1
EXHIBIT 99.(b)(5)
October 12, 1995
Hall Financial Group
1 Metro Square, Suite 170
2655 Villa Creek
Dallas, Texas 75234
Attention: Mr. Larry Levey
Reference: Valuation of Hall Institutional Mortgage Fund Interest
Gentlemen:
Bryan E. Humphries & Associates performed narrative "As Is" market value
appraisals on seven apartment complexes in early 1995. One of the purposes of
these appraisals was to facilitate the estimation of the market value of Hall
Institutional Mortgage Fund (HIMF) interest in the seven properties. The
following chart lists the properties, appraisal date and appraised "As Is"
Market Value.
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==================================================================================================
APARTMENT NO. UNITS AGE APPRAISAL "AS IS"
DATE MARKET
VALUE
- --------------------------------------------------------------------------------------------------
1. Arrowtree 114 1972 02/20/95 $ 3,300,000
4568 Blackstone
Okemos, Michigan
- --------------------------------------------------------------------------------------------------
2. Brambletree 236 1983 02/02/95 $ 6,500,000
1802 Apollo Road
Garland, Texas
- --------------------------------------------------------------------------------------------------
3. Phoenix Square (Midtree) 122 1976 01/27/95 $ 5,200,000
7000 Phoenix Avenue, NE
Albuquerque, New Mexico
- --------------------------------------------------------------------------------------------------
4. Candlewick (Northtree) 184 1978 01/27/95 $ 6,300,000
3011 Jane Place, NE
Albuquerque, New Mexico
- --------------------------------------------------------------------------------------------------
5. The Lakes (Lanetree) 298 1979 01/31/95 $ 11,800,000
4800 San Mateo Lane, NE
Albuquerque, New Mexico
- --------------------------------------------------------------------------------------------------
6. Los Altos Towers (Twintree) 185 1978 01/30/95 $ 7,600,000
9125 Copper Avenue, NE
Albuquerque, New Mexico
- --------------------------------------------------------------------------------------------------
7. The Villa (Coachtree) 195 1969 01/27/95 $ 6,800,000
1111 Cardenas Drive, SE
Albuquerque, New Mexico
==================================================================================================
HIMF is basically a lender to all eight properties. As a lender, HIMF has a
minority equity interest and no management control of the property. Partial
interest similar to HIMF are typically discounted to compensate for the risk
associated with a minority position and lack of management control.
Various professional articles have been written on valuing partial interests
which indicate discounts up to 50% and more for various partial interest
situations. Of the articles researched regarding valuation of partial interest,
one article surveyed firms which purchase partnership interest. The following
chart summarizes this survey.
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=====================================================================================================
SUMMARY OF TRANSACTION TYPES PURCHASED BY FIVE INDUSTRIAL FIRMS(1)
- -----------------------------------------------------------------------------------------------------
TRANSACTION TYPES PURCHASED
- -----------------------------------------------------------------------------------------------------
PUBLIC DISCOUNT* PRIVATE DISCOUNT
- -----------------------------------------------------------------------------------------------------
Liquidity Fund Yes 20%-30% Yes 20%-50%
Emeryville, California
- -----------------------------------------------------------------------------------------------------
Partnership Securities Exchange Yes 20%-30% Yes 30%-45%
Oakland, California
- -----------------------------------------------------------------------------------------------------
MacKenzie Securities Yes 20%-45% Yes 20%-50%
San Francisco, California
- -----------------------------------------------------------------------------------------------------
Equity Resources No Yes 30%-40%
Cambridge, Massachusetts
- -----------------------------------------------------------------------------------------------------
Realty Repurchase Yes 17%-26% No
San Francisco, California
- -----------------------------------------------------------------------------------------------------
*These ranges are approximate. The exact rate depends on each particular partnership.
=====================================================================================================
The ranges of the chart are primarily dependent upon locational quality,
operational cash flow, partnership history and investment type. Items which had
less of a significant impact were future appreciation and property size.
Another significant variable affecting the discount was the partnership age.
The older the partnership indicated typically greater stability and a better
operating history, resulting in a smaller discount.(2)
Another way of determining discounts for fractional interest is by examining
minority interest discounts for REITS and real estate operating companies. This
is accomplished by comparing the appraised value of the assets owned to the
company's market value based on its stock price.(3) For the period 1982 through
1987 the discount for operating companies ranged from + 20% to 30% while the
discount for REITS ranged from +/- 10% to 20%. The discount was greater in poor
real estate market years when the perceived risk in holding real estate was the
greatest. The discount for the REITS was lower than operating companies because
the majority of the cash flow is paid to the shareholders, thus, they control
how this cash is used.(4)
The lack of marketability is another consideration for the size of a partial
interest discount "Real estate brokers and salesmen do not actively market
partial interest in real property. Thus, the owner of a partial interest
wishing to sell that interest has very limited resources available to market
that asset."(5) However, given the relative size of the Subject and good
operating history, this limited market discount is somewhat mitigated.
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October 12, 1995
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In 1971, the SEC published the Institutional Investor Study Report. This study
compared the price of Rule 144 stock with prices of unrestricted stock
transactions for 338 transactions. The SEC study empirically supports the
concept of discounts for lack of marketability.(6) However, this study did
indicate that large dollar transactions which fell within the top 10% in dollar
revenues and earnings and market value indicated the least discount, + 5% to
15%.(7) The Subject is considered to fall within such a transaction.
Another source of determining discounts of fractional interest of partnerships
is to examine the actual sales of these transactions. When considering the
price a buyer would pay for a fractional interest in a limited partnership, it
is wise to be aware that buyers are few and far between. The limited
partnership secondary market exhibits all of the features of a classic buyer's
market. Accordingly, investors typically expect to earn an internal rate of
return (IRR) of 20% on each dollar invested in an average-risk, non trophy real
estate limited partnership.(8)
The two best sources for recent trade data are Secondary Spectrum, a newsletter
that tracks recent trades among approximately 200 of the largest public
partnerships, and Investment Advisor magazine.(9) One sampling from these
publications shows that the real estate partnership IRRs demanded by buyers in
mid-1991 range from 17% for the most stable and conservative partnerships, to
25% for partnerships that generate positive cash flow but are making no cash
distributions.
