Long Term Financing Decision

Bourland Companies

Pramod JindalWei MaIan SinHarsh SoporyChris Yardy

October 25, 2012

2

Agenda

• Executive Summary

• Company and Industry Analysis

• Objectives and Key Issues

• Binding Constraints and Feasible Alternatives

• Decision Criteria

• Evaluation of Alternatives

• Recommendations

3

Executive Summary

Current Situation• Bourland Companies is a conservative family-owned

real estate company• Loans on its two properties are due for refinancing

Objective • Refinance each property with the best debt instrument

Key Issues• Are the properties worth keeping?• Which financing option best fits the strategy?• How much debt to raise and what are the risks?

Decision Criteria • Do the asset and liabilities match?• Which alternative is the most economic?

Recommendation• Refinance Southshore with a securitized loan of $4.6M• Refinance Bedrock with the Goliath mortgage of $4.3M• Net cash injection of $300k into the business

4

Bourland Companies

Founded by Glen

Michael joins

1987 1991 19931992Mid 80’s

Michael takes over

Growth & diversification

Acquires Southshore and Bedrock on 3-yr miniperm

Annjoins

1995

Refinancing due

Glen rejoins as non-executive Chairman

Conservative family-owned and run business

Survived recession without losing properties

Conservativeness• Low debt• Diversification• Banking Relationship

5

The objective is to refinance the properties with the most appropriate debt instrument

Key issues to consider:

• Are the properties worth keeping?

• What is the best financing option that fits the corporate strategy?

• How much debt should we raise and what are the risks?

• Can Glen retire to Florida?

• Should we maintain our relationship with Bank of Boston?

6

The real estate industry in New England is attractive

Industry is attractive

Supplier PowerLOW

RivalryLOW

SubstitutesLOW

Buyer Power

MODERATE

Threat of New

EntrantsHIGH

Supplier Power:Supplier power is low because of high availability of credit

Substitutes: Generally hard to substitute offices and malls

Rivalry: Low currently but expected to increase

Buyer Power: Moderate but expected to grow because of increased supply for offices

Threat of New Entrants: Increased capital from securitization expected to lower barrier to entry for developers or acquirers

7

Company Analysis

Customers• Retail customers value location

• Office customers are price sensitive

Competitors• Alternatives available in close

proximity of Bedrock but experiencing management problems

Capability• Owns top-tier properties in strategic

locations

• Deep expertise in real estate management

Bourland has a sustainable competitive advantage with its top-tier properties

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040%

10%20%30%40%50%60%70%80%90%

100%

NOI Margin ProjectionSouthshore Bedrock

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004550650750850950

105011501250135014501550

Bedrock

NOI Projection

NOI (

$K)

Southshore

8

It makes sense to keep the properties

$ 000s Southshore BedrockDCF Valuation 7,670 10,129

Valuation based on cap rate

7,492 8,958

Capitalization Rate 9.0% 9.5%

Equity IRR 10.4% 11.6%

Assumes 35% tax rate and 3.5% terminal growth rateSee Appendix D, E

9

Binding Constraints & Feasible Alternatives

The financing alternative needs to satisfy the following constraints:

• Debt covenants required by the debt instrument

• Risk tolerance of the company

Feasible Alternatives

Miniperm Goliath Mortgage SecuritizationAmortization 20 yrs 15 yrs 25 yrs

Recourse? Yes No No

Term Length 3 yrs 15 yrs 10 yrs

Which is the best financial option that satisfies the binding constraints?

See Appendix C

10

Decision Criteria

• Asset Liability Matching1• Which alternative is cheaper? Are there

significant differences?2• Is there any interest rate risk?3• Is there any counterparty risk?4• Which option minimizes the equity

injection?5

11

MinipermAssumptions

Pre-Tax Marginal Cost of Debt 10%Tax Rate 35%Interest Rate 10%Amortization 20 yearsRollover Period 3 years

Pros

Cons

• Lowest cost to setup assuming no interest rate cap

• Lowest NPV if loan can be rolled over at the same rate

• Leverage relationship with Bank of Boston

• Short-term nature does not match long-term assets

• High interest rate risk• High counterparty risk

NPV of Financing Flows*$000s Southshore BedrockLoan Amount 4,588 4,315Miniperm 4,632 4,359Goliath Mortgage 4,659 4,485Securitization 4,728 4,603

Miniperm does not fit the asset liability matching strategy and has high counterparty and interest rate risk

* without interest rate cap, see Appendix C

12

Goliath MortgageAssumptions

Pre-Tax Marginal Cost of Debt 10%Tax Rate 35%Interest Rate (adjusted 20-yr) 9.7% / 9.95%Amortization (normalized) 20 yearsRollover Period N/A

Pros

Cons

• Low counterparty risk• Long-term nature of the loan

matches the long-term assets• Attractive NPV for Bedrock• Establish new lender

relationship

• Moderate interest rate risk (overall)

• Switching costs of going with a new partner

The Goliath mortgage is an attractive option for refinancing

NPV of Financing Flows$000s Southshore BedrockLoan Amount 4,588 4,315Miniperm 4,632 4,359Goliath Mortgage 4,659 4,485Securitization 4,728 4,603

See Appendix C

13

SecuritizationAssumptions

Pre-Tax Marginal Cost of Debt 10%Tax Rate 35%Interest Rate (adjusted 20-yr) 10.17%/10.77%Amortization (normalized) 20 yearsRollover Period N/A

Pros

Cons

• No interest rate risk matches the conservative culture

• No counterparty risk• Long-term nature of the loan

matches the long-term assets• Maintains banking relationship

• Highest cost option• Opportunity costs of lower

interest rate• Higher debt service coverage

ratio requirement

Securitization also provides an attractive low-risk refinancing option

NPV of Financing Flows$000s Southshore BedrockLoan Amount 4,588 4,315Miniperm 4,632 4,359Goliath Mortgage 4,659 4,485Securitization 4,728 4,603

See Appendix C

14

Southshore: Interest Rate Risk Analysis

9.5% 10.0% 10.5% 11.0%4100

4200

4300

4400

4500

4600

4700

4800

4900

Goliath Mortgage

Securitization

Interest Rate

NPV

of F

inan

cing

Flo

w ($

K)

9.7%

Goliath Mortgage = Securitization:

9.8%

10 b.p.

Cushion for Goliath mortgage to become more expensive than securitization is only 10 b.p., implying that securitization is worthwhile for Southshore

15

Bedrock: Interest Rate Risk Analysis

Cushion for Goliath mortgage to become more expensive than securitization is 53 b.p., which is a reasonable safety margin given the flat yield curve

0.095 0.1 0.105 0.11 0.1154300

4400

4500

4600

4700

4800

4900

Goliath Mortgage

Securitization

Interest Rate

NPV

of F

inan

cing

Flo

w ($

K)

9.95%

Goliath Mortgage = Securitization:

10.48%

53 b.p.

