Riverside Sunset Village

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Fernando Barraza Rona Dhruv Christian Passalacqua Teck Teng John Trujillo

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Table of Contents

Table of Contents

Executive Project Summary ...................................................................................... ii

Development Team ................................................................................................... iv

Letter of Intent ........................................................................................................... vi

Detailed Project Description ...................................................................................... 1

Market and Site Analysis ........................................................................................... 8

Development Strategy .............................................................................................. 20

Proposed Entitlements .............................................................................................. 26

Project Schedule ....................................................................................................... 34

Financial Analysis ..................................................................................................... 38

Conclusion ................................................................................................................ 48

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Executive S

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Executive Project SummaryProperty Overview

Location: The Subject Property is 2 city blocks of land located in Tempe, Arizona. The Subject Property (“Property”) is bound on the North by 5th Street, the East by Farmer Avenue, the South by 7th Street and the West by Wilson Street. This area includes 6th Street as well. The entire site is 6.18 acres or 269,200 square feet and is composed of 34 separate tax parcels. The entire site is zoned R1 and R3 and is owned by various owners. The City of Tempe owns 3.2 acres or 142,836 square feet. It is located in the Riverside/Sunset neighborhood.

Riverside/Sunset Village is N.Act Developments newest mixed use project. It is located in a neighborhood that is ideally situated near Mill Avenue a functioning “downtown” Main Street and Arizona State University. It has very good regional and local access and proximity to local and regional surface streets and public transportation. The project incorporates a mix of retail, residential, and public uses that will provide community interaction throughout the site.

The Riverside/Sunset Village has an abundance of open space that will be used for facilitating interaction between the community as well as accommodating the surrounding retail. The space acts as the hub of the community and is a departure from the automotive dominant street-scape which will entice a demographic of those who want to experience a community of like-minded individuals. The community space is easily accessible through the many foot paths and bike paths that have been created. Circulation has also been created throughout the village to align with the proposed linear park of the Farmer Arts District. This will harmonize the Riverside/Sunset Village with the surrounding neighborhood.

As the neighborhood continues to undergo a transition, it is evident that there is a shift from the Single Family Residential to Multi-Family Condominiums and Apartments in the area. As ASU students graduate and find jobs, they will want to live, work, and do their shopping without being dependent on the vehicle. The area has seen a resurgence of high density residential development and there is more proposed for the area along Tempe Town Lake. Young Professionals and Empty nesters will want to live close to the many restaurants on Mill Avenue in addition to the amenities that Riverside/Sunset Village will provide.

Our proposed development will take seven years for the residential component and ten years for the retail. This will allow us the flexibility to grow and manage risk.

Financial Feasibility

The project is financially viable given the proposed financing, which allows us purchase the city-owned property for $1.5 million dollars and produce a leveraged internal rate of return of over 20% for all the parcels.

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Team

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Rona Dhruv - Chief Analytics Officer

Ms. Dhruv is responsible for market analysis and site analysis for the company’s projects. Rona has over six years of experience in the real estate industry. Prior to founding N.Act Development Rona Dhruv wore many different hats; Real Estate Specialist at The Walt Disney Company, where she was a part of the Account Management team responsible for real estate strategy, portfolio management, and acquisition/disposition projects ranging from the West Coast, Texas, and Orlando. Research Specialist at Cushman & Wakefield where she prepared analytical reports profiling real estate conditions in major business markets in Southern California. Ms. Dhruv is a graduate from California State University Northridge with a Bachelor’s of Science in Real Estate and is currently a candidate for her Master of Real Estate Development at the W.P Carey School of Business at Arizona State University. Ms. Dhruv was also the recipient of the Arizona Commercial Real Estate for Women Scholarship Award in 2011.

Fernando Barraza - Chief Visionary Officer

Mr. Barraza is responsible for the vision and conceptual design of the company’s projects. Before starting N.Act Fernando worked as an architect and has had the opportunity to be head designer on various projects including infill projects, educational facilities, public transit projects, housing developments and master planning.Fernando earned his Master in Architecture from the Herberger Institute for Design at Arizona State University. Fernando has won various awards and scholarships for his professional and academic work and is leaveraging his creativity into real estate development. Fernando started his first company while in high school and has had success with a range of business ventures. Mr. Barraza is currently a candidate for a Master of Real Estate Development at the W.P Carey School of Business at Arizona State University.

Culture

N.Act is a company that promotes collaboration and accountability. N.Act believes in the support of teams leading teams which fosters horizontal teamwork and builds effective, cross-departmental problem-solving work groups.

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Team

Teck Teng - Chief Financial Officer

Mr. Teng is responsible for structuring deals and managing relationships with investors to ensure capital sources. Teck Teng is a designated broker specializing in short sales. Mr. Teng has also managed small portfolios of residential rental properties and land. Prior to beginning N.Act Development, Mr. Teng was a Business Intelligence Consultant, taking raw company data and transforming it into meaningful information. Mr. Teng received his Master of Business Administration from University of Wisconsin-Madison in 1998 and his Bachelor of Science in Engineering from Notre Dame University in 1996. He is currently a candidate for his Master of Real Estate Development at the W.P Carey School of Business at Arizona State University. Teck also served with the Singapore Infantry.

Christian Passalaqua - Chief Legal Officer

Mr. Passalacqua is responsible for overseeing the legal department of N.Act Development; ensuring any and all entitlement issues are resolved. Mr. Passalacqua is also responsible for reviewing and drafting construction scheduling documents and overseeing contractors hired on to construct projects undertaken by N.Act development. Christian also serves as Co- chair of overall sight design and layout. Christian graduated from Arizona State University with a Bachelors of Science in Housing and community development from the Herberger Institute for Design. While attending undergrad Christian was involved in starting Dillon Transfer and Supply, a small business that provided building materials to various branches of the federal government as well as state and local municipalities. Christian also started Stuart Street Properties a company that focuses on acquiring distressed residential properties and selling and or leasing those properties. Christian is currently a candidate for a Masters of Real Estate Development at Arizona State University’s W.P Carey School of Business.

John Trujillo - Chief Marketing Officer

Mr. Trujillo is the Chief Marketing Officer for N.Act Development Company. He is a fifth generation Arizonan and has been an active Agent/Broker in the valley since 1999. His career consists of residential re-sale, new home sales, independent development companies, and now primarily land acquisition and development. Mr. Trujillo has worked for Eagle Construction and Development Company and RDB Development Company as one of their Commercial Leasing, Acquisition and Disposition Specialist. Prior to being one of the Partners in N.Act Development Company, Mr. Trujillo was the Designated Broker of Trujillo Properties, LLC. Mr. Trujillo brings in depth knowledge of the local market conditions through his relationships that he has created over the coarse of his career. He was also responsible for comprising all of the raw figures for the Analysis and Market Data. Mr. Trujillo received his Bachelor’s degree from Arizona State University in Justice Studies and Theatre in 2009. Currently, he is a candidate for his Master of Real Estate Development degree from the W. P. Carey School of Business at Arizona State University. Mr. Trujillo was the Top Gun recipient from Hyland Bay in 2005, the #1 leader in new home agency training and certification in the United States.

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Mis

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CompanyN.Act Development was created with the intention of developing personal interaction within our communities.

MissionThrough inventive solutions create environments that foster social interaction and promote healthy lives.

VisionTo understand the needs of the community and to transform the vision into reality. The people are our number one priority and we strive to create interaction between the neighborhoods and the residents because all that we do is about integrating.

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InterAction

Core Values

Core Values

CommunityWith community interaction it’s all about the people. The people are what make communities thrive. We create communities for the residents who live in our development and for those that surround the development.

TechnologyWe utilize technology to create a beneficial community for the residents. It’s used as a tool to understand what the needs of the community are.

EnvironmentWe analyze the area and adapt to the environmental needs of our surroundings. This creates less of an environmental impact not only in the present but also for future generations. N.Act Development strives to benefit the neighborhoods and the cities that we develop in.

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Lette

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City of Tempe31 East Fifth StreetTempe, AZ 85281

LETTER OF INTENTRe: Riverside Sunset Village Approximately 6.3 acres just off Mill Avenue in downtown Tempe, AZ.These 2 square city blocks are located between 7th and 5th street, Wilson Street and Farmer Ave.

Dear City of Tempe:

n. Act Development is interested in acquiring approximately 3.2 acres located in Riverside Sunset Village, approximately from 7th St. to 5th St. Wilson Avenue to Farmer Avenue (2 city blocks).1. Proposed Offer Price: $1.25 Million Dollars

2. Premises: Zoning is commercial M U3, M U4, R-4, R-5 with approximately 134,436 square feet including Assessor’s Parcel Numbers: 124-33-008A, 124-33-007A, 124-33-006, 124-33-005, 124-33-004A, 124-33-001A, 124-33-002A, 124-33-009A

3. Purchaser: n. Act Development

4. Financing: Construction loan

5. Deposit: Upon execution of the Agreement, the Purchaser will deposit with Thomas Title, Mr. Brett Hopper, the amount of $500,000 which will be invested in an interest bearing trust account and will be retained by the Vendor as its sole remedy.

6. Access to Information: Immediately upon execution of this Letter of Intent, the Purchaser and its advisors will have full access during normal business hours to or copies of all documents pertaining to the property and within the Vendor’s control e.g. appraisal, environmental, engineering, structural, mechanical, traffic, soils, drainage, foundation and roof reports and all other studies, notices or information pertaining to the condition or status of the Property.

7. Condition(s) Precedent: The obligation of the Purchaser to purchase the Property will be subject to satisfaction or written waiver by the Purchaser of the following condition(s) (the “Condition(s) Precedent”) within 15 days after execution and delivery of the Agreement: • Review and approval of the Materials • Completion of satisfactory due diligence searches and examinations; • Satisfactory review and approval of the zoning for the Property • Obtaining satisfactory confirmation that necessary approval’s for the Purchaser’s in tended use of the Property will be available

8. Return of Materials: The Materials will be returned to the Seller or destroyed if the Agreement is not executed within the time provided.

9. Closing: The Closing will occur no later than 5 months (after approval) following the satisfaction or written waiver by the Purchaser of the Condition(s) Precedent.