Brad Davidson in his article on fractional partnership interest, constructs a
chart separating the various items of Ask associated with fractional interest.
A percentage based upon his research is also assigned to each, ranging from the
perceived least risky partnership interests to the most risky. The chart which
follows displays this continuum.
=================================================================================================
FACTORS THAT AFFECT THE MOST ACTIVE NEUTRAL LEAST
PARTNERSHIP ATTRACTIVE
- -------------------------------------------------------------------------------------------------
Relative risk of the partnership's asset(s) 3% 7% 10%
- -------------------------------------------------------------------------------------------------
Historical consistency of earnings 3% 6% 9%
- -------------------------------------------------------------------------------------------------
Condition of the partnership asset(s) 2% 3% 5%
- -------------------------------------------------------------------------------------------------
Partnership market's growth potential 2% 3% 4%
- -------------------------------------------------------------------------------------------------
Portfolio diversification 1% 1% 2%
- -------------------------------------------------------------------------------------------------
Strength of partnership's management 1% 1% 2%
- -------------------------------------------------------------------------------------------------
FACTORS THAT AFFECT THE FRACTIONAL INTEREST
- -------------------------------------------------------------------------------------------------
Magnitude of the fractional interest 2% 4% 7%
- -------------------------------------------------------------------------------------------------
Liquidity of the interest 2% 4% 6%
- -------------------------------------------------------------------------------------------------
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=======================================================================================
FACTORS THAT AFFECT THE MOST ACTIVE NEUTRAL LEAST
PARTNERSHIP ATTRACTIVE
- ---------------------------------------------------------------------------------------
Ability to influence management 0% 1% 1%
- ---------------------------------------------------------------------------------------
Ease of asset analysis 0% 0% 1%
- ---------------------------------------------------------------------------------------
Aggregate discount 16% 30% 47%
=======================================================================================
Based upon Mr. Davidson's description of each of the items of discount, Mack
Pogue's interest is located at the "Most Attractive" end of the discounting
spectrum based upon the quality and history of the property.
Historically, the IRS has been involved in valuing many fractional interest
partnerships. Obviously, the taxpayer is attempting to reduce tax liability by
showing the greatest discount, thus, the results of any IRS survey might
indicate a greater discounting than typical.
For IRS cases, the customarily accepted range of a fractional interest discount
is approximately 20% to 40%. This range has been sustained in a number of tax
court memoranda.(11)
A recently published article by Mark S. Thompson, PhD. sites studies of the
secondary market that has arisen for interests in investment partnerships as a
basis for estimating partial interest discounts. The 1992 and 1993 studies by
Partnership Profiles, Inc. revealed average discounts of 44% and 46%,
respectively for public partnership interests. These vehicles typically have
unit sizes of $500 to $1,000 and hundreds or thousands of individual investors
in each partnership. The article also states that numerous court rulings and
IRS testimony have supported discounts of 50% and more from prorated asset
values in the valuation of fractional holdings. The authors conclude that the
two main sources of partial interest price reductions are illiquidity and lack
of control.(12)
In April 1995, Bryan E. Humphries and Associates surveyed various local real
estate professionals for their opinions on the discount of a partial interest
in a partnership that owned a Class A apartment community. Those surveyed
included: Capital Consultants Realty Services, Inc. (Roland Freeman), The
Worthing Companies (Stephen Church), Don Cummins (Miller Commercial), Capital
Realty Group, Inc. (Bob Lankford) and G.E. Capital (Margaret Powell) and Brian
O'Boyle (O'Boyle Properties). The majority of those surveyed represented a
principal's viewpoint.
The majority of the principals surveyed indicated a discount would be required
for the purchase of the fractional interest in a property if control of the
property were not available. Subjective estimates ranged typically from 80% to
90% of total value would be paid for the partial interest with one respondent
indicating the discount could be up to 50%.
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October 12, 1995
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Most of the above survey data relates to large investor grade properties or
pools of properties. HIMF has an interest in eight separate properties located
in three different markets. Thus, the risk associated with individual
properties is diversified. However, unlike typical ownership interests,
proportionate shares of cash flows and residual funds at sale are not
distributed equally to each property. The order or priority of cash payments at
the sale of the properties to HIMF adds considerable risk to the value of the
lender interest. This payment structure varies greatly between properties.
Following the priority payment system for each property is listed along with a
discussion and discounting for the risk associated with each property's HIMF
lender's interest. For properties #1 - #4, the HIMF value will be based upon a
sale at the 1995 "As Is" appraised market value of the properties.
Properties #5 - ##7 were involved in a transaction completed in February 1995
with affiliates of National Housing Partnership, Paine Webber and Hall
Financial Group, Inc. wherein the old Hall ownership partnership each
transferred their property to a new partnership ("New LP"). Each old Hall
Partnership received cash at closing and retained an interest in the
corresponding New LP. The old Hall partnership (of which HIMF is a portion) is
to receive a preferred return plus 20% of the cash flow after debt service and
preferred return. Additionally, the old partnership has the potential to
receive a portion or all of its senior equity upon sale at some time in the
future. As of the date of the narrative appraisals, all of these properties
contained total debt relatively close to the estimated values.
The following chart shows this relationship:
===========================================================================
APARTMENT ESTIMATED VALUE TOTAL 1, 2 & 3 LIENS
- ---------------------------------------------------------------------------
Coachtree $ 6,800,000 $ 6,439,573
- ---------------------------------------------------------------------------
Lanetree $11,800,000 $11,193,025
- ---------------------------------------------------------------------------
Twintree $ 7,600,000 $ 8,238,032
===========================================================================
A prudent investor in an upward trending apartment market such as the Subject
would consider a holding period for the properties to maximize the old and new
partnership values as the properties' NOI and values increase. Additionally,
based upon the priority payments system of each property, the new partnership
would realize only limited funds at sale if the property were sold based upon a
1995 value. For our HIMF analysis, the same five-year holding period used in
the narrative appraisals' cash flows will be analyzed for the HIMF value of
these properties.