16

The optimal debt amount for Southshore is $4.6M, permitting a recapitalization dividend of $0.6M

SouthshoreOptimal Loan $4.6M

Current Loan $3.9M

Recap Dividend

(net of fees)

$0.6M

A $4.6M securitized loan allows Bourland to meet its debt covenants even in the worst case of 10% vacancy

VacancyBest Case 3.0%

Base Case 5.0%

Worst Case 10.0%

NOI - Worst

NOI - Base

NOI - Best

DSCR * Payment (Current Amt)

DSCR * Payment (Full Amt)

DSCR * Payment (Optimal Amt)

500

550

600

650

700

750

800

850

900

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Amou

nt ($

K)

Southshore - Securitization

See Appendix D

17

The optimal debt amount for Bedrock is $4.3M, requiring an equity injection of $0.9M

BedrockOptimal Loan $4.3M

Current Loan $5.0M

Equity Injection (incl. fees)

$0.9M

A $4.3M Goliath mortgage allows Bourland to meet its debt covenants even in the worst case of 10% vacancy

VacancyBest Case 2.0%

Base Case 0.8-6.3%

Worst Case 10.0%

NOI - Worst

NOI - Base

NOI - Best

DSCR * Payment

(Current Amt)

DSCR * Payment (Full

Amt)

DSCR * Payment

(Optimal Amt)650

750

850

950

1050

1150

1250

1350

1450

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Amou

nt ($

K)

Bedrock - Mortgage

See Appendix E

18

Securitization is the best option for Southshore

Miniperm Goliath Securitization Rank

Asset Liability Fit #1

NPV of Financing($ 000s) 4,632 4,659 4,728 #2

Interest Rate Risk High High None #3

Counterparty Risk High None None #4

Equity Injection($ 000s) n.a. (296)* (591)* #5

*Special dividend based on optimal loan amount, net of fees

19

Goliath mortgage is the best option for Bedrock

Miniperm Goliath Securitization Rank

Asset Liability Fit #1

NPV of Financing($ 000s) 4,359 4,485 4,603 #2

Interest Rate Risk High Low None #3

Counterparty Risk High None None #4

Equity Injection($ 000s) n.a. 868* 866* #5

Based on optimal loan amount

20

Results of Refinancing

Sources & Uses of Capital($ thousands)

Sources UsesSouthshore SouthshoreSecuritized Loan 4,588 Miniperm Loan 3,900Equity 1,100 Financing Fees 97

Recap Dividend 591Equity 1,100

5,688 5,688Bedrock BedrockMortgage 4,315 Bullet Loan 5,000Equity 2,000 Financing Fees 183Cash Injection 868 Equity 2,000

7,183 7,183TOTAL 12,871 TOTAL 12,871

Bourland CompaniesNet Cash Injection 277

21

Recommendations

• Proceed with refinancing both properties:

• Finance Southshore with securitized loan of $4.6M• Finance Bedrock with the Goliath mortgage of $4.3M

• For now, Glen should stick around until increases in NOI facilitates additional dividends or opportunities for refinancing

• Bourland should be careful with the amount of debt raised as the incentives for Bank of Boston has changed with securitization – incentivized to lend as much as possible

Appendices

Appendix AMacroeconomy

25

Macroeconomy

• Savings and Loans Crisis results in oversupply of developed real estate1986-1989

• Recession1990-1991

• Federal Reserve cuts interest rate to 6% to stimulate growth1992

• Federal Reserve raises interest rates 5 times due to inflation fears1994

• ‘Soft Landing’ expected for economy1995

Real Estate bust yielded bargains; Economy doing well again

26

Big changes in Fed Prime Rate in response to Economic Conditions (1985-1995)

Jul-83 Nov-84 Mar-86 Aug-87 Dec-88 May-90 Sep-91 Jan-93 Jun-94 Oct-95 Mar-975

6

7

8

9

10

11

12

13

Inte

rest

Rat

e (%

)

Appendix BEconomic Assumptions

28

1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 20YR 30YR

2.0%

4.0%

6.0%

8.0%

1995 Yield Curve

Inte

rest

Rat

e

Yield Curve Data20-yr yield 7.85%25-yr 7.80%30-yr 7.75%10-yr 7.66%15-yr 7.76%Switch from 15-20 0.10%Switch from 25-20 -0.05%

1995 Yield Curve is Flat

Scenarios 1Southshore Bedrock

Base Case 5.00% 3.40%Best Scenario 3.00% 2.00%Worst Scenario 10.00% 10.00%Selected 5.00% 3.40%

Appendix CLoan Options and NPV Evaluations

30

Worksheet for Loan OptionsSouthshore Bedrock

Miniperm Insurance Co. Securitization Miniperm Insurance Co. SecuritizationProjected Rate 10% 9.60% 10.12% 10% 9.85% 10.72%Adjusted Rate (based on 20 yr Amortization) 10% 9.70% 10.17% 10% 9.95% 10.77%Loan Term 3 15 10 3 15 10Amortization 20 15 25 20 15 25Adjusted Amortization 20 20 20 20 20 20Renewal rate 0.25% 0 0 0.25% 0 0Debt Constant (Principal and interest) 11.75% 12.84% 11.12% 11.75% 13.04% 11.63%Stabilized NOI $674,298 $674,298 $674,298 $851,056 $851,056 $851,056Required Debt Coverage (DSCR) 1.2 1.25 1.25 1.25 1.25 1.4Maximum Annual Constant Debt Service $561,915 $539,438 $539,438 $680,845 $680,845 $607,897Maximum Loan Using Debt Coverage Test $4,782,255 $4,201,234 $4,851,672 $5,794,424 $5,221,202 $5,226,975Capitalization Rate for Retail Properties 9.00% 9.00% 9.00% 9.50% 9.50% 9.50%Value Based on Cap Rate $7,492,200 $7,492,200 $7,492,200 $8,958,484 $8,958,484 $8,958,484Required Loan to Value Coverage (LTV) 75% 75% 75% 75% 75% 65%Maximum Loan Using Loan to Value Test $5,619,150 $5,619,150 $5,619,150 $6,718,863 $6,718,863 $5,823,015Upfront Fees 0.25% + $5k legal 1% + 2.5% 2% 0.25% + $5k legal 1% + 2.5% 2%Recourse or Non-Recourse R NR NR R NR NR

