Hypo Office 1

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University of Alberta *

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455

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Finance

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Feb 20, 2024

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xlsx

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10

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Hypo Office Model Parameters Current Market Assumptions CPI Market Rent Market Vacancy Market TI Market Growth 2.00% $ 25.00 7.50% $ - 2.00% Yrly Parking Rate Ingoing Cap Outgoing Cap Sale Commission Replace. Res. $ 1,200 7.00% 7.00% 3.00% 1.00% Leasing Comm. 0% Leasing Assumptions Commencement Expiration Year Month Year Month Rent Area Quantum Energy Solutions (Suite 1) 1 1 5 12 40,000 Office Tenant 2 (Suite 2) 1 1 5 12 35,000 Office Tenant 3 (Suite 3) 1 1 5 12 25,000 Base Year Rent Rent Esc. Ten. Imp. Rent Abate. # Parking Stalls Quantum Energy Solutions $ 26.00 0.00% $ - 0 45 Office Tenant 2 $ 24.50 0.00% $ - 0 35 Office Tenant 3 $ 27.50 0.00% $ - 0 20 Yearly Rental Income 1 2 3 4 5 Quantum Energy Solutions $ 1,040,000.00 $ 1,040,000.00 $ 1,040,000.00 $ 1,040,000.00 $ 1,040,000.00 Office Tenant 2 $ 857,500.00 $ 857,500.00 $ 857,500.00 $ 857,500.00 $ 857,500.00 Office Tenant 3 $ 687,500.00 $ 687,500.00 $ 687,500.00 $ 687,500.00 $ 687,500.00 Yearly Parking Revenue 1 2 3 4 5 Quantum Energy Solutions $ 54,000.00 $ 55,080.00 $ 56,181.60 $ 57,305.23 $ 58,451.34 Office Tenant 2 $ 42,000.00 $ 42,840.00 $ 43,696.80 $ 44,570.74 $ 45,462.15 Office Tenant 3 $ 24,000.00 $ 24,480.00 $ 24,969.60 $ 25,468.99 $ 25,978.37 Tis and Leasing Commissions 1 2 3 4 5 Quantum Energy Solutions $ - $ - $ - $ - $ - Office Tenant 2 $ - $ - $ - $ - $ - Office Tenant 3 $ - $ - $ - $ - $ - Rental Abatement Per Year 1 2 3 4 5 Quantum Energy Solutions $ - $ - $ - $ - $ - Office Tenant 2 $ - $ - $ - $ - $ - Office Tenant 3 $ - $ - $ - $ - $ - Expense Assumptions Amount/Yr Units Area %fixed Inflation Property Tax $ 587,159.00 $ Amount 100% CPI Property Insurance $ 0.60 $/Area Gross SF 100% CPI Repairs and Maintenance $ 0.60 $/Area Gross SF 15% CPI Utilities $ 0.75 $/Area Gross SF 60% CPI Management $ 30,000.00 $ Amount 100% CPI Expense Schedule 1 2 3 4 5 Property Tax $ 587,159.00 $ 598,902.18 $ 610,880.22 $ 623,097.83 $ 635,559.78 Property Insurance $ 60,000.00 $ 61,200.00 $ 62,424.00 $ 63,672.48 $ 64,945.93 Repairs and Maintenance $ 60,000.00 $ 61,200.00 $ 62,424.00 $ 63,672.48 $ 64,945.93 Utilities $ 75,000.00 $ 76,500.00 $ 78,030.00 $ 79,590.60 $ 81,182.41 Management $ 30,000.00 $ 30,600.00 $ 31,212.00 $ 31,836.24 $ 32,472.96 Financing Assumptions Purchase and Sale Assumptions LTV 80% Purchase Price $ 34,000,000 DSCR 1.4 Sale Price Amortization Length (Years) 25 Payments Per Year 12 Discount Rate Interest Rate (APR) 6.75% Rate Quoted 1 Before Debt Discount Rate Origination Fee 1% After Debt Discount Rate
Hypo Office Model Summary Building Summary Physical Summary Property Type Office Gross Leaseable Area 100,000 # of Tenants 3 Underground Parking 100 Performance Summary Stabilized Proforma NOI (Year 1) $ 2,408,175 Estimated Purchase Price $ 34,000,000 Stabilized Proforma NOI (Year 6) $ 2,711,996 Estimated Sale Price $ 37,580,519 Unlevered IRR 9.63% Unlevered PV $ 34,858,272 Unlevered NPV $ 858,272 Levered IRR 12.96% Levered PV $ 13,815,920 Levered NPV $ 322,007 Summary Ratios 1 2 3 4 5 Unlevered ROE 7.96% 7.96% 7.97% 7.98% 7.98% Levered DSCR 1.57 1.57 1.58 1.58 1.58 ROE 0.00% 7.66% 7.68% 7.70% 156.02% 1 2 3 4 5 2,705,000 2,707,400 2,709,848 2,712,345 2,714,892 Yearly NOI 1 2 3 4 5 6 (34,000,000) 2,677,950 2,680,326 2,682,750 2,685,222 40,268,261 Cash Flow (Unlevered) 1 2 3 4 5 6 (13,493,913) 957,825 960,201 962,625 965,097 19,558,293 Cash Flow (Levered) 1 2 3 4 5 - 400,000 800,000 1,200,000 1,600,000 Amortization Schedule Interest Payment Principal Payment