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October 12, 1995
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Calculation of HIMF Lender Interest
#1 ARROWTREE APARTMENTS
Estimated "As Is" 2/20/95 Market Value of Arrowtree Apartments $ 3,300,000
Less: Closing Costs @ 2% -66,000
Sales Commissions @ 3% -99,000
-------------
Net Proceeds from Sale $ 3,135,000
Less: 1st Priority
1st Lien Mortgage Debt -1,316,594
HIMF Mortgage Debt -880,415
-------------
Equity Remaining After 1st Priority $ 937,991
Less: 2nd Priority
Hall Financial Group, Inc. Post Petition Debt -81,799
-------------
Equity Remaining After 2nd Priority $ 856,192
Less: 3rd Priority
HIMF Debt Partial payment -209,658
-------------
Equity Remaining After 3rd Priority $ 646,534
Less: 4th Priority
Capital & Preferred Return -171,875
-------------
Equity Remaining After 4th Priority $ 474,659
Less: 5th Priority
HIMF Debt Partial Payment* -474,659
-------------
Equity Remaining After 5th Priority 0
Total Undiscounted Value of HIMF Interest (Arrowtree Apartments) $ 1,564,732
Say, $ 1,550,000
=============
*The 5th Priority HIMF Debt Prorata is $547,237. However, only $474,659 is
available to be distributed.
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Hall Financial Group
October 12, 1995
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Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. This type of relationship best reflects the Subject's
1st Priority HIMF mortgage debt. Combining the HIMF debt with the 1st lien debt
represents only 66.5 % of the total property value, reducing the risk
associated with this portion of the HIMF value. A 20% to 30% discount will be
applied to the 1st priority HIMF Mortgage Debt.
The next portion of the HIMF value is derived from Debt Proration in the 3rd
Priority. Based upon our valuation, the 3rd Priority necessitates the paying of
74% of property value to prior interests before the paying of the $209,658
Third Priority. Additional equity risk is associated with this portion of the
HIMF valuation and a 30% to 40% discount will be applied to the 3rd Priority.
The remaining portion of the HIMF equity is derived from the 5th Priority of
payment. This is the most risky portion of the HIMF value, comprising the last
14.4% of equity available from the sale of the property. Any slight changes in
the value of the Subject drastically affects the value of this 5th Priority. A
50% to 60% discount will be applied to this portion of the HIMF value.
Based upon the ranking of the priorities of the Subject, the estimated HIMF
value range can be calculated as follows:
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October 12, 1995
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Calculation of HIMF Lender Value
High Range Low Range
------------- -------------
1st Priority - HIMF Mortgage Debt
$880,415 x 20% Discount $ 704,332
$880,415 x 30% Discount $ 616,291
3rd Priority - HIMF Debt Prorata
$209,658 x 30% Discount 146,761
$209,658 x 40% Discount 125,795
5th Priority - HIMF Debt Prorata
$474,659 x 50% Discount 237,330
-------------
$474,659 x 60% Discount 189,864
-------------
$ 1,088,423 $ 931,950
INDICATED VALUE RANGE OF HIMF'S LENDER
INTEREST IN THE ARROWTREE APARTMENTS, SAY $ 1,100,000 - $ 900,000
============= =============
Calculation of HIMF Lender Interest
#2 BRAMBLETREE APARTMENTS
Estimated "As Is" 2/2/95 Market Value of Brambletree Apartments $ 6,500,000
Less: Closing Costs @ 2% -130,000
Sales Commissions @ 3% -195,000
-------------
Net Proceeds from Sale $ 6,175,000
Plus: Partnership Cash 188,477
Plus: Deficit Operating Account 119,965
-------------
Net Cash Available for Distribution $ 6,483,442
1st Priority FNMA Lien
1st Lien Balance (Accrual & Payment) $ -5,910,867
Interest Accrual as of 12/31/94 -1,117,931
-------------
Equity Remaining After 1st Priority $ -546,367
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2nd Priority
Capital & Preferred Return -313,880
------------
Equity Remaining after 2nd Priority $ -860,247
3rd Priority
50% to Limited partners 0
50% to Prorata to HFGI & HIMF 0
------------
Total Undiscounted Value of HIMF Interest (Brambletree Apartments) 0
============
Based upon our value of $6,500,000, an inadequate amount of funds are available
from the sale to pay the 1st Priority (FNMA Lien) by $546,356. The HIMF
Mortgage Debt of $2,282,464 is the Third Priority. With inadequate funds
available to totally pay the 1st Lien, no funds can be dispersed toward the
HIMF Mortgage. Thus, the value of the HIMF Mortgage Debt is considered to be
zero.
INDICATED VALUE OF HIMF'S LENDER
INTEREST IN THE BRAMBLETREE APARTMENTS -0-
Calculation of HIMF Lender Interest
#3 PHONENIX SQUARE (MIDTREE)
Estimated "As Is" 1/27/95 Market Value of Phoenix Square Apartments $ 5,200,000
Less: Closing Costs @ 2% -104,000
Sales Commissions @ 5% -260,000
-------------
Net Proceeds from Sale $ 4,836,000
Less: 1st Priority
1st Lien Mortgage Debt -4,153,223
-------------
Equity Remaining After 1st Priority $ 682,777
Less: 2nd Priority
Hall Financial Group, Inc. Post Petition Debt -91,337
-------------
Equity Remaining After 2nd Priority $ 591,440
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Less: 3rd Priority
LP Capital & Preferred -345,440
-------------
Equity Remaining After 3rd Priority $ 246,000
Less: 4th Priority
Aetna Deferred -72,044
-------------
Equity Remaining After 4th Priority $ 173,956
Less: 5th Priority
HFGI Prorata (17%) $ -29,573
HMIF Prorata (33%) -57,405
LP/GP Prorata (50%) -86,978
-------------
Equity Remaining After 5th Priority 0
Total Undiscounted Value of HIMF Interest (Midtree) $ 57,405
Say, $ 57,500
=============
*The 5th Priority HIMF Debt Prorata is $911,778. However, only $173,956 is
available to be distributed prorata.
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, the total HIMF equity is derived from the 5th
Priority of payment. This is a more risky portion of the HIMF value, comprising
the last 5 % of equity available from the sale of the property. Any slight
changes in the value of the Subject drastically affects the value of this 5th
Priority. A 50% to 60% discount will be applied to this portion of the HIMF
value.