Prepayment Penalty None

No prepayment in years 1-3, 5% fee in year 4 and less

0.5% for each year thereafter N/A None

No prepayment in years 1-3, 5% fee in year 4 and less

0.5% for each year thereafter N/A

Other Consideration2.2% fee to cap

rate <11% N/A N/A2.2% fee to cap

rate <11% N/A N/A

Interest Rate Structure Prime + 1%15-yr treasury +

1.75%10-yr treasury +

2.4% Prime + 1%15-yr treasury +

2%10-yr treasury +

2.4% - Fixed / Variable? Variable Variable Fixed Variable Variable Fixed

Upfront Fee AnalysisLoan Amount $4,782,255 $4,201,234 $4,851,672 $5,794,424 $5,221,202 $5,226,975Upfront Fees $11,956 $147,043 $97,033 $14,486 $182,742 $104,539Legal Fees $5,000 $5,000

Mandatory Fees $16,956 $147,043 $97,033 $19,486 $182,742 $104,539Other (Interest Rate Cap) $105,210 $127,477

Total Fees $122,165 $147,043 $97,033 $146,963 $182,742 $104,539

31

NPV of Financing Flow (Miniperm) - SouthshoreAmount Borrowed $4,587,840Interest 10.00%Amortization 20Annual Debt Constant $538,886Market Value $7,492,200

1995Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,587,840 $4,587,840 $4,507,738 $4,419,626 $4,322,703 $4,216,087 $4,098,810 $3,969,805 $3,827,899 $3,671,803 $3,500,097Annual Debt Service $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886Interest Payment $458,784 $450,774 $441,963 $432,270 $421,609 $409,881 $396,980 $382,790 $367,180 $350,010Principal Payment $80,102 $88,112 $96,923 $106,616 $117,277 $129,005 $141,906 $156,096 $171,706 $188,876Ending Principal $4,587,840 $4,507,738 $4,419,626 $4,322,703 $4,216,087 $4,098,810 $3,969,805 $3,827,899 $3,671,803 $3,500,097 $3,311,221Renewal fee – – $10,807 – – $9,925 – – $8,750 –Tax shield on interest $160,574 $157,771 $154,687 $151,295 $147,563 $143,458 $138,943 $133,976 $128,513 $122,503After tax Financing Flow $378,312 $381,115 $395,006 $387,591 $391,323 $405,352 $399,943 $404,910 $419,123 $416,383PV of After tax Financing Flow $355,222 $336,014 $327,005 $301,284 $285,619 $277,802 $257,366 $244,659 $237,791 $221,818

11 12 13 14 15 16 17 18 19 20$3,311,221 $3,103,457 $2,874,917 $2,623,523 $2,346,989 $2,042,802 $1,708,196 $1,340,130 $935,257 $489,896

$538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886 $538,886$331,122 $310,346 $287,492 $262,352 $234,699 $204,280 $170,820 $134,013 $93,526 $48,990$207,764 $228,540 $251,394 $276,534 $304,187 $334,606 $368,066 $404,873 $445,360 $489,896

$3,103,457 $2,874,917 $2,623,523 $2,346,989 $2,042,802 $1,708,196 $1,340,130 $935,257 $489,896 $0– $7,187 – – $5,107 – – $2,338 – –

$115,893 $108,621 $100,622 $91,823 $82,145 $71,498 $59,787 $46,905 $32,734 $17,146$422,993 $437,452 $438,264 $447,063 $461,848 $467,388 $479,099 $494,320 $506,152 $521,740$211,586 $205,464 $193,282 $185,129 $179,579 $170,641 $164,241 $159,116 $152,981 $148,068

Setup cost $16,956NPV of total Financing Flow $4,631,622

32

NPV of Financing Flow (Goliath) - SouthshoreAmount Borrowed $4,587,840Interest 9.70%Amortization 20Annual Debt Constant $527,711Market Value $7,492,200

1995Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,587,840 $4,587,840 $4,504,920 $4,413,961 $4,314,183 $4,204,732 $4,084,670 $3,952,967 $3,808,496 $3,650,019 $3,476,177Annual Debt Service $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711Interest Payment $444,791 $436,752 $427,934 $418,260 $407,649 $396,009 $383,240 $369,234 $353,869 $337,015Principal Payment $82,920 $90,959 $99,778 $109,451 $120,062 $131,702 $144,471 $158,477 $173,842 $190,696Ending Principal $4,587,840 $4,504,920 $4,413,961 $4,314,183 $4,204,732 $4,084,670 $3,952,967 $3,808,496 $3,650,019 $3,476,177 $3,285,481Renewal fee – – – – – – – – – –Tax shield on interest $155,677 $152,863 $149,777 $146,391 $142,677 $138,603 $134,134 $129,232 $123,854 $117,955After tax Financing Flow $372,034 $374,848 $377,934 $381,320 $385,034 $389,108 $393,577 $398,479 $403,857 $409,756PV of After tax Financing Flow $349,328 $330,488 $312,873 $296,409 $281,029 $266,669 $253,269 $240,774 $229,130 $218,288

11 12 13 14 15 16 17 18 19 20$3,285,481 $3,076,298 $2,846,833 $2,595,123 $2,319,009 $2,016,125 $1,683,878 $1,319,418 $919,625 $481,071

$527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711 $527,711$318,527 $298,247 $276,000 $251,597 $224,828 $195,463 $163,252 $127,918 $89,158 $46,640$209,184 $229,464 $251,711 $276,114 $302,883 $332,248 $364,459 $399,794 $438,554 $481,071

$3,076,298 $2,846,833 $2,595,123 $2,319,009 $2,016,125 $1,683,878 $1,319,418 $919,625 $481,071 ($0)– – – – – – – – – –

$111,485 $104,386 $96,600 $88,059 $78,690 $68,412 $57,138 $44,771 $31,205 $16,324$416,227 $423,325 $431,111 $439,652 $449,021 $459,299 $470,573 $482,940 $496,506 $511,387$208,202 $198,828 $190,127 $182,060 $174,591 $167,688 $161,318 $155,453 $150,066 $145,130


*Note that Annual Debt service is based on an adjusted interest rate and amortization

*

33

NPV of Financing Flow (Securitization) - SouthshoreAmount Borrowed $4,587,840Interest 10.17%Amortization 20Annual Debt Constant $545,152Market Value $7,492,200