Hypo Office Rent Roll Tenant Commencement Expiration Rent Parking Expenses Termination Year Month Year Month Rent Area Base Year Rent Rent Esc. Tenant Improvements Rent Abatement # Parking Stalls Rent/Stall/mo Parking Rent Esc. Expenses Expense Esc. Renew Option Exercise Quantum Energy Solutions (Suite 1) 1 1 5 12 40,000 $ 26.00 0.00% $ - 0 45 100 Mkt Growth Reimbursed CPI Yes 180-150 days prior Office Tenant 2 (Suite 2) 1 1 5 12 35,000 $ 24.50 0.00% $ - 0 35 100 Mkt Growth Reimbursed CPI No NA Office Tenant 3 (Suite 3) 1 1 5 12 25,000 $ 27.50 0.00% $ - 0 20 100 Mkt Growth Reimbursed CPI No NA
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Hypo Office - Stabilized Proforma NOI Year 0 Office Rental Income 2,500,000 Operating Reimbursements 812,159 Misc Income Parking Income 120,000 Total Gross Potential Income (GI/GPI) 3,432,159 Less Stabilized Office Vacancy and Credit Loss 187,500 Effective Gross Income (EGI) 3,244,659 Less Operating Expenses Property Tax 587,159 Property Insurance 60,000 Repairs and Maintenance 60,000 Utilities 75,000 Management 30,000 Total Operating Expenses 812,159 Net Operating Income 2,432,500 Less Average Market Tis and Commissions 0 Less Replacement Reserve 24,325 Adjusted Net Operating Income 2,408,175
Hypo Office - Stabilized Proforma NOI Year 6 Office Rental Income 2,815,406 Operating Reimbursements 914,623 Misc Income Parking Income 135,139 Total Gross Potential Income (GI/GPI) 3,865,168 Less Stabilized Office Vacancy and Credit Loss 211,155 Effective Gross Income (EGI) 3,654,013 Less Operating Expenses Property Tax 661,236 Property Insurance 67,570 Repairs and Maintenance 67,570 Utilities 84,462 Management 33,785 Total Operating Expenses 914,623 Net Operating Income (NOI) 2,739,390 Less Average Market Tis and Commissions 0 Less Replacement Reserve 27,394 Adjusted Net Operating Income 2,711,996
Hypo Office - Unlevered Cash Flows Cash Flow Statement Years Ending Dec 31 0 1 2 3 4 5 Office Rental Income Office Tenant 1 1,040,000 1,040,000 1,040,000 1,040,000 1,040,000 Office Tenant 2 857,500 857,500 857,500 857,500 857,500 Office Tenant 3 687,500 687,500 687,500 687,500 687,500 Total Gross Office Income 2,585,000 2,585,000 2,585,000 2,585,000 2,585,000 Operating Reimbursments 812,159 828,402 844,970 861,870 879,107 Misc Income Parking Income 120,000 122,400 124,848 127,345 129,892 Total Gross Potential Income (GI/GPI) 3,517,159 3,535,802 3,554,818 3,574,215 3,593,999 Less Vacancy and Collection Effective Gross Income (EGI) 3,517,159 3,535,802 3,554,818 3,574,215 3,593,999 Less operating Expenses Property Tax 587,159 598,902 610,880 623,098 635,560 Property Insurance 60,000 61,200 62,424 63,672 64,946 Repairs and Maintenance 60,000 61,200 62,424 63,672 64,946 Utilities 75,000 76,500 78,030 79,591 81,182 Management 30,000 30,600 31,212 31,836 32,473 Total Operation Expenses 812,159 828,402 844,970 861,870 879,107 Net Operating Income (NOI) 2,705,000 2,707,400 2,709,848 2,712,345 2,714,892 Less Rent Abatement 0 0 0 0 0 Less TI's and Commissions 0 0 0 0 0 Less Replacement Reserve 27,050 27,074 27,098 27,123 27,149 Adjusted Net Operating Income 2,677,950 2,680,326 2,682,750 2,685,222 2,687,743 Sale of Asset 37,580,519 Less Purchase of Asset 34,000,000 Net Cash Flows (34,000,000) 2,677,950 2,680,326 2,682,750 2,685,222 40,268,261 Ratios ROE 7.96% 7.96% 7.97% 7.98% 7.98%