Based upon the ranking of the priorities of the Subject, the estimated HIMF
value range can be calculated as follows:
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October 12, 1995
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Calculation of HIMF Lender Value
High Range Low Range
----------- ----------
5th Priority - HIMF Debt Prorata
$57,405 x 50% Discount $ 28,703
-----------
$57,405 x 60% Discount $ 22,962
----------
INDICATED VALUE RANGE OF HIMF'S Lender
Interest in the Phoenix Square (Midtree)
Apartments, Say $ 30,000 - $ 23,000
=========== ==========
Calculation of HIMF Lender Interest
#4 CANDLEWICK APARTMENTS (NORTHTREE)
Estimated "As Is" 1/27/95 Market Value of Candlewick Apartments $ 6,300,000
Less: Closing Costs @ 2% -126,000
Sales Commissions @ 5% -315,000
-------------
Net Proceeds from Sale $ 5,859,000
Less: 1st Priority
1st Lien Mortgage Debt -4,916,379
-------------
Equity Remaining After 1st Priority $ 942,621
Less: 2nd Priority
Hall Financial Group, Inc. Post Petition Debt -293,713
-------------
Equity Remaining After 2nd Priority $ 648,908
Less: 3rd Priority
HIMF Debt Prorata* (50%) $ -324,454
LP/GP Prorata (50%) -324,454
-------------
Equity Remaining After 3rd Priority 0
Total Undiscounted Value of HIMF Interest (Northtree) $ 324,454
Say, $ 325,000
=============
*The 3rd Priority HIMF Debt Prorata is $1,114,699. However, only $648,908 is
available to be distributed prorata.
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October 12, 1995
Page 13
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control.
The only portion of the HIMF value is derived from Debt Proration in the 3rd
Priority. Based upon our valuation, the 3rd Priority necessitates the paying of
90% of property value to prior interests before the paying of the Third
Priority. This is the a more risky portion of the HIMF value, comprising the
last 10% of equity available from the sale of the property. Any slight changes
in the value of the Subject drastically affects the value of this 3rd Priority.
A 50% to 60% discount will be applied to this portion of the HIMF value.
Based upon the ranking of the priorities of the Subject, the estimated HIMF
value range can be calculated as follows:
Calculation of HIMF Lender Value
High Range Low Range
---------- ---------
3rd Priority - HIMF Debt Prorata
$324,454 x 50% Discount $ 162,227
$324,454 x 60% Discount $ 129,782
INDICATED VALUE RANGE OF HIMF'S LENDER
INTEREST IN THE CANDLEWICK (NORTHTREE)
APARTMENTS, SAY $ 160,000 $ 130,000
========== =========
As previously discussed, #5 - #7 HIMF values will be based upon the five-year
cash flows of our narrative appraisals. The parameters of each cash flow,
liens and priorities for each property are described as follows:
#5 THE LAKES (LANETREE)
(Please note cash flow analysis following this letter)
Cash Flow Assumption
1. The discounted cash flow analysis is based upon a five year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).
2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for Years 2 through 6.
3. First-year vacancy collection loss in the discounted cash flow is
projected at 5% of gross potential income. Vacancy/collection loss is
projected to be 5% also for years 2 through 6.
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October 12, 1995
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4. With the exception of management expense, which is calculated as a
percentage of annual effective gross income, each operating expense
category is projected to increase at an annual rate of 4% during years
two through six of the cash flow.
5. The projected sixth-year net income is capitalized at a rate of
11.50%. This calculation results in the projected reversion sale price
at the end of the fifth year. Selling expenses of 3.0% are deducted
from the reversion sale price.
Lien Parameters
1. 1st Lien $9,051,184 @ 8.37% Interest Only
2. 2nd Lien $925,6549 @ 9.66% Interest Only
3. 3rd Lien (PW Mortgage) $1,216,186 @ 9.66% Interest only for years 1
and 2, years 3-6 a $58,004 principal reduction in the middle of the
year.
4. Senior Equity - a 6% (Preferred Return) interest only payment from
cash flow. After all liens are paid, including the 6% (Preferred
Return), Senior Equity is entitled to 20% of the available cash flows.
The sum of the 6% Preferred return and the 20% payment of available
cash flow are the funds available to Priority Payments. Total Senior
Equity is $3,279,878.
Lien Payment
Upon sale at the end of the fifth year. The first payment from the sales
proceeds is for the principal balance of Liens 1, 2 and 3. Any remaining funds
from sale go toward the balance of the Senior Equity. The balance paid to
Senior Equity becomes a portion of the funds available for priority payments.
Priority Payments
Priority #2 No payments
Priority #3 Prorata payment of HFGI (11%), HMIF (39%) and
LP/GP (50%) of cash flow and reversion over
the holding period up to $2,678,642.
Priority #4 Payment of remaining $34,147 of cash flow to
LP/GP
Total HIMF Cash Flow The same discount rate (+- 12%) deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of the
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October 12, 1995
Page 15
HIMF payments. Thus, the undiscounted value
of the HIMF Interest is $657,660, say
$660,000.
Discounting
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative
cash flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property was held for a period of time and
appreciated. Presumption of assumptions in a five-year cash flow adds
considerable risk to the Present Value of the HIMF Lender Interest. For our
cash flow analysis, the HIMF interest will be discounted 40% to 60%.
Discounted value range of the HIMF Interest in the Lakes (Lanetree), Say,
$265,000 - $395,000.
#6 LOS ALTOS TOWERS (TWINTREE)
(Please note cash flow analysis following this letter)
Cash Flow Assumption
1. The discounted cash flow analysis is based upon a five year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).
2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for Years 2 through 6.
3. First-year vacancy collection loss in the discounted cash flow is
projected at 5% of gross potential income. Vacancy/collection loss is
projected to be 5% also for years 2 through 6.
4. With the exception of management expense, which is calculated as a
percentage of annual effective gross income, each operating expense
category is projected to increase at an annual rate of 4% during years
two through six of the cash flow.
5. The projected sixth-year net income is capitalized at a rate of 11.0%.
This calculation results in the projected reversion sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price.
Lien Parameters
1. 1st Lien $5,852,629 @ 8.37% Interest Only
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October 12, 1995
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2. 2nd Lien $600,152 @ 9.66% Interest Only
3. 3rd Lien (PW Mortgage) $785,251 @ 9.66% Interest only for years 1 and
2, years 3-6 a $58,004 principal reduction in the middle of the year.