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Letter of Intent

10. Costs: The Purchaser and the Seller will each bear their own expenses in connection with this Letter of Intent and the purchase and sale of the Property.

11. Confidentiality: All negotiations regarding the Property will be confidential and will not be disclosed to anyone other than respective advisors and internal staff of the parties and necessary third parties, such as lenders approached for financing.

12. Purchase and Sale Agreement: Upon execution of this Letter of Intent, the Purchaser will prepare a draft of the formal Agreement for the Seller’s review.

13. Not a Binding Contract: This Letter of Intent does not create a binding contract and will not be enforceable. Only the definitive Agreement, duly executed and delivered by the Seller and the Purchaser, will be enforceable.

14. Commission: Seller will compensate n. Act Development, Inc. John L. Trujillo, Designated Broker and Teck Teng Associate Broker, a commission of 3% of the purchase price. Seller shall hold Buyer harmless from all claims regarding all real estate commissions.

15. Assignment: Buyer may assign its rights and obligations under the Purchase Agreement at any time without prior consent of the Seller, this also includes without limitation to a third party from which buyer will have the contractual right to acquire lots pursuant to an option agreement or similar arrangement with such third party.

Sincerely,Buyer: n. Act Development, Inc.

By: _____________________________________________

Date: _____________________________________________

Acceptance: If you are agreeable to the foregoing terms, please sign and return a duplicate copy of this Letter of Intent by no later than 5:00 p.m., May 1, 2012 facsimile is acceptable.

Seller:

_____________________________________________________City of Tempe

The above terms are accepted this __________ day of ____________________, 2011.

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Zoning

Here is a shot of the current zoning of the area. As you can see there are several different zonings on our overall site. We are requesting our zoning be changed to MU-3 with a PAD overlay. We are also requesting our site be included in the TOD for Tempe which will permit the Riverside/ Sunset Village to fall into the neighborhood plan as well as Tempe’s plan of having a more bicycle and pedestrian friendly area. Our proposed zoning allows 25 dwelling units per acre and a maximum height of 50 feet. Riverside/Sunset village will slope from the proposed Farmer Art District down to the existing residential on the west side of the site. We want to blend into the existing area and not be obnoxiously over dense like some projects in the area.

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Retail Synergy

The target retail tenant mix for the Riverside/Sunset Village will create a more convenient area for the people to live. This includes a dry cleaner/laundromat, a daycare, a market, fedex kinkos, barbershop and others. The main goal is to provide people what they need and to keep them out of their car.

Open Space

The open space we will be providing in the Riverside Sunset Village will provide the community with an amenity that is often overlooked. N.Act development will not simply be providing open space for the sake of open space, instead we have positioned some of our proposed retail uses to take full advantage of the green belts that traverse our site. The proposed fitness center will have designated portions of the open space to utilize for outdoor classes. The daycare center will also open onto the green belts providing an outdoor activities area.

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EnvironmentIn considering our core values Riverside/Sunset leaves plenty of open space for community activities and community interaction. We also provide a link to Farmer Arts District through continuing our green space and walkways. Our shading device over the retail parking will have vines growing over them to provide more shade and a cooler area creating a micro-climate. This also aligns with our core values in adapting to the environmental needs of the area. Riverside/Sunset features solar panels on every building that will provide clean energy for the community

CirculationRiverside/Sunset Village leaves circulation through the development for pedestrian and bicycles. The community is able to move easily through the site from north to south and east to west.

Retail SpaceTo maximize the visibility of our retail we ran it parallel with the street. Conversely we aligned the residential product above East to West for a more sustainable orientation.

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TechnologyThe train runs right by our site on the east side and is loud and obnoxious. 90 decibels is generated from the train. It is impossible to ignore this fact so why not embrace it? Riverside/Sunset Village has lights attached to each structure that react to the amount of sound in the area. This same feature has been used on the CalTrans building in Los Angeles. This ties back to our core values; we are using technology as a positive tool to benefit the community. When the train passes by the lights will be at their brightest. Riverside/Sunset will have a water feature that utilizes reclaimed water that also reacts to noise. The louder it gets the more the water will shoot up into the air using dragon pumps. The falling water will produce a white noise that will drown out some of the sound from the train. This creates an event of lights and water dancing for the community instead of a nuisance every time the train passes by.

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ParcelsWe decided to assemble the parcels in our site so that our phasing of the project would allow us to maintain a linear path throughout the project regardless of witch phase was brought on line first.

With the development of Phase 1 consisting of parcels A4 and A2, N.Act will be able to provide a residential product to support the retail uses in Phase 2 and beyond. Phase 2 encompasses parcels A3 and A1 that N.Act will acquire from the city will be comprised of all previous parcels fronting onto 5th street. The block will be evenly divided into the two parcels allowing N.Act to develop parcel A1 and Sell A3. By Retaining A1 it will allow N.Act to maintain a linear open space through Parcel A4 and A2. Our strategy for developing the remaining parcels was one that would allow any parcel to be acquired at any time and still seamlessly integrate with the build product by tying into the open space corridor. Parcels B, C and D were assembled in uniform proportions to allow for the Retail uses to be implemented on Farmer Ave. Parcel E was designated for our larger residential product and as such N.Act dedicated a larger parcel size to allow for the residential circulation and open space.

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Market and Site Analysis

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Tempe is located within the Phoenix Metropolitan area and is home to the main campus of Arizona State University. With 59,794 students at the Tempe campus recorded for 2011, it is the largest public university in the United States by enrollment.

The resident population base in Tempe has increased from 158,625 in 2000 to 171,055 residents in 2010. Population growth for Tempe is forecasted to reach 176,735 by 2015.Neighborhood Background

Primary MarketThe Primary Market area for our proposed development is the Riverside/Sunset Village which consists of Priest Ave to the West, Mill Avenue to the East, University to the South, and Tempe Town Lake to the North.

The area consists of an estimated 7,821 residents in 3,705 households. It is expected to increase to 8,747 residents in 2015. The average household income is $50,000-$74,999. The median age range for the area is between 25-34.

Secondary MarketThe Secondary Market area is identified because there will be an inflow of consumers who reside in this area. It includes the Primary Market area, but expands the market area to as far north as McDowell Road. This area consists of an estimated 42,876 persons in 17,033 households. The average household income is $50,000-$74,999. The secondary market has become more significant with the Tempe Town Lake Bridge which provides access beyond Tempe Town Lake and into the Primary market area.

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Tapestry Segmentation In order to evaluate our Primary Market area a Tapestry Segmentation was ran. It combines the “who” of lifestyle demography with the “where” of local neighborhood geography. With these results it allows us to not only understand the socio-economic mix of the area but also the lifestyle characteristics of the residents in the community.Based on our research on ESRI, three classifications came up for the Riverside/Sunset neighborhood.

Young and RestlessChange is the constant for Young and Restless households. This young, on-the-go population has a median age of 28.6 years. Approximately two-thirds of them are younger than 35. Fifty-eight percent of these households are either single person or shared. Neighborhoods are diverse. Fifty-six percent of the residents are white; however, an above-average representation of blacks, Hispanics, and Asians also live in these neighborhoods.

The median household income is $46,185, and the median net worth is $12,857. Although the median household income is below the US median; only 23 percent of these residents have children, giving them more disposable income than segments with similar income levels. They are educated; 36 percent aged 25 years or older hold a bachelor’s or graduate degree; 69 percent have attended college. These ethnically diverse folks are very career oriented. Seventy-two percent are in the labor force; 10.2 percent are unemployed. Seventy-four percent of the females are working. Most employed residents have professional, sales

Preferences These young, single professionals are pursuing their careers and living a busy lifestyle. They are technologically savvy and take advantage of the convenience provided by many products and services. They go online to communicate with friends and family, shop, bank, and look for jobs. They read magazines to stay current on the latest lifestyle and entertainment trends and are just as likely to read a music magazine as a business publication. They go online for the latest news and sports. Television viewing is average. Radio is a good way to reach them; they listen to urban and contemporary hit music. Seeing movies at theaters and on DVD is a major source of entertainment. They also enjoy going to bars or nightclubs. Their busy schedule also includes working out at the gym and playing various sports. Domestic vehicles have a slight edge in this market.

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Dorms to DiplomasDemographic With a median age of 21.7 years, Dorms to Diplomas residents are college students who are the youngest of the Tapestry segments. Seventy-nine percent of the residents are enrolled in a college or university. Forty two percent share housing with one or more roommates; 38 percent live in single-person dwellings. Ethnic diversity is slightly lower in this segment than in the United States. Seventy-one percent of the residents are white; 10 percent are black. Although there is a higher percentage of Asians, Hispanics have a lower percentage compared to the United States.

Socioeconomic To support themselves while they attend school, nearly three-fourths of the employed residents work part-time in low-paying service jobs. The educational institutions at the center of these communities employ many residents, especially in the educational services, accommodation/food services, and retail trade industry sectors. The median household income for this segment is $19,089; the median net worth is $8,899. Fifty-five percent of the residents aged 25 years and older hold a bachelor’s or graduate degree.

Preferences Spending patterns of Dorms to Diplomas residents reflect their carefree lifestyle and their focus on their education. When they do not eat at the dining hall or in one of the nearby fast-food restaurants, they use convenient prepared and frozen foods. Most individuals own or share a refrigerator and microwave. Owning a personal computer is a necessity; they prefer laptops. Internet access is available to all and used frequently to research school assignments, find employment opportunities, make travel plans, and keep in touch with friends and family. Most own cell phones, iPods, and digital cameras. They download music and share videos. They bank online. Aside from the exercise they get from participating in college sports and walking or jogging around campus, they work out at on-campus gyms. Favorite pastimes include playing football, basketball, volleyball, and practicing yoga. They eat low-fat, low-calorie food. They also attend rock concerts, go dancing, and go to the movies and the theater. Typical of dorm life, they spend time with friends watching sports and playing cards. Although they often shop at discount stores, they prefer branded clothing from American Eagle and Old Navy.

