Capital Gain Max Tax Rate15%Tax Rate on Straight Line Recapture25%Month Placed in Service:1 (from CashFlows Sheet)Year---->1234567891011Vacancy Rates (enter just year 1, or each year)7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%Rent Income Escalators (enter just year 2, or each year)3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Other Income Escalator3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Expense Escalators (enter just year 2, or each year)3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Alternative 1Alternative 2Alternative 3Cap rate used in Sale9.00%10.00%11.00%Expenses of Sale7.00%Participation:Cash Flows -- 0%Sale Proceeds -- 0%1st2dPayment frequencyMonthlyMonthly(1212multiplier -- do not erase)0Highlighting Flag

LICENSE: (page down for instructions on use)This Template was developed by Gary G. Tharp, CCIM, for the CCIM Institute which holds copyright to the CCIM Business Forms. The business form template streamlines calculations that can otherwise be achieved through the use of a financial calculator with the 'paper' forms published by the Institute.This CCIM Business Forms template is provided at no cost for the use of the members of the CCIM Institute and others who may wish to use them. They may be used in the course of doing business, including giving copies of reports generated by the template to clients, their agents and consultants, etc., but the templates themselves may not be sold, rented or in any way become in and of themselves a source of income. This CCIM Business Forms template is presented on an 'as-is' basis. Neither the Institute nor the author accept any liability that may arise as a result of reliance on any conclusion indicated by the Template or any report generated by the template, even if the Template is defective. No warranty is given concerning the suitability of the Template for any application. Forms may be copied with inclusion of the following: "Reprinted with permission of the CCIM Institute / Copyright 2004" Please direct all comments and questions regarding calculations and operation of the template to: Gary G. Tharp, CCIM G T Commercial, Inc.Home: 2083 Biltmore Point Bus: 14 E. Washington Street, Suite 404 Longwood, FL 32779 Orlando, FL 32801 407/862-9206 Fax: 407/862-3666 407/206-2246 Fax: 240/331-0676 email: [email protected] website: www.garytharp.com____________________________________________________________________________________Overview: (Down for more)The template consists of five worksheets, plus this documentation worksheet. The active sheets are called APOD, CashFlows, Sales, IRR~NPV, and Assumptions. The Assumptions worksheet is where you set the "global" assumptions that permeate all the sheets: tax rates, escalation rates for income and expenses, cap rates and vacancy rates, and expenses on sale.There are macros that allow you to view highlights that help new users fill in the blanks and avoid erasing important formulas. If you wish a template unencumbered by the macros, you may erase them, or simply go and get the "Un"-macro version from my website: www.garytharp.com All the sheets are protected, so as to protect certain formulae that are more critical, but the protection for each sheet may be removed (except for this ReadMe sheet, which is password protected) using the drop-down menu: Tools | Protection | Unprotect Sheet The APOD worksheet: Much of the data that must be input to the template resides here, and is carried over to the CashFlows worksheet. All the computations are automated. Note that if you put no number in the 'Size of Property' blank, you won't have any answers that depend on dollars-per-units information.There are three ways to enter each expense category: dollars per unit (such as dollars per square foot), percentage of GOI, in the "%" column, or by just plugging in the number in the third, "Expense", column. The Mortgage information may not be entered on the APOD, but only on the CashFlows sheet, and will carry back to the APOD.At the minimum, entries you must make on the APOD are Purchase Price, Size of Property, INCOME and EXPENSE information.DO NOT enter on the APOD: % of vacancy (derived from the Assumptions sheet), and mortgage information (derived from CashFlows sheet).CashFlowsThe CashFlows worksheet derives much of its input from the APOD, although you can override that by plugging in numbers just about wherever you want. You enter the mortgage info on this sheet -- amount, rate, and term, and then the payments will calculateautomatically, and be posted to the APOD and SALES worksheets. Income and expenses on this worksheet will escalate in accordance with percentages you enter in the Assumptions worksheet (default is 3%), which is also where the tax brackets come from (default ordinary income is 36%). CFBT and CFAT numbers, of course, will carry over into the IRR worksheet, and the cost recovery and mortgage information, etc., is carried over to the Sales worksheet. The date you use in the "In Service Date" blank in the Cost Recovery Data box on this worksheet is used by the Assumptions worksheet to extract the "month placed in service" for amortization and cost recovery purposes. You may, of course, over-ride that number, but the two should agree always.The Sales worksheet is pretty self-documenting. The sales price for each of the three scenarios is calculated by capping the 6th year's NOI (the sixth NOI is in a hidden cell at the end of line 7 on the CashFlows sheet.) The cap rates for each alternative are entered in the Assumptions worksheet, as is the 'cost of sale' percentage.The IRR~NPV worksheet is just the frosting on the cake -- before and after tax IRRs on the three alternative cash sales. All the numbers derive from the CashFlows and Sales sheets, and there is nothing to input to get the IRR. The NPV for each T-bar is zero, because the default NPV formula is looking at the IRR as its discount rate. In order to discover the NPV at a different discount rate, enter that rate in the light-green box under the T-bar. (Doing so, of course, erases the formula that has it looking at the IRR, but you always know what that NPV is!)None of the worksheets are password-protected, except this 'readme' sheet. That means you can modify anything you like, but it also means that if you plug numbers into cells that contain formulae you will destroy the formulae. It is a good idea to save this workbook as an .xlt (i.e., excel template) file before you use it for the first time, so that you will avoid corrupting your "model" by accidentally saving it with data in place. If you want to reformat to add gridlines, column and row headers, etc, just click on Tools and then Options, to customize your model (in unprotected mode).