4. Senior Equity - a 6% (Preferred Return) interest only payment from
cash flow. After all liens are paid, including the 6% (Preferred
Return), Senior Equity is entitled to 20% of the available cash flows.
The sum of the 6% Preferred return and the 20% payment of available
cash flow are the funds available to Priority Payments. Total Senior
Equity is $1,403,626.
Lien Payment
Upon sale at the end of the fifth year. The first payment from the sales
proceeds is for the principal balance of Liens 1, 2 and 3. Any remaining funds
from sale go toward the balance of the Senior Equity. The balance paid to
Senior Equity becomes a portion of the funds available for priority payments.
Priority Payments
Priority #2 Limited partnership capital and preferred payment
of $170,301.
Priority #3 HFGI payment of $378,265 for post position debt
and deferred commission of $185,734.
Priority #4 Prorata payment of HFGI (10%), HIMF (40%) and
LP/GP (50%) of cash flow and reversion over the
holding period up to $4,694,818.
Total HIMF Cash Flow The same discount rate (+- 12%) deemed appropriate
in our narrative appraisal is considered
appropriate for the PW of the HIMF payments. Thus,
the undiscounted value of the HIMF Interest is
$196,637, say $195,000.
Discounting
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative
cash flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property was held for a period of time and
appreciated. Presumption of assumptions in a five-year cash flow adds
considerable risk to the Present Value of the HIMF Lender Interest. For our
cash flow analysis, the HIMF interest will be discounted 40% to 60%.
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October 12, 1995
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Discounted value range of the HIMF Interest in the Los Altos Towers (Twintree)
Apartments is, say $80,000 - $115,000.
#7 THE VILLAS (COACHTREE)
(Please note cash flow analysis following this letter)
Cash Flow Assumption
1. The discounted cash flow analysis is based upon a five year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).
2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for Years 2 through 6.
3. First-year vacancy collection loss in the discounted cash flow is
projected at 5% of gross potential income. Vacancy/collection loss is
projected to be 5% also for years 2 through 6.
4. With the exception of management expense, which is calculated as a
percentage of annual effective gross income, each operating expense
category is projected to increase at an annual rate of 4% during years
two through six of the cash flow.
5. The projected sixth-year net income is capitalized at a rate of
11.50%. This calculation results in the projected reversion sale price
at the end of the fifth year. Selling expenses of 3.0% are deducted
from the reversion sale price.
Lien Parameters
1. 1st Lien $5,211,560 @ 8.37% Interest Only
2. 2nd Lien $528,948 @ 9.66% Interest Only
3. 3rd Lien (PW Mortgage) $699,065 @ 9.66% Interest only for years 1 and
2, years 3-6 a $58,004 principal reduction in the middle of the year.
4. Senior Equity - a 6% (Preferred Return) interest only payment from
cash flow. After all liens are paid, including the 6% (Preferred
Return), Senior Equity is entitled to 20% of the available cash flows.
The sum of the 6% Preferred return and the 20% payment of available
cash flow are the funds available to Priority Payments. Total Senior
Equity is $1,118,164.
18
Hall Financial Group
October 12, 1995
Page 18
Lien Payment
Upon sale at the end of the fifth year. The first payment from the sale
proceeds is the principal balance of Liens 1, 2 and 3. Any remaining funds from
sale go toward the balance of the Senior Equity. The balance paid to Senior
Equity becomes a portion of the funds available for priority payments.
Priority Payments
Priority #2 Limited partnership capital and preferred payment
of $38,320.
Priority #3 HFGI payment of $186,934 for post position debt.
Priority #4 HFGI payment of $249,533 for deferred commission
of 3%.
Priority #5 Payment of $118,481 of post petition deferred
accrued interest to HFGI.
Priority #6 Prorata payment of HFGI (5%), HIMF (45%) and
LP/GP (50%) of cash flow and reversion over the
holding period up to $3,559,008.
Total HIMF Cash Flow The same discount rate (+- 12%) deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of the HIMF
payments. Thus, the undiscounted value of the
HIMF Interest is $230,584, say $230,000.
Discounting
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative
cash flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property was held for a period of time and
appreciated. Presumption of assumptions in a five-year cash flow adds
considerable risk to the Present Value of the HIMF Lender Interest. For our
cash flow analysis, the HIMF interest will be discounted 40% to 60%.
Discounted value range of the HIMF Interest in The Villas (Coachtree)
Apartments is, say $90,000 - $140,000.
19
Hall Financial Group
October 12, 1995
Page 19
HIMF OTHER ASSETS
HIMF contains other assets of cash. As of the 9/30/95 HIMF balance sheet, HIMF
contained a cash balance of $1,274,872, say, $1,275,000.
Discounting
Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control.
HIMF Cash High Range Low Range
- --------- ----------- ----------
$1,275,000 x 20% Discount $ 1,020,000
$1,275,000 x 30% Discount $ 892,500
Say, $ 1,020,000 $ 890,000
The following chart summarizes the HIMF Lender Interest Value as a total dollar
amount and as a range discounted for the risk associated with the fractional
interests previously described.
========================================================================================================
NO. NAME UNDISCOUNTED DISCOUNTED HIMF
HIMF VALUE RANGE
- --------------------------------------------------------------------------------------------------------
1 Arrowtree Apartments $ 1,550,000 $ 900,000 - $ 1,100,000
- --------------------------------------------------------------------------------------------------------
2 Brambletree Apartments -0- -0- - -0-
- --------------------------------------------------------------------------------------------------------
3 Phoenix Square (Midtree) Apartments $ 57,500 $ 23,000 - $ 30,000
- --------------------------------------------------------------------------------------------------------
4 Candlewick (Northtree) Apartments $ 325,000 $ 130,000 - $ 160,000
- --------------------------------------------------------------------------------------------------------
5 The Lakes (Lanetree) Apartments $ 660,000 $ 265,000 - $ 395,000
- --------------------------------------------------------------------------------------------------------
6 Los Altos Towers (Twintree) $ 195,000 $ 80,000 - $ 115,000
Apartments
- --------------------------------------------------------------------------------------------------------
7 The Villas (Coachtree) Apartments $ 230,000 $ 90,000 - $ 140,000
- --------------------------------------------------------------------------------------------------------
8 HIMF Cash $ 1,275,000 $ 890,000 - $ 1,020,000
- --------------------------------------------------------------------------------------------------------
20
Hall Financial Group
October 12, 1995
Page 20
===========================================================================================================
NO. NAME UNDISCOUNTED DISCOUNTED HIMF
HIMF VALUE RANGE
- -----------------------------------------------------------------------------------------------------------
TOTAL UNDISCOUNTED VALUE OF THE $ 4,292,500
HIMF INTEREST
- -----------------------------------------------------------------------------------------------------------
TOTAL DISCOUNTED VALUE RANGE OF THE HIMF INTEREST $ 2,378,000 - $ 2,960,000
===========================================================================================================
We appreciate the opportunity to be of service and hope you find the enclosed
useful.