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Retirement CommunitiesDemographic Most of the households in Retirement Communities are single seniors who live alone; a fourth is married couples with no children living at home. This older market has a median age of 52.6 years. One-third of the residents and 44 percent of householders are aged 65 years or older. Twenty-three percent of the population and 31 percent of householders are aged 75 years or older. Most of the residents are white.

Socioeconomic The median household income for Retirement Communities is $49,174, slightly below the US median, but the median net worth of $99,494 is much higher than the US value. Nearly half of the households earn income from interest, dividends, and rental properties; 45 percent receive Social Security benefits; and 26 percent receive retirement income. Most of those still working are employed in white-collar occupations. Retirement Communities residents are an educated group: 14 percent of the residents aged 25 years and older hold a graduate degree, 35 percent have a bachelor’s degree and more than 60 percent have attended college.

Preferences With more time to spend on leisure activities and hobbies, residents play musical instruments, paint or draw, work crosswords, play bingo, or attend adult education classes. They also visit museums, attend the theater, go dancing, practice yoga, go canoeing, and play golf. They will travel to gamble in Atlantic City or to visit Disney World. They attend sports events such as golf tournaments, tennis matches, and baseball games. They spend time with their grandchildren and spoil them with toys. Politically active, these residents are “joiners” and belong to civic clubs and charitable organizations. They own stocks and bank online. They prefer to own or lease a domestic vehicle. These residents describe themselves as moderate or frequent viewers of daytime and primetime TV. They watch news programs and baseball games, tennis matches, and golf tournaments. Cable channel favorites are Bravo, truTV, ESPN news, and Travel Channel. They listen to classical and public radio. Avid readers, they regularly read daily newspapers

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Tempe Apartment MarketThe table below shows the base rents for comparable residential projects in the area. They are shown by bedroom type. Of the eight projects, the average studio is 560 square feet and rents for $783.60, the average one bedroom is 632 square feet and rents for $808 and the average two bedroom units are 905 square feet and rents for $1,012. On average three bedrooms are 1,473 square feet and rent for $2,271. Overall, the rent per square foot is $1.33.

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Residential Apartment Analysis

SupplyAfter compiling date for the general Tempe submarket, our research shows that there are 2,304 units either recently completed, under construction, or in development. They vary from Traditional Apartments, Student Housing, and Senior housing. Of those, 915 units are Traditional Apartments.

To create a true comparable list we evaluated the primary market area and came up with eight apartment communities which are truly comparable to our proposed development. Of those eight there are two that are Class A (Grigio at Tempe Town Lake and West Sixth) but felt they needed to be included due to the fact that amenities are key for the type of demographic and they were the most recent additions to the area. The young professional would like to have amenities on site that would eliminate the need for a car, such as pool and fitness center.

DemandIn the past year Vacancy rates have declined in the Tempe submarket. There has been a resurgence of the multi housing market. One example is the newly built West Sixth residences which were 100 leased by mid-September 2011. A month after the first tower was completed. The second tower is scheduled to be completed soon and is about 30-40 percent leased. The majority of the renters are students and some empty nesters. The second tower so far will have more nonstudents.The area is in transition and is dominated by the student population. The Encore on Farmer will cater to a different demographic, individuals 55 years and older who earn less than 60 percent of the area median income. Besides appealing to the younger population the Riverside/Sunset neighborhood will also attract empty nesters and seniors. Our development will attract a population where a single family residence is too big and for those that would like a pedestrian friendly neighborhood with amenities nearby. Besides our Primary and Secondary markets we will expand our reach to markets outside of Metropolitan Phoenix who are looking to be a part of a transitioning neighborhood. Based on new projects in the area under construction and those that are planned but have no end date, our project at Riverside/Sunset Village will take advantage of the demand and create more supply for the immediate submarket.

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Future DevelopmentsThere has been significant activity as it pertains to new developments in our Primary market area. Majority of the projects were green lit prior to 2008 but have just recently started to pick up traction.

Evergreen Development is a proposed development bounded by Rio Salado Parkway to the north and First Street to the south. The plan being proposed is to include 379 units, including live-work space for artists in residence, gallery space, a coffee shop and wine bar and an outdoor food court. The total development area would be approximately 415,000 square feet and no taller than 75 feet.

Farmers Studios mixed-use/office Farmer Studios is a ‘flex-use’ building located in a transitional zone between downtown Tempe and the Sunset/Riverside neighborhood to the west. The 13,000 square foot building is placed to create a pedestrian friendly environment along Fifth Street and Farmer Avenue. The one-acre site incorporates an auto court for 54 cars and a unique retention courtyard. The building was designed, zoned and constructed to allow for any combination of retail, office and/or residential studios, while serving as the architect/owner’s own office.

Farmer Arts District is a proposed mixed use development in Tempe by Paragon Development.186 residential condominiums including live/work space, workforce housing and market rate housing and 54,000 square feet of retail and gallery space. There will also be a Linear park space adjacent to railroad tracks. In 2011 the Farmer Arts District began Phase I of their development with the Senior Living Center Encore on Farmer. The proposed Farmer Arts District will be a development that harmonizes with the surrounding neighborhood. With the Riverside/Sunset Village we would like to align the open areas with those of the proposed linear park. Further creating access and circulation throughout the village.

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Hayden Ferry @ Tempe Town Lake. Hayden Ferry Lakeside is a sophisticated, 43-acre master planned mixed-use project on the south shore of Tempe Town Lake in downtown Tempe, Arizona. Two office towers, two lakefront luxury condominiums, retail office lofts and a parking structure already rise above the shoreline, with blue glass and shapes reminiscent of sailing ships. At completion, the project will be comprised of Class “A” office and plaza-level restaurant and retail space, mid-rise office towers, a full-service hotel, and luxury residential condominiums. The planned bridge-to-bridge development fronts a mile-long expanse of Tempe Town Lake shoreline on Rio Salado Parkway between the bridges at Mill Avenue and Rural Road.

Southbank will be the City of Tempe’s most complex development to date, South Bank will encompass 3.6 million square feet of retail, office, hotel and residential space on one of the city’s last major parcels of undeveloped land.

Hayden Flour Mill is located at Rio Salado Parkway and Mill Avenue. It is perhaps one of the most iconic of all Tempe structures. It is being revitalized to provide a link between Tempe Town Lake and Mill Avenue. Plans are to open the grounds to the public and create a special event center. Until the development market returns to its strength, Tempe is working to rejuvenate the Hayden Flour Mill as an event venue.

Jones Studio expansion will consist of a one-story office building, with approximately 6,354 s.f. on .36 net acres, located at 205 S. Wilson. This will serve as the headquarters for Jones Studio. This expansion and relocation is another example of firms relocating into this transitional area.

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How did we determine the best and highest use of the land? Each parcel has unique positional characteristics such the amount of street frontage and the existing use of the adjacent parcels that create opportunities and challenges for determining the right use of the land.

Parcels adjacent to high traffic-count areas would be attractive for commercial uses. Based on ground observation over several periods throughout the week, 5th St has the highest traffic count (which includes vehicles, pedestrians and bicyclists), followed by Farmer Ave.

Because Wilson St does not connect with University and dead-ends at an apartment complex, 6th street, 7th street, and Wilson are relatively quiet streets. For all parcels adjacent to these low traffic-count streets, the logical use would be the same as the adjacent parcels, which is residential (multi-family).

High traffic counts do not necessarily dictate the use of commercial use. We needed an empirical means to determine the highest and best use on each parcel; consequently we used the Risk-Reward analysis, which plots profitability against risk. Profitability is determined by Net Present Value and Internal Rate of Return, both outcomes of the Pro forma analysis detailed in a later section. Risk is indicated by vacancy rates and specific location relative to the busy street corner.

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Results of the Risk-Reward Study

Parcels trending toward the lower right quadrant produce the most desirable combination of risk and reward. Conversely, the upper left quadrant is the least desirable because of low profitability and high risk.

Parcels A2 and A4 are both profitable and low risk. Parcel A1 and A3MU are both modeled as mixed use retail and residential. However, because A1 is on the street corner and A3 is off the street corner, parcel A3MU gets a higher risk rating because it has a higher probability of a larger vacancy rate.

It was evident we had to find another strategy for parcel A3. We considered other uses and modeled A3 as Residential and Entitled Land, where we would sell the land to another developer after zoning and entitlement. Both scenarios produced desirable outcomes, with A3R having significant NPV and A3L having a high IRR.

Selling the entitled land for parcel A3 makes the most sense because it reduces the overall risk of the entire development. Even though the sheer profit is less than developing A3 as residential, we would rather receive smaller profits earlier. We can also still maintain overall architectural and design control of A3 through CC&R’s. Even though we will pursue an entitled land sale of parcel A3, our backup plan, if the parcel does not meet a minimum sale threshold within 6-8 months, is to pursue developing A3 as multi-family housing, modeled as A3R.

$$ $ $$$Low Risk

Medium Risk

High Risk Worst Case

Best Case

A3-MUIRR 22%

NPV $773,652Vacancy 15%

A1IRR 23%

NPV $825,118Vacancy 13.5%On Corner

A3-RIRR 42%

NPV $693,660Vacancy 5%

A4IRR 38%

NPV $517,082Vacancy 5%

A2IRR 38%

NPV $891,713Vacancy 5%A3-L

IRR 236%NPV $448,236

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PhasingThe phasing plan follows the Risk-Reward analysis. The entire city owned property will be purchased after receiving zoning and entitlements from the city. We will market A3 for sale during the entitlement phase to solicit offers. Parcel A2 and A4 will start construction immediately after purchase. Because the vacancy rate of retail is still very high at over 14%, we will delay construction of A1 for an additional 2 years, when we predict that absorption will reduve vacancies to acceptable levels.

Ownership and Disposition of City-Owned ParcelsThe land owned by the city is split into four discrete parcels, A1 through A4, as discussed in the project description section. The multi-family parcels, A2 and A4, will have a 6 month lease-up with a 5 year stabilization period, after which we will sell off to an investment group. A3 will be sold as entitled land within 6 to 12 months of closing on the land purchase. A1 will finish stabilization after month 48 and will be sold after 10 years.