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Hypo Office - DCF Analysis Constraints Capitalization Rate 7.00% Growth Rate 2.00% Discount Rate 9.00% Years Ending Dec 31 0 1 2 3 4 5 Net Cash Flow (34,000,000) 2,677,950 2,680,326 2,682,750 2,685,222 40,268,261 Discounted to Year 0 (34,000,000) 2,456,835 2,255,977 2,071,575 1,902,279 26,171,607 Total Cash Flow 16,994,509 PV 34,858,272 NPV 858,272 IRR 9.63%
Hypo Office - Debt Financing Loan Variables Amortization Schedule Years 1 2 3 4 5 LTV 80% Initial Balance 20,924,579 20,587,231 20,226,729 19,841,482 19,429,791 DSCR 1.40 Interest Payment 1,382,778 1,359,622 1,334,878 1,308,435 1,280,177 Amortization Length (Yrs) 25 Principal Payment 337,347 360,503 385,247 411,690 439,948 Payments Per Year 12 Ending Balance 20,587,231 20,226,729 19,841,482 19,429,791 18,989,843 Interest Rate (APR) 6.75% Interest Rate (EAR) 6.86% Payment Schedule Period Interest Rate 0.55% ENR 6.66% Asset Price 34,000,000 Origination Fee 209,246 Total Project Cost 34,209,246 First Year NOI 2,408,175 Annual Payment Based on DSCR 1,720,125 Loan Amount Based on LTV 27,200,000 Loan Amount Based on DSCR 20,924,579 Max Loan (Lesser of LTV, DSCR) 20,924,579 Equity Portion 13,284,667 Annual Payment 1,720,125 1 2 3 4 5 - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Interest Payment Principal Payment Payment ($)
Hypo Office -Levered Cash Flows Cash Flow Statement Years Ending Dec 31 0 1 2 3 4 5 Potential Gross Revenue Office Rental Income Office Tenant 1 1,040,000 1,040,000 1,040,000 1,040,000 1,040,000 Office Tenant 2 857,500 857,500 857,500 857,500 857,500 Office Tenant 3 687,500 687,500 687,500 687,500 687,500 Total Gross Office Income 2,585,000 2,585,000 2,585,000 2,585,000 2,585,000 Operating Reimbursments 812,159 828,402 844,970 861,870 879,107 Misc Income Parking Income 120,000 122,400 124,848 127,345 129,892 Total Gross Potential Income (GI/GPI) 3,517,159 3,535,802 3,554,818 3,574,215 3,593,999 Less vacancy and collection 0 Effective Gross Income (EGI) 3,517,159 3,535,802 3,554,818 3,574,215 3,593,999 Less operating Expenses Property Tax 587,159 598,902 610,880 623,098 635,560 Property Insurance 60,000 61,200 62,424 63,672 64,946 Repairs and Maintenance 60,000 61,200 62,424 63,672 64,946 Utilities 75,000 76,500 78,030 79,591 81,182 Management 30,000 30,600 31,212 31,836 32,473 Total Operating Expenses 812,159 828,402 844,970 861,870 879,107 Net Operating Income (NOI) 2,705,000 2,707,400 2,709,848 2,712,345 2,714,892 Less Rent Abatement 0 0 0 0 0 Less TI's and Commissions 0 0 0 0 0 Less Replacement Reserve 0 27,050 27,074 27,098 27,123 27,149 Adjusted Net Operating Income 0 2,677,950 2,680,326 2,682,750 2,685,222 2,687,743 Sale of Asset 37,580,519 Less Purchase of Asset 34,000,000 Net Unlevered Cash Flow (34,000,000) 2,677,950 2,680,326 2,682,750 2,685,222 40,268,261 Unlevered IRR 9.63% Levered Cash Flows Adjusted Net Operating Income 2,677,950 2,680,326 2,682,750 2,685,222 2,687,743 Less Loan Origination Fee 209,246 Less Initial Equity 13,284,667 Less LTD 1,720,125 1,720,125 1,720,125 1,720,125 1,720,125 Terminal Equity 18,590,675 Net Levered Cash Flow (13,493,913) 957,825 960,201 962,625 965,097 19,558,293 Levered IRR 12.96% Ratios DSCR 1.57 1.57 1.58 1.58 1.58 ROE 7.66% 7.68% 7.70% 156.02%
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Hypo Office - Levered DCF Analysis Weighted Average Cost of Capital Capital Rate Structure r' 38.83% 12.36% rd 61.17% 6.86% r 9.00% Discount Rate 12.36% Levered DCF Year Ending Dec 31 0 1 2 3 4 5 Net Levered Cash Flow (13,493,913) 957,825 960,201 962,625 965,097 19,558,293 Discounted to Yr 0 (13,493,913) 852,426 760,508 678,530 605,416 10,919,040 Sum of Net levered cash 9,910,127 PV 13,815,920 NPV 322,007 IRR 12.96% r' 39% rd 61%

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