Respectfully submitted,
BRYAN E. HUMPHRIES & ASSOCIATES
Bryan E. Humphries, MAI
President
BEH/bh
Attachments: Footnotes, Cash Flows - Lanetree, Twintree, Coachtree
21
FOOTNOTES
(1)Martin J. Healy, Jr., "Valuation of Partial Interests," The Appraisal Journal
(July 1988): pg. 293-298.
(2)Ibid.
(3)Lance S. Hall, Valuation of Fractional Interests: A Business Appraiser's
Perspective, The Appraisal Journal (April 1989): pg. 173-179.
(4)Lance S. Hall, Valuation of Fractional Interests: A Business Appraiser's
Perspective, The Appraisal Journal (April 1989): pg. 173-179.
(5)Lloyd D. Honford, Jr., MAI, The Market Value of Partial Interest in Real
Property, The Appraisal Journal (October 1989): pg. 460-465.
(6)Martin J. Healy, Jr., Valuation of Partial Interest, The Appraisal Journal
(July, 1988): pg. 293-298.
(7)Martin J. Healy, Jr., Valuation of Partial Interest, The Appraisal Journal
(July, 1988): pg. 293-298.
(8)Brad Davidson, Valuation of Fractional Interest in Real Estate Limited
Partnerships-Another Approach, The Appraisal Journal (April, 1992): pg.
1984-1994.
(9)Partnership Profiles, Inc., Secondary Spectrum (Dallas: Partnership Profiles,
Inc.) monthly newsletter; and Robert A. Stanger Company, Investment Advisor
(New Jersey: Robert A. Stanger Company) monthly magazine.
(10)Brad Davidson, Valuation of Fractional Interests in Real Estate Limited
Partnerships-Another Approach, The Appraisal Journal (April, 1992): 1984-1994.
(11)See three cases the Internal Revenue Service (IRS) frequently cites when
arguing the appropriateness of a fractional discount: Estate of Andrews v.
Commissioner, 79 TC 983 (1982); Ward v. Commissioner, 87 TC 78 (1986); and
Estate of Piper v. Commissioner, 72 TC 1062.
(12)Mark S. Thompson, PhD. and Eggert Dagbjartsson, Market Discounting of
Partial Ownership Interests, The Appraisal Journal (October, 1994): 535-541.
22
LOS ALTOS TOWER (LANETREE) - HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
4800 SAN MATEO LANE, NE
ALBUQUERQUE, NEW MEXICO
NET RENTABLE AREA 232,462 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 298 MANAGEMENT $ 83,833 $0.36
FIRST YEAR OCCUPANCY 95.00% AD/PROMOTION $ 34,869 $0.15
EXPENSE GROWTH RATE 4.00% REAL ESTATE TAXES $144,126 $0.62
RESALE CAP RATE 11.50% INSURANCE $ 34,869 $0.15
UTILITIES $ 81,362 $0.35
MAINTENANCE/REPAIRS $174,347 $0.75
GENERAL/ADMIN. $ 34,869 $0.15
PAYROLL $278,954 $1.20
TOTAL OPERATING EXPENSES $867,229 $3.73
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
----------- ---------- ------------- ------------- ----------- ---------
RENTAL INCOME $ 2,106,120 $2,190,365 $ 2,277,979 $ 2,369,099 $ 2,463,863 $ 2,562,417
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
PLUS: OTHER INCOME 100,000 104,000 108,160 112,486 116,986 121,665
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
GROSS POTENTIAL INCOME $ 2,206,120 $2,294,365 $ 2,386,139 $ 2,481,585 $ 2,580,848 $ 2,684,082
LESS: VACANCY/COLLECTION LOSS (110,306) (114,718) (119,307) (124,079) (129,042) (134,204)
% OF GROSS POTENTIAL INCOME 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
EFFECTIVE GROSS INCOME $ 2,095,814 $2,179,647 $ 2,266,832 $ 2,357,506 $ 2,451,806 $ 2,549,878
TOTAL OPERATING EXPENSES $ (867,229) $ (901,918) $ (937,994) $ (975,514) $(1,014,535) $ (1,055,116)
PER SQUARE FOOT $ (3.73) $ (3.88) $ (4.04) $ (4.20) $ (4.36) $ (4.54)
NET OPERATING INCOME $ 1,228,585 $1,277,729 $ 1,328,838 $ 1,381,992 $ 1,437,271 $ 1,494,762
LESS: DEFERRED MAINTENANCE
LESS: 1ST LIEN $ (757,584) $ (757,584) $ (757,584) $ (757,584) $ (757,584)
LESS: 2ND LIEN $ (89,419) $ (89,419) $ (89,419) $ (89,419) $ (89,419)
LESS: 3RD LIEN (PW MTG) $ (117,483) $ (117,483) $ (172,685) $ (167,082) $ (161,480)
REVERSION @ 11.50% $12,997,932
LESS: SELLING EXPENSE @ 3.00% $ (389,938)
LESS: 1ST LIEN PRINCIPAL $(9,051,184)
LESS: 2ND LIEN PRINCIPAL $ (925,659)
LESS: 3RD LIEN PRINCIPAL (PW MTG) $(1,042,170)
NET REVERSION TO SENIOR EQUITY $ 1,588,981
CASH FLOW (NET OF REVERSION) $ 264,099 $ 313,243 $ 309,150 $ 367,907 $ 428,788