Acquisition Strategy for Privately Owned ParcelsDistressed OwnerWe will approach the lender and homeowner and work together in coming up with a short sale acquisition strategy. Some of these strategies may include incentivizing the homeowner.

Investors/DevelopersWe will try and negotiate a sale and consider other structures such as a join venture to gain their cooperation and partnership.

Non-distressed OwnerWe will offer the Non-distressed owner the current market rate and if that is not accepted then we have taken into account that possibility by designing our phasing strategy to build around potential holdouts.

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UsesN.ACT Development has determined that the best way to develop this particular site is to implement a mixed-use project encompassing retail and residential units that will further facilitate the transitional nature of the current community. The project will encompass a total 123,802 sf of residential product and 32,000 sf of retail product parked on 80,000 sf of on site parking. Building A, Phase One will consist of 11,731 total square footage of residential product on the second and third floors above podium parking, with 6,300 square feet of parking available. Building B, Phase One will consist of 20,234 total square footage of residential product on the second and third floor above podium parking, with 10,800 square feet of parking available.

Parcel A, Phase Two of the project will consist of two buildings. Building A on the Northeast portion of the property will consist of 15,706 square feet of residential product as well as 6,400 square feet of retail product. All of the building uses will be parked on 8,400 square feet of parking plus additional on street parking. The second building of the phase will be on the Northwest corner of the project and consist of 15,331 square feet of residential and 6,400 square feet of retail all parked on 8,100 square feet of parking plus additional on street parking.

Upon completion of development on the city owned property N.ACT will begin to develop parcels, as we are able to acquire them. For this example we will run through the process as if we will acquire the future parcels in order. The product we will be placing on Parcel B will consist of 17,600 square feet of residential and 4,800 square feet of retail served by 8,800 square feet of parking with additional on street parking. Parcel C will consist of 11,200 square feet of residential and 8,000 square feet of retail. The structure on parcel C will be served by 8,000 square feet of parking with the addition of on street parking. Parcel D will have 16,000 square feet of residential and 6,400 square feet of retail, the parcel will have 17,600 square feet of parking plus on street parking. The final parcel of the site if developed in order will be Parcel E on the South West corner of the project, consisting of 16,000 square feet of residential and served by 12,000 square feet of parking. All future construction will be as noted in Parcel A, Phases One and Two.

Building A, Phase One consists of a three-story structure. The first floor is podium parking and circulation to the second and third stories of residences. Building B, Phase One is set up identically to Building A with two stories of residential above parking. Building A, Phase Two will be three story structure consisting of retail and podium parking on the first floor with two stories of residential above. Building B, Phase Two will consist of two stories of residential above retail and podium parking totaling a three story building. Parcel B will consist of retail and parking on the ground floor and two levels of residential product above. Parcel C is three stories consisting of the top two levels for residential with the ground floor being retail and parking. Parcel D will encompass three stories in total the first floor being retail and parking and the top two floors are residential. Parcel E will be a residential structure consisting of two stories of residential above podium parking on the first floor.

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LayoutBuilding A, Phase One will be located on the Northeast corner of 6Th street and Wilson. The building will be oriented with a Northwest exposure to limit the impact of the summer heat. Building B, Phase One will be located on the Southeast corner of 6th street and Wilson, the structure will be a U shaped building creating a internal courtyard that faces East into the development. Building A, Phase Two will be located on the Southwest corner of 5th and Farmer on the Northeast corner of the project. The structure will stand as two identical three story staggered towers connected by the first floor retail that will be oriented towards the street in an East to West exposure while the residential above will be oriented more sustainability to the North and South. Building B of the second phase will be a L shaped building on the Southeast corner of 5th and Wilson at the Northwest corner of the site. The structure will have retail frontage on 5th street with residential above. The next phase of the project will consist of building a mixed use structure on Parcel B. The structure will be a three story building with residential above oriented North to South while the retail on the first floor will consist of retail oriented towards the street with East West exposure.

The structure to be built on parcel C will be two identical residential towers of tree stories with the first floor retail connecting the two buildings. The retail will be oriented towards Farmers while the two residential structures will be oriented with a North South exposure. The building will be on the Southwest corner of 6th and Farmer.The structure that will be built on the Northwest corner of 7th and Farmer, Parcel D of our project, will consist of retail located along Farmer, oriented toward the street with two identical residential structures above oriented North South to minimize exposure to the sun. The final structure will be placed on the Southwest corner of the project this will be on the Northeast corner of 7th and Wilson. The structure will be an L shaped building of strictly residential product with most of the residential units along 7th street. There will be eight points of egress and regress for parking upon completion of the project. Two along 7th Street, one entering into Parcel D and one to Parcel E. There will be four driveways along 6th Street, two each on either side of the street leaving one entrance into Parcel C, Phase One on the south side of the street. The North side of the street will consist of one entrance onto Parcel B and another onto Phase 1. The last two driveways will be along 5th street, one on the East side of the project into phase 2 and another on the West side of the project along 5th also into phase 2.

All the parking on the site will be surface parking with the residential structures elevated over the parking areas. The parking for building A, Phase 1 will have a surface lot in the rear of the building towards Wilson with residential parking under the structure on the surface. Building B, Phase 1 will consist of a surface lot with the residential structure built above the parking for residents. Phase Two will consist of a covered surface parking lot that runs the length of the structure parallel to 5th street There will be residential parking under the structures on the phase. The surface lot on Parcel B will consist of covered parking and podium parking under the residences. This lot will connect to the surface parking on phase 2 of the project to create more circulation within the site. The lot on Parcels C and D will be connected and run parallel to Farmer behind the retail product. There will also be podium parking under the residences for resident use as well. The parking on Parcel E will consist of podium parking under the residential product as well as some surface parking to the north of the structure.

Our proposed site layout will provide pedestrian paths along all the perimeters of the parking lots thus more conducive to keeping pedestrians out of the parking lot while still allowing them to get back to their vehicles in a timely, convenient manner. We wanted to create a more pedestrian friendly environment and thus decided to let the pedestrian define his or her own path, leaving a central corridor of open space for the pedestrian to utilize.

At N.ACT Development, we desire to develop a community that truly created a more beneficial residential and retail environment. We believe that by orienting the residential units all with North/South exposure will reduce the resident’s cost of operation, creating a savings and a more enjoyable climate for the home during the summer months. In addition, by covering the surface parking with plant life such as vines we will create a micro climate bringing down the temperature throughout the site wile still allowing natural light in to the area. The linear water features that run parallel to some of the pedestrian paths will provide a welcome distraction, creating a soothing white noise, when trains pass along the east side of the site behind the Farmers arts district. The water features will also assist in subduing the drone of passing air traffic as we are in close proximity to Phoenix Sky Harbor International Airport.

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EntitlementsThe site that we at N.ACT Development are proposing to develop currently falls under R-3 (Multi-Family Residential limited) Zoning with the exception of AZ parcel #124-33-009A. This parcel, AZ parcel #124-33-009A, falls under R-1 PAD (single Family Residential, Planed Area Development). Furthermore there are five parcels that fall under an MU-4 PAD (Mixed Use High Density, Planed Area Development) consisting of AZP # 124-33-005, AZP# 124-33-004A, AZP# 124-33-001A, AZP# 124-33-002A, AZP# 124-33-016A. The Remaining Parcels all Fall under the R-3 Zoning designation. Please refer to Exhibit C1 for the current zoning map from the city of Tempe outlining N.ACT’s proposed redevelopment site. The City of Tempe has designated the site for residential uses as Exhibit C2 –C3 display from the city of Tempe General Plan 2030. The City has designated the area as land that is primarily used for living and other daily activities conducted in a dwelling. These dwellings are to include housing types such as single family (detached and attached) multi family and group homes as defined in the Tempe General Plan 2030. We at N.ACT Development are proposing the properties in question be rezoned MU-3 as the current zoning will not permit the uses we would like to provide to the community. As per Tempe’s vision of mixed-use developments we at N.ACT would like the opportunity to rezone the parcels in question, allowing us to provide residential and commercial uses, create a living environment relative to a village concept thus allowing the opportunity for residents to live and work in the proximity of the Downtown Tempe District; all the while providing close proximity to public transit facilities as well as providing residents and visitors alike the ability to walk and bike freely through our development and the surrounding community. N.ACT Development is proposing a density of Medium to High (up to 25 DU/Acre). which will comply to the current permitted density per the zoning district on the site. N.ACT Development is proposing building heights of thirty five (35) to fifty (50) feet. This will allow us to provide a more diverse product to the community and integrate commercial and residential units in a way to meet the city of Tempe’s Community Design Principals. Currently the building height that we at N.ACT are proposing are not permitted in the existing zoning districts on the proposed site. N.ACT Development’s proposed building setbacks are 20 Feet in order to create a more open, pedestrian oriented community. We, in desiring to separate the domain of the vehicle from that of the pedestrian, and in order to create more of a buffering effect between the two uses, felt that a 20 foot setback would be the best way to separate the two spaces. The proposed building setbacks of 20 feet do currently comply with the required setbacks in the existing zoning districts on the proposed site.

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Specifically-Requires EntitlementIn order to achieve our desired development we at N.ACT are requesting that the City of Tempe grant us entitlements of the following type, Inclusion in the TOD (transit oriented development) overlay district as well as allowing the creation of a PAD (planned area development) overlay district. We are also requesting a zoning change as well as a proposed amendment to the general plan for 2030. N.ACT will be requesting a zoning change from the current R-3 and R-1Pad to MU-3 zoning. This zoning change will allow us to transition the neighborhood from single family residential product to a mixed use product encompassing residential retail and office space. N.ACT will also be proposing that the city allow us to implement a PAD (Planed Area Development) to encompass any and all parcels acquired by N.ACT. Thus allowing us to implement a set of design standards that will encourage and promote unity in the type of design throughout the project. Furthermore the PAD will ensure that any further development on the site will adherer to our initial envisioning of the community. To further ensure our envisioning for the site is possible we at N.ACT will also submit an application to the City of Tempe to include our proposed project site into the already existing TOD (Transportation Overlay District). If granted inclusion into the TO D we will be able to design our project in a way that will allow us to minimize the parking requirements to create a more pedestrian community, thus further aligning our own development goals with the City’s goals of promoting and developing livable and sustainable neighborhoods, alternative modes of transportation to include walking, bicycling and public transportation such as light rail, busses and the future street car line that would have a stop one block form our proposed site. The final part of our requested entitlements would be a General Plan Amendment. As it currently stands, the general plan for 2030 as drafted in 2003 calls for single family residential with medium to high density with a maximum of 25 dwelling units per acre. We are requesting an amendment to allow the map to recognize a mixed use designation to encompass the site and match the land use designation of the uses to the North and East of our proposed site.