0.25

0

???Page ??? (???)11/24/2008, 15:34:56Page / ??????Property Name Annual Property Operating DataLocationType of PropertyPurchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial InvestmentSize of Property(Sq. Ft./Units)0 Purpose of analysis0 0 Assessed/Appraised ValuesLand015%Improvements085%AmortLoanPersonal Property00% BalancePeriodic PmtPmts/YrInterestPeriodTermTotal0100%1st Please enter this mortgage information on the Cash Flows worksheet.

$0 Please enter this mortgage information on the Cash Flows worksheet.





02ndPlease enter this mortage information on the Cash Flows worksheet.






0Adjusted Basis as of:24-Nov-08$0 $/SQ FT%ALL FIGURES ARE ANNUALor $/Unitof GOICOMMENTS/FOOTNOTES1 POTENTIAL RENTAL INCOME0 2 Less: Vacancy & Cr. Losses( 7.% of PRI ) 3 EFFECTIVE RENTAL INCOME 4 Plus: Other Income (collectable) 5 GROSS OPERATING INCOME0 OPERATING EXPENSES:6 Real Estate Taxes07 Personal Property Taxes008 Property Insurance09 Off Site Management010 Payroll011 Expenses/Benefits012 Taxes/Worker's Compensation013 Repairs and Maintenance014 Utilities:015016017018019 Accounting and Legal020 Licenses/Permits021 Advertising022 Supplies023 Miscellaneous Contract Services:024025026027028029 TOTAL OPERATING EXPENSES0 30 NET OPERATING INCOME0 31 Less: Annual Debt Service0 32 Less: Participation Payments (from Assumptions) - 33 Less: Leasing Commissions0 34 Less: Funded Reserves0 35 CASH FLOW BEFORE TAXES$0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute Prepared for:The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.Prepared by:

Cash Flow Analysis Worksheet.Property Name0Purchase PricePlus Acquisiition CostsPlus Loan Fees/CostsLess MortgagesEquals Initial Investment0Prepared For00Prepared By00Date Prepared24-Nov-0800Mortgage DataCost Recovery Data1st Mortgage2nd MortgageImprovementsPersonal PropertyAmount Value0Interest Rate C. R. MethodSLAmortization Period Useful Life39Loan Term0 Years0 Years In Service DateJanuary-05Payments/Year12 12 Date of SaleDecember-14Periodic Payment - - RecaptureAnnual Debt Service - - Investment Tax Loan Fees/Costs Credit ($$ or %)Taxable IncomeYear :1234567891011th Year1 Potential Rental Income0 0 0 0 0 0 0 0 0 0 0 2-Vacancy & Credit Losses0 0 0 0 0 0 0 0 0 0 0 3=Effective Rental Income0 0 0 0 0 0 0 0 0 0 0 4+Other Income (collectable)0 0 0 0 0 0 0 0 0 0 0 5=Gross Operating Income0 0 0 0 0 0 0 0 0 0 0 6-Operating Expenses0 0 0 0 0 0 0 0 0 0 0 7=NET OPERATING INCOME0 0 0 0 0 0 0 0 0 0 0 8-Interest - 1st Mortgage0 0000000009-Interest - 2nd Mortgage0 00000000010-Participation Payments0 0 0 0 0 0 0 0 0 0 11-Cost Recovery - Improvements0 0 0 0 0 0 0 0 0 0 12-Cost Recovery - Personal Property13-Amortization of Loan Fees/Costs0 0 0 0 0 0 0 0 0 0 14-Leasing Commissions0 0 0 0 0 0 0 0 0 0 15=Real Estate Taxable Income0 0 0 0 0 0 0 0 0 0 16Tax Liability (Savings) @ 35.00%0 0 0 0 0 0 0 0 0 0 Cash Flow17 NET OPERATING INCOME (Line 7)0 0 0 0 0 0 0 0 0 0 18 -Annual Debt Service0 0 0 0 0 0 0 0 0 0 19-Participation Payments0 0 0 0 0 0 0 0 0 0 20 -Leasing Commissions0 0 0 0 0 0 0 0 0 0 21 -Funded Reserves0 0 0 0 0 0 0 0 0 0 22 =CASH FLOW BEFORE TAXES0 0 0 0 0 0 0 0 0 0 23 -Tax Liability (Savings) (Line 16)0 0 0 0 0 0 0 0 0 0 24 =CASH FLOW AFTER TAXES$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.

Alternative Cash Sales WorksheetMortgage BalancesYear:12345Principal Balance - 1st Mortgage0 0000Principal Balance - 2nd Mortgage0 0000TOTAL UNPAID BALANCE$0 $0 $0 $0 $0 6789100000000000$0 $0 $0 $0 $0 Calculation of Sale ProceedsPROJECTED SALES PRICE$0 $0 $0 (At 9.% cap)(At 10.% cap)(At 11.% cap)CALCULATION OF ADJUSTED BASIS:1 Basis at Acquisition$0 $0 $0 2 +Capital Additions3 -Cost Recovery (Depreciation) Taken0 0 0 4 -Basis in Partial Sales5 =Adjusted Basis at Sale0 0 0 CALCULATION OF CAPITAL GAIN ON SALE:Red Cells contain protected formulas6 Sale Price0 0 0 7 -Costs of Sale0 0 0 8 -Adjusted Basis at Sale (Line 5)0 0 0 9 -Participation Payment on Sale0 0 0 10 =Gain or (Loss)0 0 0 11 -Straight Line Cost Recovery (limited to gain)0 0 0 12 -Suspended Losses13 =Capital Gain from Appreciation0 0 0 ITEMS TAXED AS ORDINARY INCOME:14 Unamortized Loan Fees/Costs (negative)0 0 0 15 +16 =Ordinary Taxable Income0 0 0 CALCULATION OF SALES PROCEEDS AFTER TAX:17 Sale Price 0 0 0 18 -Cost of Sale0 0 0 19 -Participaiton Payments on Sale0 0 0 20 -Mortgage Balance(s)0 0 0 21 +Balance of Funded Reserves0 0 0 22 =SALE PROCEEDS BEFORE TAX0 0 0 23 -Tax (Savings): Ordinary Income at 35% (Line 16)0 0 0 24 -Tax: Straight Line Recapture at 25% (Line 11)0 0 0 25 -Tax on Capital Gains at 15% (Line 13)0 0 0 26 =SALE PROCEEDS AFTER TAX$0 $0 $0 Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.