1995Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,587,840 $4,587,840 $4,509,271 $4,422,712 $4,327,349 $4,222,289 $4,106,543 $3,979,026 $3,838,541 $3,683,768 $3,513,255Annual Debt Service $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152Interest Payment $466,583 $458,593 $449,790 $440,091 $429,407 $417,635 $404,667 $390,380 $374,639 $357,298Principal Payment $78,569 $86,559 $95,362 $105,061 $115,746 $127,517 $140,485 $154,773 $170,513 $187,854Ending Principal $4,587,840 $4,509,271 $4,422,712 $4,327,349 $4,222,289 $4,106,543 $3,979,026 $3,838,541 $3,683,768 $3,513,255 $3,325,401Renewal fee – – – – – – – – – –Tax shield on interest $163,304 $160,508 $157,426 $154,032 $150,292 $146,172 $141,633 $136,633 $131,124 $125,054After tax Financing Flow $381,848 $384,645 $387,726 $391,120 $394,860 $398,980 $403,519 $408,519 $414,029 $420,098PV of After tax Financing Flow $358,543 $339,126 $320,978 $304,027 $288,201 $273,435 $259,667 $246,840 $234,900 $223,797

11 12 13 14 15 16 17 18 19 20$3,325,401 $3,118,442 $2,890,435 $2,639,240 $2,362,499 $2,057,612 $1,721,719 $1,351,666 $943,978 $494,828

$545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152 $545,152$338,193 $317,146 $293,957 $268,411 $240,266 $209,259 $175,099 $137,464 $96,003 $50,324$206,959 $228,007 $251,195 $276,742 $304,886 $335,893 $370,053 $407,688 $449,150 $494,828

$3,118,442 $2,890,435 $2,639,240 $2,362,499 $2,057,612 $1,721,719 $1,351,666 $943,978 $494,828 ($0)– – – – – – – – – –

$118,368 $111,001 $102,885 $93,944 $84,093 $73,241 $61,285 $48,113 $33,601 $17,613$426,785 $434,151 $442,267 $451,209 $461,059 $471,912 $483,868 $497,040 $511,551 $527,539$213,483 $203,913 $195,047 $186,846 $179,272 $172,293 $165,876 $159,992 $154,613 $149,714


*


34

NPV of Financing Flow (Miniperm) - BedrockAmount Borrowed $4,314,755Interest 10.00%Amortization 20Annual Debt Constant $506,810Market Value $8,958,484

Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,314,755 $4,314,755 $4,239,421 $4,156,554 $4,065,400 $3,965,130 $3,854,834 $3,733,507 $3,600,049 $3,453,244 $3,291,759Annual Debt Service $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810Interest Payment $431,476 $423,942 $415,655 $406,540 $396,513 $385,483 $373,351 $360,005 $345,324 $329,176Principal Payment $75,334 $82,867 $91,154 $100,270 $110,297 $121,326 $133,459 $146,805 $161,485 $177,634Ending Principal $4,314,755 $4,239,421 $4,156,554 $4,065,400 $3,965,130 $3,854,834 $3,733,507 $3,600,049 $3,453,244 $3,291,759 $3,114,125Renewal fee – – $10,163 – – $9,334 – – $8,229 –Tax shield on interest $151,016 $148,380 $145,479 $142,289 $138,780 $134,919 $130,673 $126,002 $120,864 $115,212After tax financing cashflow $355,793 $358,430 $371,494 $364,521 $368,030 $381,224 $376,137 $380,808 $394,175 $391,598PV of After tax financing cashflow $334,078 $316,013 $307,541 $283,350 $268,618 $261,266 $242,046 $230,096 $223,637 $208,614

11 12 13 14 15 16 17 18 19 20$3,114,125 $2,918,728 $2,703,791 $2,467,361 $2,207,288 $1,921,207 $1,606,518 $1,260,360 $879,587 $460,736

$506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810 $506,810$311,413 $291,873 $270,379 $246,736 $220,729 $192,121 $160,652 $126,036 $87,959 $46,074$195,397 $214,937 $236,430 $260,073 $286,081 $314,689 $346,158 $380,774 $418,851 $460,736

$2,918,728 $2,703,791 $2,467,361 $2,207,288 $1,921,207 $1,606,518 $1,260,360 $879,587 $460,736 $0– $6,759 – – $4,803 – – $2,199 – –

$108,994 $102,155 $94,633 $86,358 $77,255 $67,242 $56,228 $44,113 $30,786 $16,126$397,815 $411,414 $412,177 $420,452 $434,357 $439,567 $450,581 $464,896 $476,024 $490,684$198,992 $193,234 $181,777 $174,109 $168,890 $160,484 $154,465 $149,645 $143,875 $139,255


35

NPV of Financing Flow (Goliath) - BedrockAmount Borrowed $4,314,755Interest 9.95%Amortization 20Annual Debt Constant $504,908Market Value $8,958,484

Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,314,755 $4,314,755 $4,238,949 $4,155,605 $4,063,971 $3,963,225 $3,852,459 $3,730,678 $3,596,786 $3,449,578 $3,287,730Annual Debt Service $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908Interest Payment $429,102 $421,564 $413,275 $404,162 $394,143 $383,127 $371,016 $357,700 $343,061 $326,965Principal Payment $75,806 $83,345 $91,633 $100,746 $110,766 $121,781 $133,892 $147,208 $161,848 $177,944Ending Principal $4,314,755 $4,238,949 $4,155,605 $4,063,971 $3,963,225 $3,852,459 $3,730,678 $3,596,786 $3,449,578 $3,287,730 $3,109,787Renewal fee – – – – – – – – – –Tax shield on interest $150,186 $147,547 $144,646 $141,457 $137,950 $134,094 $129,856 $125,195 $120,071 $114,438After tax financing cashflow $354,722 $357,361 $360,262 $363,452 $366,958 $370,814 $375,053 $379,713 $384,837 $390,471PV of After tax financing cashflow $333,073 $315,071 $298,243 $282,519 $267,836 $254,131 $241,349 $229,435 $218,339 $208,014

11 12 13 14 15 16 17 18 19 20$3,109,787 $2,914,147 $2,699,050 $2,462,562 $2,202,556 $1,916,692 $1,602,399 $1,256,849 $876,934 $459,237

$504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908 $504,908$309,268 $289,812 $268,421 $244,902 $219,044 $190,615 $159,359 $124,994 $87,211 $45,671$195,640 $215,096 $236,488 $260,006 $285,864 $314,293 $345,550 $379,915 $417,697 $459,237

$2,914,147 $2,699,050 $2,462,562 $2,202,556 $1,916,692 $1,602,399 $1,256,849 $876,934 $459,237 ($0)– – – – – – – – – –

$108,244 $101,434 $93,947 $85,716 $76,665 $66,715 $55,775 $43,748 $30,524 $15,985$396,664 $403,474 $410,961 $419,193 $428,243 $438,193 $449,133 $461,161 $474,384 $488,923$198,416 $189,505 $181,241 $173,588 $166,512 $159,982 $153,968 $148,443 $143,380 $138,755



*

36

NPV of Financing Flow (Securitization) - BedrockAmount Borrowed $4,314,755Interest 10.77%Amortization 20Annual Debt Constant $533,700Market Value $8,958,484