In pursuing the aforementioned entitlements we have identified the processes we must undertake in order to meet the application requirements for each entitlement requested. In relation to the Planned Area Development, Transit Oriented Development, Zoning variance and the General Plan Amendment the process is the same for most of the process. Beginning with the preliminary application documents need to consist of, Building Elevations, Black and White line drawings of all sides of the buildings, to include dimensions, exterior materials and architectural characteristics. There will be included a set of colored elevation drawings to be formatted for submittal as required in 24” X 36”. This set of drawings must include shading and shadow on the buildings as well as 25’ of landscaping around the building.

Following will be a Building Section to consist of a scale drawing of proposed structures, detailing the dimensions of the structure, showing walls, floors, slab, roof, partitions, vertical circulation, doors and windows as well as structural elements, vertical circulation and mechanical equipment. Floor Plans must also be submitted with all floors and dimensions shown, all documentation must be submitted in 24” X 36” and 8.5” X 11” electronically on CD in PDF format. A General Plan Map must be submitted outlining the current zoning as well as the existing and proposed land use. The density of the site and surrounding uses must also be identified. In order to asses the overall aesthetics of the site a Landscape Plan outlining the trees, ground cover, trees, plants and there general location on the site as well as the conceptual size and location of lighting on the site shall be included in the submittal.

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Specifically-Requires Entitlement ContNeighborhood meetings must be scheduled prior to the first public hearing in order to address all the Proposed entitlements as N.ACT’s proposed development is within 300 feet of Residential Dwellings. An ownership / Tenant list must be provided to the city including names and mailing addresses of the property owners within the subject area boundary. There are also Photos and Graphics to be provided in order to contextually show the relationship of the subject site to the surrounding property. Preliminary site grading and drainage studies to be performed must be provided to indicate the proposed storm water retention details, slope and depth, cross sections, flow patterns and top of curb. The study must also take into account the utility requirements (water and wastewater), fire protection, power requirements, telecommunications and cable TV if necessary, of the increased density equation. Where the process differs in our requested entitlements, it is to be set forth in the Letter Of Explanation that is required by the City. the Letter is to be addressed to the proper Board and or Commission outlining the development. In the case of the Zoning Amendment the letter must describe the project and provide justification that is based on findings of consistency and conformance with the General Plan. Where as the letter for the PAD overlay must provide justification for the proposal to include how the PAD Overlay district, if granted, will accommodate, encourage and promote innovatively designed development, encompassing residential and non residential land uses to form a beneficial addition to the community. A description of how the proposed PAD will be implemented over the traditional zoning regulations currently in place.

In the case of the General Plan, the letter must include the quantitative impacts of the proposed amendment compared to the current General Plan. The letter must outline the public benefits for the change, explain how, if any, negative impacts will be mitigated. Identify how the proposed amendment will support the land use principals as well as how the proposed amendment will meet the goals of the General Plan elements including, land use, accessibility, community design, economic development, environment, transit, bikeways, parking, recreation and open space. Once the application has been submitted we move on to the next steps in the process to include a Preliminary Discussion. This discussion is to familiarize the prospective developer or applicant with the City Of Tempe’s current zoning and development code as well as the General Plan. Applications will then be placed on the Scheduling for the Agenda of a regular meeting with the appropriate decision making body. The commission meeting that is held next is where the proposal may be denied, or continued with modifications, in compliance with the zoning and development code. The result of the meeting will be taken into record on both the staff report and the action letter that describes the actions and intent of the decision making bodies. In the case of a denial the person or entities bringing the proposal may appeal the decision by providing a written appeal within 14 days of the decision or the decision becomes final. Since N.ACT development is requesting a General Plan Amendment, Zoning Amendment and a Planed Area Development Overlay we will be required to have the requests forwarded to a City Council Hearing. The hearing will consist of two parts the first meeting will introduce the project followed by a 2nd public hearing. N.ACT has taken into account all the possibilities relating to the development of this project and feel that the entitlements we are requesting fit our development goals the best. We have examined the surrounding community and feel it is vital that we implement a PAD overlay in order to maintain uniformity throughout the project as well as blending in with the surrounding community. Although the General Plan change is not required, as we are within the plans projected density, we feel that by designating the project a mixed use area will provide more of a forward thinking approach to finding solutions to better serve the community as well as conform with the proposed uses to the North and East of the proposed project.

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We did examine the possibility of requesting MU-4 zoning, (however standing with MU-3) as we felt that the unlimited density that MU-4 carries would be unnecessary and would not fit with our outlook for the project as well as not fitting with our goal of creating a transition to the bordering community to the West. N.ACT felt that the community would be better served by a developer that took into account their (the community‘s) surroundings, by not attempting to build a project that was too dense for the surrounding values. we feel that given how N.ACT has taken into account the surrounding community, and taken into account the transitional aspects of the project, the community will be receptive to our proposal; as well, we are prepared to take into account the communities concerns that may be raised. N.ACT also feels that the actions taken by the Riverside Mixed Use Building have paved the way for forward thinking projects in this particular community as this particular project was granted MU-4 Zoning as well as a PAD overlay. We also feel that, given the Farmers Arts district caries a MU-4 zoning designation that our proposal of MU-3 to create a transition to the neighboring R-3 will be a welcomed solution to the transitional nature of the area. We are not pursuing a MU-4 zoning designation and the unlimited density that that caries. Given that the Northeast corner of the project encompassing five parcels currently carries a TOD overlay we feel that the inclusion of our entire project in the TOD Overlay will be well excepted.

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ID Task Name Predecessors Start Duration

1 Riverside Sunset Neighborhood Wed 11/23/11 1170 days?2 Due Dilligence Wed 11/23/11 112 days3 ALTA Title Wed 11/23/11 20 days