HALL-TWINTREE PRE/CF PAYMENTS
6% PREFERENCE OF $3279878 $ 196,793 $ 196,793 $ 196,793 $ 196,793 $ 196,793
20% OF CASH FLOWS $ 13,461 $ 23,290 $ 22,471 $ 34,223 $ 46,399
REVERSION-SENIOR EQUITY $ 1,588,981
FUNDS AVAILABLE TO PRIORITIES $ 210,254 $ 220,083 $ 219,264 $ 231,016 $ 1,832,173
(HALL-LANETREE CF & REV)
FUNDS AVAILABLE TO PRIORITIES $ 210,254 $ 220,083 $ 219,264 $ 231,016 $ 1,832,173
(HALL-LANETREE CF & REV)
LESS: 2ND PRIORITY $ 0
LESS: 3RD PRIORITY
HFGI PRO RATA (11%) $ (23,128) $ (24,209) $ (24,119) $ (25,412) $ (197,783)
HIMF PRO RATA (39%) $ (81,999) $ (85,832) $ (85,513) $ (90,096) $ (701,230)
LP/GP PRO RATA (50%) $ 105,127) $ (110,041) $ (109,632) $ (115,508) $ (899,013)
LESS: 4TH PRIORITY
HFGI POST/PRE PETITION DEBT $ (34,147)
CASH FLOW $ 0 $ 0 $ 0 $ 0 $ 0
----------- ---------- ------------- ------------- -----------
DISCOUNT RATE 11.00% 11.50% 12.00% 12.50% 13.00% 14.00% 15.00%
----------- ---------- ------------- ------------- ----------- --------- ---------
PW OF HIMF CASH FLOW $ 681,558 $ 669,461 $ 657,660 $ 646,144 $ 634,907 $ 613,234 $ 592,580
DISCOUNTED @ 40% $ 408,935 $ 401,677 $ 394,596 $ 387,687 $ 380,944 $ 367,941 $ 355,548
DISCOUNTED @ 60% $ 272,623 $ 267,785 $ 263,064 $ 258,458 $ 253,963 $ 245,294 $ 237,032
23
LOS ALTOS TOWER (TWINTREE) - HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
9125 COPPER AVE., NE
ALBUQUERQUE, NEW MEXICO
NET RENTABLE AREA 170,635 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 185 MANAGEMENT $ 52,891 $0.031
FIRST YEAR OCCUPANCY 95.00% AD/PROMOTION $ 25,595 $0.15
EXPENSE GROWTH RATE 4.00% REAL ESTATE TAXES $ 85,318 $0.50
RESALE CAP RATE 11.00% INSURANCE $ 25,595 $0.15
UTILITIES $ 51,191 $0.30
MAINTENANCE/REPAIRS $ 136,508 $0.80
GENERAL/ADMIN. $ 25,595 $0.15
PAYROLL $ 170,635 $1.00
TOTAL OPERATING EXPENSES $ 573,328 $3.36
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
----------- ----------- ------------ ----------- ----------- -----------
RENTAL INCOME $ 1,331,880 $ 1,385,155 $ 1,440,561 $ 1,498,184 $ 1,558,111 $ 1,620,436
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
PLUS: OTHER INCOME 60,000 62,400 64,896 67,492 70,192 72,999
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
GROSS POTENTIAL INCOME $ 1,391,880 $ 1,447,555 $ 1,505,457 $ 1,565,676 $ 1,628,303 $ 1,693,435
LESS: VACANCY/COLLECTION LOSS (69,594) (72,378) (75,273) (78,284) (81,415) (84,672)
% OF GROSS POTENTIAL
INCOME 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
EFFECTIVE GROSS INCOME $ 1,322,286 $ 1,375,177 $ 1,430,185 $ 1,487,392 $ 1,546,888 $ 1,608,763
TOTAL OPERATING EXPENSES $ (573,328) $ (596,262) $ (620,112) $ (644,917) $ (670,713) $ (697,542)
PER SQUARE FOOT ($3.36) ($3.49) ($3.63) ($3.78) ($3.93) ($4.09)
NET OPERATING INCOME $ 748,958 $ 778,915 $ 810,073 $ 842,475 $ 876,175 $ 911,221
LESS: DEFERRED MAINTENANCE
LESS: 1ST LIEN $ (489,865) $ (489,865) $ (489,865) $ (489,865) $ (489,865)
LESS: 2ND LIEN $ (57,975) $ (57,975) $ (57,975) $ (57,975) $ (57,975)
LESS: 3RD LIEN $ (75,855) $ (75,855) $ (111,498) $ (107,880) $ (104,263)
REVERSION @ 11.00% $ 8,283,828
LESS: SELLING EXPENSE @ 3.00% $ (248,515)
LESS: 1ST LIEN PRINCIPAL $(5,852,629)
LESS: 2ND LIEN PRINCIPAL $ (600,152)
LESS: 3RD LIEN PRINCIPAL (PW MTG) $ (672,895)
NET REVERSION TO SENIOR EQUITY $ 900,637
CASH FLOW (NET OF REVERSION) $ 125,263 $ 155,220 $ 150,735 $ 186,755 $ 224,072
HALL-TWINTREE PRE/CF PAYMENTS
6% PREFERENCE @ $1403626 $ 84,218 $ 84,218 $ 84,218 $ 84,218 $ 84,218
20% OF CASH FLOWS $ 8,209 $ 14,200 $ 13,303 $ 20,507 $ 27,971
REVERSION-SENIOR EQUITY $ 909,637
FUNDS AVAILABLE TO PRIORITIES $ 92,427 $ 98,418 $ 97,521 $ 104,725 $ 1,021,826
(HALL-TWINTREE CF & REV)
FUNDS AVAILABLE TO PRIORITIES $ 92,427 $ 98,418 $ 97,521 $ 104,725 $ 1,021,826
(HALL-TWINTREE CF & REV)
LESS: 2ND PRIORITY-CAP & PREF $ (92,427) $ (77,874)
LESS: 3RD PRIORITY-POST PETITION
DEBT & DEF COM 2% $185734 $ (20,544) $ (97,521) $ (104,725) $ (155,474)
LESS: 4TH PRIORITY
HFGI PRE PET. DEBT DEBT (10%) $ (86,635)
HIMF DEBT PRO RATA (40%) $ (346,541)
LP/GP PRO RATA (50%) $ (433,176)