Year 0 1 2 3 4 5 6 7 8 9 10Beginning Principal $4,314,755 $4,314,755 $4,245,755 $4,169,322 $4,084,658 $3,990,876 $3,886,994 $3,771,923 $3,644,459 $3,503,267 $3,346,869Annual Debt Service $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700Interest Payment $464,699 $457,268 $449,036 $439,918 $429,817 $418,629 $406,236 $392,508 $377,302 $360,458Principal Payment $69,001 $76,432 $84,664 $93,782 $103,883 $115,071 $127,464 $141,192 $156,398 $173,242Ending Principal $4,314,755 $4,245,755 $4,169,322 $4,084,658 $3,990,876 $3,886,994 $3,771,923 $3,644,459 $3,503,267 $3,346,869 $3,173,627Renewal fee – – – – – – – – – –Tax shield on interest $162,645 $160,044 $157,163 $153,971 $150,436 $146,520 $142,183 $137,378 $132,056 $126,160After tax financing cashflow $371,055 $373,656 $376,537 $379,729 $383,264 $387,180 $391,517 $396,322 $401,644 $407,540PV of After tax financing cashflow $348,409 $329,437 $311,716 $295,172 $279,737 $265,347 $251,944 $239,470 $227,874 $217,107

11 12 13 14 15 16 17 18 19 20$3,173,627 $2,981,727 $2,769,159 $2,533,698 $2,272,877 $1,983,966 $1,663,939 $1,309,445 $916,773 $481,809

$533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700 $533,700$341,800 $321,132 $298,238 $272,879 $244,789 $213,673 $179,206 $141,027 $98,736 $51,891$191,900 $212,568 $235,461 $260,821 $288,911 $320,027 $354,494 $392,673 $434,964 $481,809

$2,981,727 $2,769,159 $2,533,698 $2,272,877 $1,983,966 $1,663,939 $1,309,445 $916,773 $481,809 $0– – – – – – – – – –

$119,630 $112,396 $104,383 $95,508 $85,676 $74,786 $62,722 $49,360 $34,558 $18,162$414,070 $421,304 $429,316 $438,192 $448,024 $458,914 $470,978 $484,340 $499,142 $515,538$207,123 $197,879 $189,336 $181,455 $174,204 $167,547 $161,457 $155,904 $150,863 $146,308


*


37

Miniperm vs. Capped Miniperm (Southshore)

9.5% 10.0% 10.5% 11.0% 11.5% 12.0%4100

4200

4300

4400

4500

4600

4700

4800

4900

Miniperm

Capped Miniperm

Goliath Mortgage

Securitization

Interest Rate

NPV Financing Flow ($K)

10% 11%

38

Miniperm vs. Capped Miniperm (Bedrock)

0.095 0.1 0.105 0.11 0.1154200

4300

4400

4500

4600

4700

4800

4900

Miniperm

Capped Miniperm

Goliath Mortgage

Securitization

Interest Rate

NPV

of F

inan

cing

Flo

w ($

K)

10% 11%

Appendix DFinancial Analysis (Southshore)

40

Southshore 10-yr Projection – Base CaseSq. Ft. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

TJ MAXX 29,615 Rate 11.63 11.63 11.63 11.63 11.63 12.63 12.63 12.63 12.63 12.63 Income 344,422.45 344,422.45 344,422.45 344,422.45 344,422.45 374,037.45 374,037.45 374,037.45 374,037.45 374,037.45

PAPA GINOS 3,600 Rate 12.94 14.25 14.25 14.75 14.75 15.25 15.50 15.50 16.00 16.25 Income 46,584.00 51,300.00 51,300.00 53,100.00 53,100.00 54,900.00 27,900.00 56,700.00 57,600.00 58,500.00

BOSTON CHICKEN 4,200 Rate 16.00 16.50 17.00 17.50 18.00 18.50 19.00 19.50 20.00 20.50 Income 67,200.00 69,300.00 71,400.00 73,500.00 75,600.00 77,700.00 79,800.00 81,900.00 84,000.00 86,100.00

KINKO'S COPYING 8,450 Rate 16.00 16.50 17.00 17.50 18.00 18.50 19.00 15.50 16.00 16.50 Income 135,200.00 139,425.00 143,650.00 147,875.00 152,100.00 156,325.00 160,550.00 65,488.00 135,200.00 139,425.00

THE BIG PARTY 10,713 Rate 15.00 15.00 15.50 16.00 16.00 17.50 18.00 18.50 19.00 19.50 Income 160,695.00 160,695.00 166,051.50 171,408.00 171,408.00 187,477.50 192,834.00 198,190.50 203,547.00 208,903.50

Vacant Space 5,099 Rate 14.00 14.25 14.50 14.75 15.00 15.25 15.50 15.75 16.00 16.25 Income 17,846.00 72,660.75 73,935.50 75,210.25 76,485.00 77,759.75 79,034.50 80,309.25 81,584.00 82,858.75

Total Rental Income 61,677 771,947 837,803 850,759 865,516 873,115 928,200 914,156 856,625 935,968 949,825

Gross Income 771,947 837,803 850,759 865,516 873,115 928,200 914,156 856,625 935,968 949,825Vacancy Allow 5% 38,597 41,890 42,538 43,276 43,656 46,410 45,708 42,831 46,798 47,491

Total Income 733,350 795,913 808,221 822,240 829,460 881,790 868,448 813,794 889,170 902,333Expense

CAM/RE Tax on Vacant Space $2.5 ( 10,186) ( 7,624) ( 7,624) ( 7,624) ( 7,624) ( 7,624) ( 7,624) ( 7,624) ( 7,624) ( 7,624)Management Fee 5% ( 36,668) ( 39,796) ( 40,411) ( 41,112) ( 41,473) ( 44,089) ( 43,422) ( 40,690) ( 44,459) ( 45,117)Structural Reserve $0.2 ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199) ( 12,199)

Total Expense 59,053 59,619 60,234 60,935 61,296 63,912 63,245 60,513 64,282 64,940 NOI 674,298 736,294 747,987 761,305 768,164 817,877 805,203 753,281 824,889 837,394

41

Southshore 10-yr Projection – Best CaseSq. Ft. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004












42

Southshore 10-yr Projection – Worst CaseSq. Ft. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004