4 FEMA Flood Plain 5 Tue 2/14/12 10 days

5 Environmental 3 Fri 12/23/11 35 days

6 Market Research 3 Fri 12/23/11 50 days

7 Marketing Strategy 6 Tue 3/6/12 42 days

8 Financial Analysis 3 Fri 12/23/11 30 days

9 Capital Structure 3 Fri 12/23/11 35 days

10 Obtain Legal Concil 3 Fri 12/23/11 32 days

11 Go / No Go Decision 10 Thu 2/9/12 20 days

12 Land Acquision 2 Thu 5/3/12 110 days13 Purchase Agreement City Property 11 Thu 5/3/12 30 days

14 Close On City Property 13 Thu 6/14/12 60 days

15 Purchase Agreement Independent Owners 11 Thu 5/3/12 50 days

16 Close On Independent Property 15 Fri 7/13/12 60 days

17 Entitlements 2 Mon 9/10/12 56 days18 Zoning Changes Mon 9/10/12 42 days19 Neighborhood Meeting 14 Mon 9/10/12 14 days

20 Commission Meeting 19 Fri 9/28/12 14 days

21 City Council Hearing 20 Thu 10/18/12 14 days

22 PAD Overlay Mon 9/10/12 56 days23 Neighborhood Meeting 14 Mon 9/10/12 14 days

24 Commission Meeting 20,23 Thu 10/18/12 14 days

25 City Council Hearing 21,24 Wed 11/7/12 14 days

26 TOD Overlay 14 Mon 9/10/12 56 days27 Neighborhood Meeting 14 Mon 9/10/12 14 days

28 Commission Meeting 20,23,27 Thu 10/18/12 14 days

29 City Council Hearing 21,24,28 Wed 11/7/12 14 days

30 General Plan Amendment Mon 9/10/12 56 days31 Neighborhood Meeting 14 Mon 9/10/12 14 days

32 Commission Meeting 20,23,27,31 Thu 10/18/12 14 days

33 City Council Hearing 21,24,28,32 Wed 11/7/12 14 days

34 Site Design 12 Mon 10/8/12 145 days35 Preliminary Design 11 Mon 10/8/12 40 days

36 RFP - Architects 35 Wed 12/5/12 35 days

37 RFP - Landscape Architects 35 Wed 12/5/12 35 days

38 Award to Architect 36 Tue 1/29/13 10 days

O N D J F M A M J J A S O N D JHalf 1, 2012 Half 2, 2012 Half 1,

39 Award to Landscape Architect 37 Tue 1/29/13 10 days

40 City Plan Review 38,39 Tue 2/12/13 40 days

41 Obtain Permit 40 Tue 4/9/13 20 days

42 Pre Construction 34 Tue 5/7/13 61 days?43 RFP to General Contractors 41 Tue 5/7/13 35 days

44 Award Contract 43 Tue 6/25/13 10 days

45 Demo Permit 44 Tue 7/9/13 15 days

46 Ground Breaking 45 Tue 7/30/13 1 day?

47 Parcel A2 42 Wed 7/31/13 176 days48 Demolition 46 Wed 7/31/13 15 days

49 Site Prep 46,48 Wed 8/21/13 20 days

50 Sub Grade construction 49 Wed 9/18/13 20 days

51 Site Grading 50 Wed 10/16/13 10 days

52 Building Foundation 51 Wed 10/30/13 16 days

53 Parking Lot 51 Wed 10/30/13 10 days

54 Parking Lot Finishing 53 Wed 11/13/13 5 days

55 Vertical Construction 52 Thu 11/21/13 50 days

56 Exterior Finishing 55 Thu 1/30/14 20 days

57 Interior Finishing 55 Thu 1/30/14 30 days

58 Site Landscaping 52,56 Thu 2/27/14 20 days

59 Ocupancy Permit 57 Thu 3/13/14 15 days

60 Parcel A4 42 Wed 7/31/13 176 days61 Demolition Wed 7/31/13 15 days

62 Site Prep 61 Wed 8/21/13 20 days

63 Sub Grade construction 62 Wed 9/18/13 20 days

64 Site Grading 63 Wed 10/16/13 10 days

65 Building Foundation 64 Wed 10/30/13 16 days

66 Parking Lot 64 Wed 10/30/13 10 days

67 Parking Lot Finishing 66 Wed 11/13/13 5 days

68 Vertical Construction 65 Thu 11/21/13 50 days

69 Exterior Finishing 68 Thu 1/30/14 20 days

70 Interior Finishing 68 Thu 1/30/14 30 days

71 Site Landscaping 65,69 Thu 2/27/14 20 days

72 Ocupancy Permit 70 Thu 3/13/14 15 days

73 Parcel A3 60 Thu 4/3/14 132 days74 RFP - Broker Thu 4/3/14 17 days

75 Hire Broker 74 Mon 4/28/14 5 days

76 Offer And Acceptance 75 Mon 5/5/14 20 days

O N D J F M A M J J A S O N D J

77 Closing 76 Mon 6/2/14 90 days

78 Parcel A1 60 Thu 10/1/15 176 days79 Demolition Thu 10/1/15 15 days

80 Site Prep 79 Thu 10/22/15 10 days

81 Sub Grade construction 80 Thu 11/5/15 20 days

82 Site Grading 81 Thu 12/3/15 20 days

83 Building Foundation 82 Thu 12/31/15 16 days

84 Parking Lot 82 Thu 12/31/15 10 days

85 Parking Lot Finishing 84 Thu 1/14/16 5 days

86 Vertical Construction 83 Fri 1/22/16 50 days

87 Exterior Finishing 86 Fri 4/1/16 20 days

88 Interior Finishing 86 Fri 4/1/16 30 days

89 Site Landscaping 83,87 Fri 4/29/16 20 days

90 Ocupancy Permit 88 Fri 5/13/16 15 days

91 Parcel B 60 Thu 10/1/15 176 days104 Parcel C 60 Thu 10/1/15 176 days117 Parcel D 60 Thu 10/1/15 176 days130 Parcel E 60 Thu 10/1/15 176 days

F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J1, 2013 Half 2, 2013 Half 1, 2014 Half 2, 2014 Half 1, 2015 Half 2, 2015 Half 1, 2016 H

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F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J1, 2013 Half 2, 2013 Half 1, 2014 Half 2, 2014 Half 1, 2015 Half 2, 2015 Half 1, 2016 Half ID Task Name Predecessors Start Duration

1 Riverside Sunset Neighborhood Wed 11/23/11 1170 days?2 Due Dilligence Wed 11/23/11 112 days12 Land Acquision 2 Thu 5/3/12 110 days17 Entitlements 2 Mon 9/10/12 56 days34 Site Design 12 Mon 10/8/12 145 days42 Pre Construction 34 Tue 5/7/13 61 days?47 Parcel A2 42 Wed 7/31/13 176 days60 Parcel A4 42 Wed 7/31/13 176 days73 Parcel A3 60 Thu 4/3/14 132 days78 Parcel A1 60 Thu 10/1/15 176 days91 Parcel B 60 Thu 10/1/15 176 days

104 Parcel C 60 Thu 10/1/15 176 days117 Parcel D 60 Thu 10/1/15 176 days130 Parcel E 60 Thu 10/1/15 176 days

O N D J F M A M J J A S O N D JHalf 1, 2012 Half 2, 2012 Half 1

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Summary

The project is financially viable given the proposed financing, which allows us to purchase the city-owned property for $1.5 million dollars and produce a leveraged internal rate of return of over 20% for all the parcels.

The project has a mediocre return without any debt. With leverage, the project delivers outstanding return. Leveraging does not increase the NPV of residential parcels but significantly improves the IRR and Cash on Cash returns. Choosing to lever the sale of A3 as entitled land produces a 9-fold increase of IRR and 4-fold increase in NPV. It is obvious that IRR is an excellent measure of investment performance over time, while Cash on Cash measures the overall return.

A1 A2 A3L A3R A3MU A4UnleveredIRR 14.1% 19.2% 26.4% 19.1% 13.9% 19.2%NPV $688,743 $882,739 $127,540 $662,830 $639,378 $511,658Cash Multiple 2.18 2.15 1.26 2.14 2.16 2.15Stabilized CoC 10.0% 10.2% N/A 10.1% 10.5% 10.2%

LeveredIRR 23% 38% 236% 42% 22% 38%NPV $825,118 $891,713 $448,236 $693,660 $773,652 $517,082Cash Multiple 5.41 4.99 1.97 4.93 5.27 5.00Stabilized CoC 14.0% 10.6% N/A 10.6% 14.0% 10.6%

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AssumptionsThe financial analysis depends on assumptions that affect the outcome of the project. Due diligence to produce accurate numbers included online research through established databases, interviewing practitioners such as construction managers, and physically walking the surrounding area to gather market information such as rent rolls and vacancies. The following financial assumptions include estimates on cost, income, economics, leasing, operations and other constraints.

Square Feet Per Acre 43,560Parking RequirementRatio Residential TOD (cars per bedroom) 0.75Ratio Residential (cars per bedroom) 1Ratio Retail (cars per 1000 sqft) 3.33Area per space 400Minimum Open Space 0%Acquisition and DevelopmentDeveloper General Conditions 5%Estimated Building Efficiency Retail 0.95Estimated Building Efficiency Residential 0.87Construction Loan Rate 12%Inflation 2.5%Acquisition & Development %Pre Acquisition 5.0%Pre Development 10.0%Development 85.0%Property SaleLandValueAfterEntitlements 1.40Offer Discount 92%Year 10 Retail Cap Rate 8.5%Year 10 Residentail Cap Rate 6.5%Transaction Costs 5.0%Hard & Soft Costs EstimatesRetail Building Shell & Core 65Residential Building on top of Retail 60Residential Building stand alone 65Surface Parking & Site Development 8Tenant Improvements / sqft 25Soft Cost % of Hard Costs 31%Retail Land Market Cost /sqft 30.00Residential Land Market Cost /sqft 18.00

Retail AssumptionsYearly Growth Rate 3%Absorbtion Factor (months) 8Stabilized Occupancy 0.9Vacancy Tier 1 9%Vacancy Tier 2 12%Market Rent per month 2.00Market Rent per year 24Rental Concessions 0Effective Gross Rent 24.00Expense Stop % of EGR 1%Expense Stop 0.24Net Effective Rent 23.76Net Effective Rent Adjusted 21.38Operating Expenses /sqftCAM 3.00Taxes 2.25Insurance 1.50Reserve 0.30

Total Operating Expenses 7.05Leasing Commission 3%Capital Reserve % of Lease 2%Residential AssumptionsYearly Growth Rate 2%Absorbtion Factor (months) 6Stabilized Occupancy 0.95Vacancy 5%Market Rent per sqft per month 1.55Market Rent per sqft per year 18.60Rental Concessions 1.302Effective Gross Rent 17.30Operating Expenses % of EGR 13%Operating Expenses 2.25Net Effective Rent 15.05Net Effective Rent Adjusted 14.30Operating Expenses /sqftCAM 1.00Taxes 0.80Insurance 0.41Reserve 0.20

Total Operating Expenses 2.41Leasing Commission 3%

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Weighted Average Cost of CapitalGiven the current capital structure, the project is not viable at a 10.45% weighted average cost of capital. The secondary debt component has over 50% of the value and costs as much as the equity. We propose the following:

1. Eliminate the public bond financing because even though the rate is low, the approval time period is too lengthy and risky.

2. Increase the LTV of the primary lender from 15% to 50%. In return, we are willing to add an additional half a point of interest to the loan and change it from interest only from the first 3 years to fully amortizing.

3. Increase the equity component from 10% to 20%.

By making the tradeoff to adjust the loan terms, we are able to switch the weighted cost of capital from 10.45% to 9.71%, which increases our residual land value by 68%.

@6.50% Int Only 3 yrs

@10%

@6%

@10%@10%

@7%

@10%

@10%

Proposed TermsComponent Type Ratio Adjusted Ratio Rate Term (years) Payment (Mrtg Constant) Weighted AverageDebt Primary 50.00% 50% 7.00% 25 0.08481 4.24%

Secondary 30.00% 30% 10.00% 20 0.1158 3.47%Equity Primary 20.00% 20.00% 10% 2.00%

100.00% 100% Weighted Rate 9.71%

Original TermsComponent Type Ratio Adjusted Ratio Rate Term (years) Payment (Mrtg Constant) Weighted Average

Debt Primary 15.00% 15% 6.50% 25 0.007800 1.40%Primary 6.50% 25 0.08555Secondary 50.00% 50% 10.00% 20 0.1158 5.79%Public 25.00% 17.50% 6.00% 20 0.0865 1.51%

Equity Primary 10.00% 10.00% 10% 1.00%Primary Additional 0.00% 6.00% 10% 0.60%Secondary Additional 0.00% 1.50% 10% 0.15%

100.00% 100% Weighted Rate 10.45%

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Deriving the Purchase Price for City-Owned Land

The residual land analysis, when based on the proposed cost of capital, results in a land value of approximately $12 a square foot or $1.6 million dollars. We are making an offer of $1.5 million dollars, which gives us approximately $100k of negotiation upside. When comparing the residual land value of A3 as strictly residential versus mixed use, the latter use produces four times the value than residential. Because residual land value analysis is static and does not take into account the influences of time against fluctuating rates such as vacancies, rents and inflation, the offer price is based on developing A3 as residential because it is less speculative and can be developed immediately.

Minimum Room Size Requirenment

Maximum Lease Amount* http://www.azhousing.gov/azcms/uploads/RENTAL%20APPLICATIONS/LIHTC/11%20QAP/Exhibit_D_2011_Design_Guidelines.pdf

* http://www.azhousing.gov/azcms/uploads/RENTAL%20APPLICATIONS/LIHTC/Inclim2011-Post%201989%20Projects.pdf

Low Income Housing RequirementThe city requires 20% of all residential units to accommodate low income housing at 50% of median income. The Arizona Department of Housing provides further guidance on this requirement, which we have incorporated into our design. The two constraints that significantly affect our financial planning are restrictions on minimum room size and maximum rents.