BEFORE TAXNAlternative 1Alternative 2Alternative 3IRn$n$n$NU00 00 00 TT10 10 10 EE20 20 20 RR30 30 30 N0 40 40 40 A50 50 50 L60 60 60 F70 70 70 O80 80 80 R90 90 90 A10 + 10 + 10 + TIRR=.0%IRR=.0%IRR=.0%ESNPV=$0 NPV=$0 NPV=$0 SE@0.%@0.%@0.%TARAFTER TAXAlternative 1Alternative 2Alternative 3On$n$n$FL00 00 00 A10 10 10 N20 20 20 R30 30 30 RE40 40 40 ET50 50 50 TN60 60 60 UI70 70 70 R80 80 80 N90 90 90 10 + 5 + 5 + IRR=.0%IRR=.0%IRR=.0%NPV=$0 NPV=$0 NPV=$0 @0.%@0.%@0.%Cap rate used on Sale = 9.%Cap rate on Sale = 10.%Cap rate on Sale = 11.%Authored by Gary G. Tharp, CCIM Copyright 2004 by the CCIM Institute The statements and figures herein, while not guaranteed, are secured from sources we believe authoritative.Alternative 1Alternative 2Alternative 3n0(0) 0(0)0(0)10 10 10 20 20 20 30 30 30 40 40 40 50 50 5 0 60 60 6 0 70 70 7 0 80 80 8 0 90 90 9 0 10 010 010 0IRR=0.00%IRR=0.00%0.00%0(0)0(0)0(0)10 10 10 20 20 20 30 30 30 40 40 40 50 505060 60 60 70 70 70 80 80 80 90 90 90 10 010 010 0IRR=0.00%IRR=0.00%IRR=0.00%

Ordinary Income Tax Bracket35%Capital Gain Max Tax Rate15%Tax Rate on Straight Line Recapture25%Month Placed in Service:1 (from CashFlows Sheet)Year---->1234567891011Vacancy Rates (enter just year 1, or each year)7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%7.00%Rent Income Escalators (enter just year 2, or each year)3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Other Income Escalator3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Expense Escalators (enter just year 2, or each year)3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%Alternative 1Alternative 2Alternative 3Cap rate used in Sale9.00%10.00%11.00%Expenses of Sale7.00%Participation:Cash Flows -- 0%Sale Proceeds -- 0%1st2dPayment frequencyMonthlyMonthly(1212multiplier -- do not erase)0Highlighting Flag