43

Debt Schedule for SouthshoreMiniperm

Goliath Mortgage

Securitization

Beginning Principal 4,587,840 4,587,840 4,507,738 4,419,626 4,322,703 4,216,087 4,098,810 3,969,805 3,827,899 3,671,803 3,500,097 Interest Payment 458,784 450,774 441,963 432,270 421,609 409,881 396,980 382,790 367,180 350,010 Principal Payment 80,102 88,112 96,923 106,616 117,277 129,005 141,906 156,096 171,706 188,876 Interest Payment and Loan Amortization 538,886 538,886 538,886 538,886 538,886 538,886 538,886 538,886 538,886 538,886 Ending Principal 4,587,840 4,507,738 4,419,626 4,322,703 4,216,087 4,098,810 3,969,805 3,827,899 3,671,803 3,500,097 3,311,221 Other overhead cost 16,956 0 0 0 0 0 0 0 0 0 Total Debt Service 555,842 538,886 538,886 538,886 538,886 538,886 538,886 538,886 538,886 538,886



44

Southshore Valuation

EBT 127,642 292,560 309,604 328,825 342,019 399,597 394,164 349,417 431,636 454,430 Taxes 44,675 102,396 108,362 115,089 119,707 139,859 137,957 122,296 151,073 159,051 Net Income (FCFE - all items are cash available to owners except Principal)82,967 190,164 201,243 213,736 222,312 259,738 256,206 227,121 280,563 295,380 PV of FCFE 75,147 156,007 149,535 143,849 135,519 143,410 128,127 102,877 115,106 109,763 Terminal ValueEquity IRR 10.4% <- Goal seek to make NPV 0 1,645,019 NPV 0

Valuation of Southshore 9.2% 1.6% 1.8% 0.9% 6.5% -1.5% -6.4% 9.5% 1.5%FCFF 447,827 488,938 496,699 505,537 510,089 543,083 534,672 500,212 547,737 556,036 PV of FCFF 410,850 411,530 383,543 358,135 331,523 323,823 292,484 251,040 252,193 234,876 Terminal Value 4,419,934 Sum of PVFCFFs 7,669,931 Precedent (Cap Rate) Value 7,492,200 Discount Rate 9.0%

Ratios for SouthshoreBreak Even Ratio (BER) 0.89 0.70 0.69 0.68 0.68 0.64 0.65 0.69 0.63 0.63NOI Margin 92% 93% 93% 93% 93% 93% 93% 93% 93% 93%Loan-To-Value (LTV) 60% 55% 54% 53% 53% 49% 50% 54% 49% 48%Debt Service Coverage Ratio (DSCR) 1.35 1.47 1.50 1.52 1.54 1.64 1.61 1.51 1.65 1.68

45

Sensitivity Analysis on DSCR (Miniperm) - Southshore

Vacancy Rate1.25 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 1.47 1.46 1.44 1.43 1.41 1.40 1.38 1.36 8.25% 1.45 1.43 1.42 1.40 1.39 1.37 1.35 1.34 8.50% 1.42 1.41 1.39 1.38 1.36 1.35 1.33 1.32 8.75% 1.40 1.38 1.37 1.35 1.34 1.32 1.31 1.29 9.00% 1.37 1.36 1.34 1.33 1.31 1.30 1.28 1.27 9.25% 1.35 1.33 1.32 1.30 1.29 1.28 1.26 1.25 9.50% 1.32 1.31 1.30 1.28 1.27 1.25 1.24 1.22 9.75% 1.30 1.29 1.27 1.26 1.25 1.23 1.22 1.20

10.00% 1.28 1.26 1.25 1.24 1.22 1.21 1.20 1.18 10.25% 1.26 1.24 1.23 1.22 1.20 1.19 1.18 1.16 10.50% 1.24 1.22 1.21 1.20 1.18 1.17 1.16 1.14 10.75% 1.22 1.20 1.19 1.18 1.16 1.15 1.14 1.13 11.00% 1.20 1.18 1.17 1.16 1.14 1.13 1.12 1.11 11.25% 1.18 1.16 1.15 1.14 1.13 1.11 1.10 1.09 11.50% 1.16 1.15 1.13 1.12 1.11 1.10 1.08 1.07 11.75% 1.14 1.13 1.12 1.10 1.09 1.08 1.07 1.05 12.00% 1.12 1.11 1.10 1.09 1.07 1.06 1.05 1.04

46

Sensitivity Analysis on DSCR (Goliath) - Southshore

Vacancy Rate1.14 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 1.29 1.27 1.26 1.24 1.23 1.22 1.20 1.19 8.25% 1.27 1.25 1.24 1.23 1.21 1.20 1.19 1.17 8.50% 1.25 1.23 1.22 1.21 1.19 1.18 1.17 1.15 8.75% 1.23 1.22 1.20 1.19 1.18 1.16 1.15 1.14 9.00% 1.21 1.20 1.18 1.17 1.16 1.15 1.13 1.12 9.25% 1.19 1.18 1.17 1.15 1.14 1.13 1.12 1.10 9.50% 1.18 1.16 1.15 1.14 1.13 1.11 1.10 1.09 9.75% 1.16 1.15 1.13 1.12 1.11 1.10 1.08 1.07

10.00% 1.14 1.13 1.12 1.11 1.09 1.08 1.07 1.06 10.25% 1.13 1.11 1.10 1.09 1.08 1.07 1.05 1.04 10.50% 1.11 1.10 1.09 1.07 1.06 1.05 1.04 1.03 10.75% 1.09 1.08 1.07 1.06 1.05 1.04 1.03 1.01 11.00% 1.08 1.07 1.06 1.05 1.03 1.02 1.01 1.00 11.25% 1.07 1.05 1.04 1.03 1.02 1.01 1.00 0.99 11.50% 1.05 1.04 1.03 1.02 1.01 0.99 0.98 0.97 11.75% 1.04 1.03 1.01 1.00 0.99 0.98 0.97 0.96 12.00% 1.02 1.01 1.00 0.99 0.98 0.97 0.96 0.95

47

Sensitivity Analysis on DSCR (Securitization) - Southshore

Vacancy Rate1.32 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 1.60 1.59 1.57 1.55 1.53 1.52 1.50 1.48 8.25% 1.57 1.55 1.54 1.52 1.50 1.49 1.47 1.45 8.50% 1.54 1.52 1.50 1.49 1.47 1.46 1.44 1.42 8.75% 1.51 1.49 1.47 1.46 1.44 1.43 1.41 1.39 9.00% 1.48 1.46 1.44 1.43 1.41 1.40 1.38 1.37 9.25% 1.45 1.43 1.41 1.40 1.38 1.37 1.35 1.34 9.50% 1.42 1.40 1.39 1.37 1.36 1.34 1.33 1.31 9.75% 1.39 1.37 1.36 1.35 1.33 1.32 1.30 1.29