Parcel A1 A2 A3R A3MU A4 Total (without A3MU)Building Area CalculationsBuilding Envelope 6,400 9,600 6,400 6,400 4,800 27,200Residential Building Area 15,706 20,234 15,331 15,331 11,731 63,002Estimated Retail Leaseable Area 6,080 6,080 6,080Estimated Residential Leaseable Area 13,664 17,604 13,338 13,338 10,206 54,812Project CostRetail Building Shell & Core 416,000$ 416,000$ 416,000Residential Building on top of Retail 942,345$ 919,862$ 942,345Residential Building stand alone $ 1,315,241$ 996,517$ 762,517$ 3,074,276Surface Parking & Site Development 265,864$ 339,352$ 268,536$ 268,536$ 201,736$ 1,075,488Tenant Improvements 160,000$ 160,000$ 160,000Total Hard Costs 1,784,209$ 1,654,593$ 1,265,053$ 1,764,398$ 964,253$ 5,668,109Total Soft Costs 553,105$ 512,924$ 392,167$ 546,963$ 298,919$ 1,757,114Total Hard & Soft Costs 2,337,314$ 2,167,517$ 1,657,220$ 2,311,361$ 1,263,172$ 7,425,222IncomeRetail Net Operating Income 130,015$ $ $ 130,015$ $ 130,015Residential Net Operating Income 195,351$ 251,681$ 190,691$ 190,691$ 145,913$ 783,636

Total NOI 325,366$ 251,681$ 190,691$ 320,705$ 145,913$ 913,651Residual Land ValueExpected Developer Profit 116,866$ 108,376$ 82,861$ 115,568$ 63,159$ 371,261Weighted Average Cost of Capital 9.71% 9.71% 9.71% 9.71% 9.71% 0Rate of Return to Achieve $0 RLV 13.92% 11.61% 11.51% 13.88% 11.55% 0Supportable Project Cost 3,349,196$ 2,590,707$ 1,962,898$ 3,301,220$ 1,501,974$ 9,404,776Residual Land Value 895,017$ 314,814$ 222,817$ 874,291$ 175,644$ 1,608,292RLV per sqft 26.93$ 7.42$ 6.64$ 26.05$ 6.97$ 11.96

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Bedroom MixThe following Bedroom Mix Matrix incorporates the city and ADOH low income requirements as well as the bedroom mix, which is based on existing supply of bedrooms.

Debt ServiceThe debt service calculations show monthly payments for each level of debt, which feeds into each pro forma. The crucial benchmark for lenders, the Debt Coverage Ratio, remains above 1.2 for all parcels.

Parcel A1Total Square feet 33,233 Sqft Bedrooms Total Sqft Unit % # Units Rent/Unit Max LI Rent Annual Gross Rent (AGR) AGR Adj for Low IncomeTotal acres 0.76 Studio 550 5 2,750 25% 5 853 573 51,150 47,796Max Units on MU 3 19.00 1 Bedroom 650 6 3,900 30% 6 1,008 614 72,540 66,874Max Units on MU 4 Unlimited 2 Bedroom 850 14 5,950 35% 7 1,318 737 110,670 100,918Dwellling Units Seeked 19 3 Bedroom 1050 3 1,050 10% 1 1,628 851 19,530 17,666Avg sqft per Bedroom 488 Total 28 13,650 100% 19 253,890 233,254Sqft per Bedroom in Bldg 561Parcel A2Total Square feet 42,419 Sqft Bedrooms Total Sqft Unit % # Units Rent/Unit Max LI Rent Annual Gross Rent AGR Adj for Low IncomeTotal acres 0.97 Studio 550 4 2,200 15% 4 853 573 40,920 38,237Max Units on MU 3 24.00 1 Bedroom 650 9 5,850 35% 9 1,008 614 108,810 100,310Max Units on MU 4 Unlimited 2 Bedroom 850 20 8,500 40% 10 1,318 737 158,100 144,168Dwellling Units Seeked 24 3 Bedroom 1050 3 1,050 10% 1 1,628 851 19,530 17,666Avg sqft per Bedroom 489 Total 36 17,600 100% 24 327,360 300,382Sqft per Bedroom in Bldg 562Parcel A3Total Square feet 33,567 Sqft Bedrooms Total Sqft Unit % # Units Rent/Unit Max LI Rent Annual Gross Rent AGR Adj for Low IncomeTotal acres 0.77 Studio 550 6 3,300 30% 6 853 573 61,380 57,355Max Units on MU 3 19.00 1 Bedroom 650 6 3,900 30% 6 1,008 614 72,540 66,874Max Units on MU 4 Unlimited 2 Bedroom 850 12 5,100 30% 6 1,318 737 94,860 86,501Dwellling Units Seeked 19 3 Bedroom 1050 3 1,050 10% 1 1,628 851 19,530 17,666Avg sqft per Bedroom 494 Total 27 13,350 100% 19 248,310 228,396Sqft per Bedroom in Bldg 568Parcel A4Total Square feet 25,217 Sqft Bedrooms Total Sqft Unit % # Units Rent/Unit Max LI Rent Annual Gross Rent AGR Adj for Low IncomeTotal acres 0.58 Studio 550 3 1,650 20% 3 853 573 30,690 28,678Max Units on MU 3 14.00 1 Bedroom 650 5 3,250 35% 5 1,008 614 60,450 55,728Max Units on MU 4 Unlimited 2 Bedroom 850 10 4,250 35% 5 1,318 737 79,050 72,084Dwellling Units Seeked 14 3 Bedroom 1050 3 1,050 10% 1 1,628 851 19,530 17,666Avg sqft per Bedroom 486 Total 21 10,200 100% 14 189,720 174,156Parcel A1 Parcel A2 Parcel A3R Parcel A3MU Parcel A4

Construction FinancingLoan Amount 2,337,314 2,167,517 1,657,220 2,311,361 1,263,172Monthly Payment Interest Only 23,373.14 21,675.17 16,572.20 23,113.61 12,631.72Annual Construction Financing Debt Servie 280,478 260,102 198,866 277,363 151,581Permanent FinancingProject Cost 3,160,729 2,457,146 1,880,037 3,115,709 1,424,764Primary Loan Terms 1% orig, 3yr int onlyInterest Rate 7.00% 7.00% 7.00% 7.00% 7.00%Amortization (years) 25 25 25 25 25LTV 50% 50% 50% 50% 50%Loan Based on LTV 1,580,365 1,228,573 940,018 1,557,854 712,382Monthly Payment Amortized 11,170 8,683 6,644 11,011 5,035Annual Debt Service Amortized 134,036 104,200 79,726 132,127 60,420Secondary Loan TermsInterest Rate 10.00% 10.00% 10.00% 10.00% 10.00%Amortization (years) 20 20 20 20 20LTV 30% 30% 30% 30% 30%Loan Based on LTV 948,219 737,144 564,011 934,713 427,429Monthly Payment Amortized 9,151 7,114 5,443 9,020 4,125Annual Debt Service 109,806 85,363 65,314 108,242 49,497Loan Based on Actuals 1,104,871 788,195 603,135 1,088,618 456,775Monthly Payment Amortized 10,662 7,606 5,820 10,505 4,408Annual Debt Service 127,947 91,275 69,845 126,065 52,896Using Debt Coverage Ratio (DCR)Yearly NOI 325,366 251,681 190,691 320,705 145,913Maximum DCR 1.2 1.2 1.2 1.2 1.2Maximum Yearly Payment (NOI/DCR/12) 271,138 209,734 158,909 267,254 121,594

Annual Permanent Debt Service 261,983 195,475 149,571 258,192 113,315DCR 1.24 1.29 1.27 1.24 1.29

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Construction DebtLoan Draw (1,962,343)Interest Payment (54,424)Loan Pament 2,016,768Final Loan PayoffEnding BalancePermanent Debt 1Payment MonthLoan Draw 1,228,573 (1,228,573) (1,228,573)Interest Payment 438,476 28,613 84,962 83,572 82,080 80,481 78,767Loan Payment 555,731 34,733 104,200 104,200 104,200 104,200 104,200Final Loan Payoff 1,111,318Ending Balance (1,222,453) (1,203,216) (1,182,588) (1,160,469) (1,136,751) (1,111,318)

Permanent Debt 2Loan Draw 788,195 (788,195) (788,195)Interest Payment 399,506 26,221 77,792 76,380 74,821 73,098 71,194Loan Payment 486,800 30,425 91,275 91,275 91,275 91,275 91,275Final Loan Payoff 700,901Ending Balance (783,991) (770,508) (755,613) (739,159) (720,982) (700,901)

Net Cash Flow Before Taxes 1,963,132 (108,376) (400,982) 51,966 56,592 61,302 66,096 2,236,534

Equity 1Equity Balance 491,429 (108,376)Equity PaymentEnding Balance 383,053

Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeRetail Growth FactorRetail Absorbtion Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00Residential Growth FactorResidential Absorbtion Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00Retail Revenue 1,175,279 112,944 164,234 169,161 174,236 179,463 184,847 190,393Retail NNN Reimbursement 334,925 32,697 47,314 48,497 49,709 50,952 52,226 53,531Retail Vacancy (105,775) (10,165) (14,781) (15,225) (15,681) (16,152) (16,636) (17,135)Residential Revenue 1,788,644 195,962 252,481 257,531 262,681 267,935 273,294 278,760Residential Vacancy (89,432) (9,798) (12,624) (12,877) (13,134) (13,397) (13,665) (13,938)Sale of Property 5,205,811 5,205,811

Subtotal Income 8,309,451 321,639 436,624 447,088 457,811 468,802 480,066 5,697,421

