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1004 Pier Avenue

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  1. 1004 Pier Avenue Trojan Partners Santa Monica, California * 3 Units$1,625,000

  2. Location

  3. Property Profile

  4. Area/Property Analysis • 10 minute walk to 3rd Street Promenade • Conveniently located off I -10 freeway • Walking distance to the beach • $230,000 in renovations and upgrades • 4.5% going in cap rate • $541,667 price per unit • $254 per sq. ft.

  5. Financing Terms • Debt Contribution: $650,000 • Equity Contribution: $1,014,000 • Total Investment: $1,657,500

  6. Cash Flow Assumptions Expense Growth Rate: 2% Rent Growth Rate: 3% • Lease: month-to-month / gross • Vacancy: 5% • Property Taxes: $19,500 • Insurance: $3,000 • Utilities: $4,868 • Maintenance: $6,000 • Property Mgt: $3,385 • Going In Cap: 4.4% • Going Out Cap: 5.2% • Annual Gross Rent: $112,860 • Acquisitions Cost: $32,500 • Origination Fee: $6,500 • Brokers Fee: 5% • Levered Discount Rate: 11.58%

  7. Risk Benchmark • Property Risk • Tenant Risk • Market Risk • Competition Unlevered IRR is estimated to be 11.5%

  8. Discount Rate The discount rate is determined by his/her circumstances, return requirements and risk aversion. Levered IRR= Unlevered IRR + (Unlevered IRR - Cost of Debt)* (Debt/Equity)Debt/Equity = average Debt/Equity = (starting D/E + Ending D/E)/ 2Starting D/E= Loan Amount/Equity ContributionEnding D/E= Outstanding Loan Balance/Net Cash Flows and SaleLevered IRR= 11.55% + (11.55% - 4.5%)*( (650,000/1,014,000)+(266,719/2,015,533) /2) Levered IRR= 11.577%

  9. Cash Flow Assumptions

  10. Cash Flow Assumptions

  11. Sensitivity Analysis

  12. Positives/Negatives • + • Santa Monica location • Trends show relatively stable Santa Monica RE market • Low price/square foot • Current tenants plan to stay • - • Low going in cap rate will not provide enough cash flow to meet levered discount rate of 11.5% • Struggling economy creates uncertainty for future • Strict lending standards

  13. Conclusion • DO NOT INVEST: • Willingness to Pay: $1,255,000 • Asking Price: $1,625,000 • NPV: - $369,891 • Levered IRR: 6.2% • Would need a significant price reduction (23%) to invest • Because this is unlikely, we plan on looking into other investments that meet our criteria

  14. Thank You! • Presenters: • Elliot Hamilton • Shira Yomtoubian • Stephanie Castillo • Kai Lu • Elizabeth Vanhorne