10.00% 1.36 1.35 1.33 1.32 1.31 1.29 1.28 1.26 10.25% 1.34 1.32 1.31 1.29 1.28 1.27 1.25 1.24 10.50% 1.31 1.30 1.28 1.27 1.26 1.24 1.23 1.21 10.75% 1.29 1.27 1.26 1.25 1.23 1.22 1.21 1.19 11.00% 1.26 1.25 1.24 1.22 1.21 1.20 1.18 1.17 11.25% 1.24 1.23 1.22 1.20 1.19 1.18 1.16 1.15 11.50% 1.22 1.21 1.19 1.18 1.17 1.16 1.14 1.13 11.75% 1.20 1.19 1.17 1.16 1.15 1.13 1.12 1.11 12.00% 1.18 1.17 1.15 1.14 1.13 1.12 1.10 1.09

Appendix EFinancial Analysis (Bedrock)

49

Bedrock 10-yr Projection – Base Case1992 1993 1994 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

IncomeRent Revenue 2,215,360 2,202,572 2,254,590 2,362,788 2,457,013 2,510,631 2,655,280 2,819,365 3,029,661 3,126,268 Absorption and Turnover Vacancy ( 146,479) ( 40,223) ( 150,623) ( 79,209) ( 99,174) ( 18,201) ( 150,947) ( 169,772) ( 85,031) ( 156,701)Base Rental Revenue 1,994,779 1,847,903 1,885,746 1,334,370 2,068,881 2,162,349 2,103,967 2,283,579 2,357,839 2,492,430 2,504,333 2,649,593 2,944,630 2,969,567 Expense Reimbursement 86,506 88,306 74,252 71,184 69,921 101,135 105,579 86,601 104,907 137,182 139,748 130,582 109,556 134,037 Other (Miscellaneous Revenue) 17,862 23,285 59,120 56,565 10,000 7,973 43,146 6,749 7,019 6,022 5,314 5,527 5,748 5,978 Total Income 2,099,147 1,959,494 2,019,118 1,462,119 2,148,802 2,271,457 2,252,692 2,376,929 2,469,765 2,635,634 2,649,395 2,785,702 3,059,934 3,109,582

Implied Vacancy Rate 3.4% 5.3% 0.8% 3.9% 3.2% 6.3% 1.7% 1.4% 4.4% 2.8%Vacancy Scenario Adjustment 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Final Vacancy 3.4% 5.3% 0.8% 3.9% 3.2% 6.3% 1.7% 1.4% 4.4% 2.8%General Vacancy ( 73,059) ( 121,036) ( 17,345) ( 92,247) ( 80,161) ( 167,326) ( 46,354) ( 40,175) ( 134,714) ( 87,464)Effective Gross Revenue 2,099,147 1,959,494 2,019,118 1,462,119 2,075,743 2,150,421 2,235,347 2,284,682 2,389,604 2,468,308 2,603,041 2,745,527 2,925,220 3,022,118 Expense

Maintenance & Repair 57,937 57,867 75,920 47,344 Custodial 184,117 178,646 206,730 115,331 Utilities 390,856 406,514 414,906 346,201 Landscaping/Snow Removal 47,943 74,719 70,914 64,230 Taxes 243,268 243,557 253,257 190,578 Administrative* 180,575 170,003 183,211 134,287 Reimbursable Expenses 1,163,622 1,217,741 1,259,176 1,312,735 1,365,082 1,424,320 1,474,288 1,153,822 1,605,185 1,664,839 Nonreimbursable Expenses 60,375 62,714 65,211 67,418 70,254 72,918 76,141 79,600 83,479 86,620 Owner Maint. & Repair 21,221 22,435 26,750 15,136 Total Expense 1,125,917 1,153,741 1,231,688 913,107 1,223,997 1,280,455 1,324,387 1,380,153 1,435,336 1,497,238 1,550,429 1,233,422 1,688,664 1,751,459

NOI 973,230 805,753 787,430 549,012 851,746 869,966 910,960 904,529 954,268 971,070 1,052,612 1,512,105 1,236,556 1,270,659

50

Bedrock 10-yr Projection – Best Case1992 1993 1994 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004


Implied Vacancy Rate 3.4% 5.3% 0.8% 3.9% 3.2% 6.3% 1.7% 1.4% 4.4% 2.8%Vacancy Scenario Adjustment -1.4% -3.3% 1.2% -1.9% -1.2% -4.3% 0.3% 0.6% -2.4% -0.8%Final Vacancy 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%General Vacancy ( 42,976) ( 45,429) ( 45,054) ( 47,539) ( 49,395) ( 52,713) ( 52,988) ( 55,714) ( 61,199) ( 62,192)Effective Gross Revenue 2,099,147 1,959,494 2,019,118 1,462,119 2,105,826 2,226,028 2,207,638 2,329,390 2,420,370 2,582,921 2,596,407 2,729,988 2,998,735 3,047,390 Expense


NOI 973,230 805,753 787,430 549,012 881,829 945,573 883,251 949,237 985,034 1,085,683 1,045,978 1,496,566 1,310,071 1,295,931

51

Bedrock 10-yr Projection – Worst Case1992 1993 1994 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004


Implied Vacancy Rate 3.4% 5.3% 0.8% 3.9% 3.2% 6.3% 1.7% 1.4% 4.4% 2.8%Vacancy Scenario Adjustment 6.6% 4.7% 9.2% 6.1% 6.8% 3.7% 8.3% 8.6% 5.6% 7.2%Final Vacancy 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%General Vacancy ( 214,880) ( 227,146) ( 225,269) ( 237,693) ( 246,977) ( 263,563) ( 264,940) ( 278,570) ( 305,993) ( 310,958)Effective Gross Revenue 2,099,147 1,959,494 2,019,118 1,462,119 1,933,922 2,044,311 2,027,423 2,139,236 2,222,789 2,372,071 2,384,456 2,507,132 2,753,941 2,798,624 Expense


NOI 973,230 805,753 787,430 549,012 709,925 763,856 703,036 759,083 787,453 874,833 834,027 1,273,710 1,065,277 1,047,165

52

Debt Schedule for BedrockMiniperm

Goliath Mortgage

Securitization

Beginning Principal # 4,314,755 4,239,421 4,156,554 4,065,400 3,965,130 3,854,834 3,733,507 3,600,049 3,453,244 3,291,759 Interest Payment 431,476 423,942 415,655 406,540 396,513 385,483 373,351 360,005 345,324 329,176 Principal Repayment 75,334 82,867 91,154 100,270 110,297 121,326 133,459 146,805 161,485 177,634 Interest Payment and Loan Amortization 506,810 506,810 506,810 506,810 506,810 506,810 506,810 506,810 506,810 506,810 Ending Principal # 4,239,421 4,156,554 4,065,400 3,965,130 3,854,834 3,733,507 3,600,049 3,453,244 3,291,759 3,114,125 Other overhead cost 19,486 0 0 0 0 0 0 0 0 0 Total Debt Service 526,296 506,810 506,810 506,810 506,810 506,810 506,810 506,810 506,810 506,810