CASH FLOW $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------- ----------- ------------ ----------- ----------- -----------
DISCOUNT RATE 11.00% 11.50% 12.00% 12.50% 13.00% 14.00% 15.00%
----------- ----------- ------------ ----------- ----------- ----------- ----------
PW OF HIMF CASH FLOW $ 205,655 $ 201,085 $ 196,637 $ 192,306 $ 188,089 $ 179,982 $ 172,292
DISCOUNTED @ 40% $ 123,393 $ 120,651 $ 117,982 $ 115,383 $ 112,853 $ 107,989 $ 103,375
DISCOUNTED @ 60% $ 82,262 $ 80,434 $ 78,655 $ 76,922 $ 75,235 $ 71,993 $ 68,917
24
THE VILLAS (COACHTREE) - HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
1111 CARDENAS DR., SE
ALBUQUERQUE, NEW MEXICO
NET RENTABLE AREA 161,712 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 195 MANAGEMENT $ 50,638 $0.031
FIRST YEAR OCCUPANCY 95.00% AD/PROMOTION $ 24,257 $0.15
EXPENSE GROWTH RATE 4.00% REAL ESTATE TAXES $ 80,856 $0.50
RESALE CAP RATE 11.50% INSURANCE $ 24,257 $0.15
UTILITIES $ 51,748 $0.32
MAINTENANCE/REPAIRS $ 145,541 $0.90
GENERAL/ADMIN. $ 24,257 $0.15
PAYROLL $ 145,541 $0.90
TOTAL OPERATING EXPENSES $ 547,095 $3.38
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
----------- ----------- ------------ ----------- ---------- -----------
RENTAL INCOME $ 1,279,584 $ 1,330,767 $ 1,383,998 $ 1,439,358 $1,496,932 $ 1,556,810
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
PLUS: OTHER INCOME 53,000 55,120 57,325 59,618 62,003 64,483
% INCREASE 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
GROSS POTENTIAL INCOME $ 1,332,584 $ 1,385,887 $ 1,441,323 $ 1,498,976 $1,558,935 $ 1,621,292
LESS: VACANCY/COLLECTION LOSS (66,629) (69,294) (72,066) (74,949) (77,947) (81,065)
% OF GROSS POTENTIAL INCOME 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
EFFECTIVE GROSS INCOME $ 1,265,955 $ 1,316,593 $ 1,369,257 $ 1,424,027 $1,480,988 $ 1,540,228
TOTAL OPERATING EXPENSES $ (547,095) $ (568,979) $ (591,738) $ (615,408) $ (640,024) $ (665,625)
PER SQUARE FOOT $ (3.38) $ (3.52) $ (3.66) $ (3.81) $ (3.96) $ (4.12)
NET OPERATING INCOME $ 718,860 $ 747,614 $ 777,519 $ 808,619 $ 840,964 $ 874,603
LESS: DEFERRED MAINTENANCE $ (81,800)
LESS: 1ST LIEN $ (436,208) $ (436,208) $ (436,208) $ (436,208) $ (436,208)
LESS: 2ND LIEN $ (51,096) $ (51,096) $ (51,096) $ (51,096) $ (51,096)
LESS: 3RD LIEN (PW MTG) $ (67,530) $ (67,530) $ (99,261) $ (96,039) $ (92,818)
REVERSION @ 11.50% $7,605,240
LESS: SELLING EXPENSE @ 3.00% $ (228,157)
LESS: 1ST LIEN PRINCIPAL (5,211,560)
LESS: 2ND LIEN PRINCIPAL $ (528,948)
LESS: 3RD LIEN PRINCIPAL (PW MTG) $ (599,042)
NET REVERSION TO SENIOR EQUITY $1,037,533
CASH FLOW (NET OF REVERSION) $ 82,226 $ 192,780 $ 190,954 $ 225,276 $ 260,842
HALL-COACHTREE PRE/CF PAYMENTS
6% PREFERENCE @ $1118164 $ 67,090 $ 67,090 $ 67,090 $ 67,090 $ 67,090
20% OF CASH FLOW $ 3,027 $ 25,138 $ 24,773 $ 31,637 $ 38,750
REVERSION - SENIOR EQUITY $1,037,533
FUNDS AVAILABLE TO PRIORITIES $ 70,117 $ 92,228 $ 91,863 $ 98,727 $1,143,373
(HALL-COACHTREE CF & REV)
FUNDS AVAILABLE TO PRIORITIES $ 70,117 $ 92,228 $ 91,863 $ 98,727 $1,143,373 $ 0
(HALL-COACHTREE CF & REV)
LESS: 2ND PRIORITY - LP/GP
CAPITAL & PREF. $ (38,320)
LESS: 3RD PRIORITY - HFGI
POST PETITION $ (31,797) $ (92,228) $ (62,909)
LESS: 4TH PRIORITY - HFGI
DEF COMM @ 3% $ (28,954) $ (98,727) $ (121,852)
LESS: 5TH PRIORITY - HFGI POST
PETITION DEBT-DEF ACCRUED INT $ (118,481)
LESS: 6TH PRIORITY
HFGI PRE-P DEBT PRO RATA (5%) $ (45,152)
HIMF DEBT PRO RATA (45%) $ (406,368)
LP/GP PRO RATA (50%) $ (451,520)
25
PAGE 2, THE VILLAS (COACHTREE) - HIMF VALUE
CASH FLOW $ 0 $ 0 $ 0 $ 0 $ 0
----------- ---------- ---------- ---------- ---------
DISCOUNT RATE 11.00% 11.50% 12.00% 12.50% 13.00% 14.00% 15.00%
----------- ---------- ---------- ---------- --------- --------- ----------
PW OF HIMF CASH FLOW $ 241,160 $ 235,801 $ 230,584 $ 225,505 $ 220,560 $ 211,055 $ 202,037
DISCOUNTED @ 40% $ 144,696 $ 141,480 $ 138,350 $ 135,303 $ 132,336 $ 126,633 $ 121,222
DISCOUNTED @ 60% $ 96,464 $ 94,320 $ 92,234 $ 90,202 $ 88,224 $ 84,422 $ 80,815