LICENSE: (page down for instructions on use)This Template was developed by Gary G. Tharp, CCIM, for the CCIM Institute which holds copyright to the CCIM Business Forms. The business form template streamlines calculations that can otherwise be achieved through the use of a financial calculator with the 'paper' forms published by the Institute.This CCIM Business Forms template is provided at no cost for the use of the members of the CCIM Institute and others who may wish to use them. They may be used in the course of doing business, including giving copies of reports generated by the template to clients, their agents and consultants, etc., but the templates themselves may not be sold, rented or in any way become in and of themselves a source of income. This CCIM Business Forms template is presented on an 'as-is' basis. Neither the Institute nor the author accept any liability that may arise as a result of reliance on any conclusion indicated by the Template or any report generated by the template, even if the Template is defective. No warranty is given concerning the suitability of the Template for any application. Forms may be copied with inclusion of the following: "Reprinted with permission of the CCIM Institute / Copyright 2004" Please direct all comments and questions regarding calculations and operation of the template to: Gary G. Tharp, CCIM G T Commercial, Inc.Home: 2083 Biltmore Point Bus: 14 E. Washington Street, Suite 404 Longwood, FL 32779 Orlando, FL 32801 407/862-9206 Fax: 407/862-3666 407/206-2246 Fax: 240/331-0676 email: [email protected] website: www.garytharp.com____________________________________________________________________________________Overview: (Down for more)The template consists of five worksheets, plus this documentation worksheet. The active sheets are called APOD, CashFlows, Sales, IRR~NPV, and Assumptions. The Assumptions worksheet is where you set the "global" assumptions that permeate all the sheets: tax rates, escalation rates for income and expenses, cap rates and vacancy rates, and expenses on sale.There are macros that allow you to view highlights that help new users fill in the blanks and avoid erasing important formulas. If you wish a template unencumbered by the macros, you may erase them, or simply go and get the "Un"-macro version from my website: www.garytharp.com All the sheets are protected, so as to protect certain formulae that are more critical, but the protection for each sheet may be removed (except for this ReadMe sheet, which is password protected) using the drop-down menu: Tools | Protection | Unprotect Sheet The APOD worksheet: Much of the data that must be input to the template resides here, and is carried over to the CashFlows worksheet. All the computations are automated. Note that if you put no number in the 'Size of Property' blank, you won't have any answers that depend on dollars-per-units information.There are three ways to enter each expense category: dollars per unit (such as dollars per square foot), percentage of GOI, in the "%" column, or by just plugging in the number in the third, "Expense", column. The Mortgage information may not be entered on the APOD, but only on the CashFlows sheet, and will carry back to the APOD.At the minimum, entries you must make on the APOD are Purchase Price, Size of Property, INCOME and EXPENSE information.DO NOT enter on the APOD: % of vacancy (derived from the Assumptions sheet), and mortgage information (derived from CashFlows sheet).CashFlowsThe CashFlows worksheet derives much of its input from the APOD, although you can override that by plugging in numbers just about wherever you want. You enter the mortgage info on this sheet -- amount, rate, and term, and then the payments will calculateautomatically, and be posted to the APOD and SALES worksheets. Income and expenses on this worksheet will escalate in accordance with percentages you enter in the Assumptions worksheet (default is 3%), which is also where the tax brackets come from (default ordinary income is 36%). CFBT and CFAT numbers, of course, will carry over into the IRR worksheet, and the cost recovery and mortgage information, etc., is carried over to the Sales worksheet. The date you use in the "In Service Date" blank in the Cost Recovery Data box on this worksheet is used by the Assumptions worksheet to extract the "month placed in service" for amortization and cost recovery purposes. You may, of course, over-ride that number, but the two should agree always.The Sales worksheet is pretty self-documenting. The sales price for each of the three scenarios is calculated by capping the 6th year's NOI (the sixth NOI is in a hidden cell at the end of line 7 on the CashFlows sheet.) The cap rates for each alternative are entered in the Assumptions worksheet, as is the 'cost of sale' percentage.The IRR~NPV worksheet is just the frosting on the cake -- before and after tax IRRs on the three alternative cash sales. All the numbers derive from the CashFlows and Sales sheets, and there is nothing to input to get the IRR. The NPV for each T-bar is zero, because the default NPV formula is looking at the IRR as its discount rate. In order to discover the NPV at a different discount rate, enter that rate in the light-green box under the T-bar. (Doing so, of course, erases the formula that has it looking at the IRR, but you always know what that NPV is!)None of the worksheets are password-protected, except this 'readme' sheet. That means you can modify anything you like, but it also means that if you plug numbers into cells that contain formulae you will destroy the formulae. It is a good idea to save this workbook as an .xlt (i.e., excel template) file before you use it for the first time, so that you will avoid corrupting your "model" by accidentally saving it with data in place. If you want to reformat to add gridlines, column and row headers, etc, just click on Tools and then Options, to customize your model (in unprotected mode).

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