53

Bedrock Valuation

EBT 314,748 487,250 429,599 500,756 542,278 649,267 616,581 1,074,941 897,051 892,438 Taxes 110,162 170,537 150,359 175,265 189,797 227,244 215,803 376,229 313,968 312,353 Net Income (FCFE - all items are cash available to owners except Principal)204,586 316,712 279,239 325,492 352,481 422,024 400,778 698,711 583,083 580,085 PV of FCFE 183,354 254,386 201,011 209,989 203,802 218,687 186,125 290,813 217,500 193,926 Terminal Value 2,484,136 Equity IRR 11.6% <- Goal seek to make NPV 0NPV 0

Valuation of BedrockFCFF 573,189 614,622 574,113 617,004 640,272 705,694 679,886 972,768 851,546 842,355 PV of FCFF 523,460 512,602 437,276 429,172 406,718 409,385 360,195 470,648 376,254 339,902 Terminal Value 5,863,315 Sum of PVFCFFs 10,128,928 Precedent (Cap Rate) Value 8,958,484 Discount Rate 9.5%

Ratios for BedrockBreak Even Ratio (BER) 0.87 0.80 0.83 0.81 0.80 0.77 0.79 0.64 0.73 0.74NOI Margin 42% 42% 40% 41% 41% 42% 40% 55% 44% 43%Loan-To-Value (LTV) 46% 43% 46% 43% 42% 38% 39% 27% 31% 32%Debt Service Coverage Ratio (DSCR) 1.76 1.88 1.76 1.89 1.96 2.16 2.08 2.98 2.61 2.58

54

Sensitivity Analysis on DSCR (Miniperm) - Bedrock

Vacancy Rate1.68 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 1.96 1.91 1.86 1.81 1.76 1.71 1.66 1.62 8.25% 1.92 1.87 1.83 1.78 1.73 1.68 1.63 1.59 8.50% 1.89 1.84 1.79 1.75 1.70 1.65 1.60 1.56 8.75% 1.85 1.81 1.76 1.71 1.67 1.62 1.58 1.53 9.00% 1.82 1.77 1.73 1.68 1.64 1.59 1.55 1.50 9.25% 1.79 1.74 1.70 1.65 1.61 1.56 1.52 1.48 9.50% 1.76 1.71 1.67 1.63 1.58 1.54 1.49 1.45 9.75% 1.73 1.68 1.64 1.60 1.55 1.51 1.47 1.43

10.00% 1.70 1.66 1.61 1.57 1.53 1.49 1.44 1.40 10.25% 1.67 1.63 1.59 1.54 1.50 1.46 1.42 1.38 10.50% 1.64 1.60 1.56 1.52 1.48 1.44 1.40 1.35 10.75% 1.61 1.57 1.53 1.49 1.45 1.41 1.37 1.33 11.00% 1.59 1.55 1.51 1.47 1.43 1.39 1.35 1.31 11.25% 1.56 1.52 1.48 1.45 1.41 1.37 1.33 1.29 11.50% 1.54 1.50 1.46 1.42 1.38 1.35 1.31 1.27 11.75% 1.51 1.48 1.44 1.40 1.36 1.32 1.29 1.25 12.00% 1.49 1.45 1.41 1.38 1.34 1.30 1.27 1.23

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Sensitivity Analysis on DSCR (Goliath) - Bedrock

Vacancy Rate1.51 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 1.71 1.66 1.62 1.58 1.54 1.49 1.45 1.41 8.25% 1.68 1.64 1.60 1.56 1.51 1.47 1.43 1.39 8.50% 1.66 1.61 1.57 1.53 1.49 1.45 1.41 1.37 8.75% 1.63 1.59 1.55 1.51 1.47 1.43 1.39 1.35 9.00% 1.61 1.57 1.53 1.49 1.45 1.41 1.37 1.33 9.25% 1.58 1.54 1.50 1.47 1.43 1.39 1.35 1.31 9.50% 1.56 1.52 1.48 1.44 1.40 1.37 1.33 1.29 9.75% 1.54 1.50 1.46 1.42 1.38 1.35 1.31 1.27

10.00% 1.52 1.48 1.44 1.40 1.37 1.33 1.29 1.25 10.25% 1.50 1.46 1.42 1.38 1.35 1.31 1.27 1.23 10.50% 1.47 1.44 1.40 1.36 1.33 1.29 1.25 1.22 10.75% 1.45 1.42 1.38 1.34 1.31 1.27 1.24 1.20 11.00% 1.43 1.40 1.36 1.33 1.29 1.25 1.22 1.18 11.25% 1.41 1.38 1.34 1.31 1.27 1.24 1.20 1.17 11.50% 1.40 1.36 1.33 1.29 1.26 1.22 1.19 1.15 11.75% 1.38 1.34 1.31 1.27 1.24 1.20 1.17 1.14 12.00% 1.36 1.32 1.29 1.26 1.22 1.19 1.15 1.12

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Sensitivity Analysis on DSCR (Securitization) - Bedrock

Vacancy Rate1.69 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Interest Rate 8.00% 2.13 2.08 2.02 1.97 1.92 1.86 1.81 1.76 8.25% 2.08 2.03 1.98 1.93 1.88 1.82 1.77 1.72 8.50% 2.04 1.99 1.94 1.89 1.84 1.79 1.73 1.68 8.75% 2.00 1.95 1.90 1.85 1.80 1.75 1.70 1.65 9.00% 1.96 1.91 1.86 1.81 1.76 1.71 1.67 1.62 9.25% 1.92 1.87 1.82 1.78 1.73 1.68 1.63 1.58 9.50% 1.88 1.83 1.79 1.74 1.69 1.65 1.60 1.55 9.75% 1.85 1.80 1.75 1.71 1.66 1.61 1.57 1.52

10.00% 1.81 1.76 1.72 1.67 1.63 1.58 1.54 1.49 10.25% 1.78 1.73 1.69 1.64 1.60 1.55 1.51 1.47 10.50% 1.74 1.70 1.66 1.61 1.57 1.52 1.48 1.44 10.75% 1.71 1.67 1.62 1.58 1.54 1.50 1.45 1.41 11.00% 1.68 1.64 1.60 1.55 1.51 1.47 1.43 1.39 11.25% 1.65 1.61 1.57 1.53 1.48 1.44 1.40 1.36 11.50% 1.62 1.58 1.54 1.50 1.46 1.42 1.38 1.34 11.75% 1.59 1.55 1.51 1.47 1.43 1.39 1.35 1.31 12.00% 1.56 1.52 1.49 1.45 1.41 1.37 1.33 1.29

Long Term Financing Decision

Economy & Finance

Transcript of Long Term Financing Decision