Operating ExpensesInflation FactorRetailCommon Area Maintenance 142,521 13,913 20,134 20,637 21,153 21,682 22,224 22,779Insurance 71,261 6,957 10,067 10,318 10,576 10,841 11,112 11,390Property Tax 106,891 10,435 15,100 15,478 15,865 16,261 16,668 17,084Reserves 14,252 1,391 2,013 2,064 2,115 2,168 2,222 2,278ResidentialCommon Area Maintenance 107,992 11,649 15,082 15,460 15,846 16,242 16,648 17,064Insurance 44,277 4,776 6,184 6,338 6,497 6,659 6,826 6,996Property Tax 86,394 9,319 12,066 12,368 12,677 12,994 13,319 13,652Reserves 21,598 2,330 3,016 3,092 3,169 3,248 3,330 3,413

Subtotal Operating Expenses 595,186 60,771 83,663 85,754 87,898 90,096 92,348 94,657

Net Operating Income 7,714,265 260,869 352,961 361,333 369,913 378,706 387,718 5,602,765

A&D ExpensesPre Acquisition 116,866 116,866 116,866Acquisition 823,416 823,416 823,416Pre Development 233,731 233,731 233,731Development 1,986,717 1,986,717 1,986,717

Subtotal A&D Expenses 3,160,729 116,866 823,416 2,220,448

Capital ExpensesCapital Reserves 21,236 1,851 2,773 2,942 3,121 3,311 3,512 3,726Tenant Improvements 342,304 166,095 176,210Leasing Commission 9,858 4,784 5,075

Subtotal Capital Expenses 373,398 172,729 2,773 2,942 3,121 3,311 184,797 3,726

Cash Flow Before Debt and Taxes 4,180,138 (116,866) (823,416) (2,220,448) 88,139 350,189 358,392 366,793 375,395 202,921 5,599,038

Loan Draw (308,136) (2,220,448)Interest Payment (156,652)Loan Pament 2,685,236Final Loan PayoffEnding Balance (308,136)Permanent Debt 1Payment MonthLoan Draw 1,580,365 (1,580,365) (1,580,365)Interest Payment 727,559 109,860 108,112 106,238 104,228 102,073 99,763 97,285Loan Payment 938,254 134,036 134,036 134,036 134,036 134,036 134,036 134,036Final Loan Payoff 1,369,670Ending Balance (1,580,365) (1,556,188) (1,530,264) (1,502,465) (1,472,657) (1,440,694) (1,406,421) (1,369,670)

Permanent Debt 2Loan Draw (1,104,871) (1,104,871) (1,104,871)Interest Payment 508,654 76,806 75,584 74,273 72,869 71,362 69,747 68,014Loan Payment 895,629 127,947 127,947 127,947 127,947 127,947 127,947 127,947Final Loan Payoff 717,897Ending Balance (1,104,871) (1,053,730) (1,001,366) (947,693) (892,614) (836,029) (777,829) (717,897)

Net Cash Flow Before Taxes 2,787,272 (116,866) (515,280) (173,844) 88,206 96,409 104,809 113,412 (59,062) 3,249,489

Equity 1Equity Balance 632,146 (116,866) (515,280)Equity PaymentEnding Balance 515,280

Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeResidential Revenue 1,690,182 63,831 312,517 318,767 325,143 331,646 338,278Residential Vacancy (84,509) (3,192) (15,626) (15,938) (16,257) (16,582) (16,914)Sale of Property 3,977,779 3,977,779

Subtotal Income 5,583,452 60,640 296,891 302,829 308,886 315,063 4,299,143

Operating ExpensesInflation FactorResidentialCommon Area Maintenance 100,976 3,759 18,495 18,958 19,432 19,917 20,415Insurance 41,400 1,541 7,583 7,773 7,967 8,166 8,370Property Tax 80,781 3,007 14,796 15,166 15,545 15,934 16,332Reserves 20,195 752 3,699 3,792 3,886 3,983 4,083

Subtotal Operating Expenses 243,352 9,060 44,573 45,688 46,830 48,001 49,201

Net Operating Income 5,340,100 51,580 252,318 257,141 262,056 267,063 4,249,943

A&D ExpensesPre Acquisition 108,376 108,376 108,376Acquisition 289,629 289,629 289,629Pre Development 216,752 216,752 216,752Development 1,842,390 1,842,390 1,842,390

Subtotal A&D Expenses 2,457,146 108,376 2,348,770

Capital ExpensesCapital Reserves 977 4,877 5,074 5,279 5,492 5,714Tenant ImprovementsLeasing Commission

Subtotal Capital Expenses 27,414 977 4,877 5,074 5,279 5,492 5,714

Cash Flow Before Debt and Taxes 2,855,539 (108,376) (2,298,167) 247,441 252,067 256,776 261,570 4,244,228

A1 A2

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Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeResidential RevenueResidential VacancySale of Property 1,162,807 1,162,807

Subtotal Income 1,162,807 1,162,807

Operating ExpensesInflation FactorResidentialCommon Area MaintenanceInsuranceProperty TaxReserves

Subtotal Operating Expenses

Net Operating Income 1,162,807 1,162,807

A&D ExpensesPre Acquisition 115,568 115,568 115,568Acquisition 804,347 804,347 804,347Pre DevelopmentDevelopment

Subtotal A&D Expenses 919,916 919,916

Capital ExpensesCapital ReservesTenant ImprovementsLeasing Commission

Subtotal Capital Expenses

Cash Flow Before Debt and Taxes 242,891 (919,916) 1,162,807

Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Acquisition DebtLoan Draw @40% LTV (340,785)Interest Payment (20,965)Loan Pament 361,751Final Loan PayoffEnding Balance (340,785)Net Cash Flow Before Taxes 562,711 (238,345) 801,056

Equity 1Equity Balance 579,130 (579,130) (579,130)Equity PaymentEnding Balance

Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeRetail Growth FactorRetail Absorbtion Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00Residential Growth FactorResidential Absorbtion Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00Retail Revenue 1,175,279 112,944 164,234 169,161 174,236 179,463 184,847 190,393Retail NNN Reimbursement 334,925 32,697 47,314 48,497 49,709 50,952 52,226 53,531Retail Vacancy (141,033) (13,553) (19,708) (20,299) (20,908) (21,536) (22,182) (22,847)Residential Revenue 1,751,394 191,881 247,223 252,168 257,211 262,355 267,602 272,954Residential Vacancy (87,570) (9,594) (12,361) (12,608) (12,861) (13,118) (13,380) (13,648)Sale of Property 5,075,710 5,075,710

Subtotal Income 8,108,705 314,374 426,702 436,918 447,387 458,117 469,113 5,556,093

Operating ExpensesInflation FactorRetailCommon Area Maintenance 142,521 13,913 20,134 20,637 21,153 21,682 22,224 22,779Insurance 71,261 6,957 10,067 10,318 10,576 10,841 11,112 11,390Property Tax 106,891 10,435 15,100 15,478 15,865 16,261 16,668 17,084Reserves 14,252 1,391 2,013 2,064 2,115 2,168 2,222 2,278ResidentialCommon Area Maintenance 105,416 11,371 14,723 15,091 15,468 15,855 16,251 16,657Insurance 43,220 4,662 6,036 6,187 6,342 6,500 6,663 6,830Property Tax 84,332 9,097 11,778 12,073 12,374 12,684 13,001 13,326Reserves 21,083 2,274 2,945 3,018 3,094 3,171 3,250 3,331

Subtotal Operating Expenses 588,976 60,101 82,795 84,865 86,987 89,162 91,391 93,675

Net Operating Income 7,519,728 254,273 343,907 352,053 360,400 368,955 377,723 5,462,418

A&D ExpensesPre Acquisition 115,568 115,568 115,568Acquisition 804,347 804,347 804,347Pre Development 231,136 231,136 231,136Development 1,964,657 1,964,657 1,964,657

Subtotal A&D Expenses 3,115,709 115,568 804,347 2,195,793

Capital ExpensesCapital Reserves 21,236 1,851 2,773 2,942 3,121 3,311 3,512 3,726Tenant Improvements 342,304 166,095 176,210Leasing Commission 9,858 4,784 5,075

Subtotal Capital Expenses 373,398 172,729 2,773 2,942 3,121 3,311 184,797 3,726

Cash Flow Before Debt and Taxes 4,030,621 (115,568) (804,347) (2,195,793) 81,544 341,134 349,111 357,280 365,645 192,926 5,458,692

A3-L A3-MU

Construction DebtLoan Draw (296,774) (2,195,793)Interest Payment (153,906)Loan Pament 2,646,473Final Loan PayoffEnding Balance (296,774)Permanent Debt 1Payment MonthLoan Draw 1,557,854 (1,557,854)Interest Payment 717,196 108,295 106,572 104,725 102,744 100,620 98,342 95,900Loan Payment 924,890 132,127 132,127 132,127 132,127 132,127 132,127 132,127Final Loan Payoff 1,350,161Ending Balance (1,557,854) (1,534,022) (1,508,467) (1,481,065) (1,451,681) (1,420,174) (1,386,388) (1,350,161)

Permanent Debt 2Loan Draw 1,088,618 (1,088,618) (1,088,618)Interest Payment 501,172 75,676 74,472 73,181 71,797 70,312 68,721 67,014Loan Payment 882,454 126,065 126,065 126,065 126,065 126,065 126,065 126,065Final Loan Payoff 707,336Ending Balance (1,088,618) (1,038,229) (986,636) (933,752) (879,484) (823,732) (766,387) (707,336)

Net Cash Flow Before Taxes 2,658,347 (115,568) (507,574) (176,648) 82,942 90,919 99,088 107,453 (65,266) 3,143,002

Equity 1Equity Balance 623,142 (115,568) (507,574)Equity PaymentEnding Balance 507,574

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Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeResidential Revenue 1,285,135 48,534 237,623 242,376 247,223 252,168 257,211Residential Vacancy (64,257) (2,427) (11,881) (12,119) (12,361) (12,608) (12,861)Sale of Property 3,026,445 3,026,445

Subtotal Income 4,247,324 46,107 225,742 230,257 234,862 239,559 3,270,796

Operating ExpensesInflation FactorResidentialCommon Area Maintenance 76,506 2,848 14,013 14,364 14,723 15,091 15,468Insurance 31,368 1,168 5,745 5,889 6,036 6,187 6,342Property Tax 61,205 2,279 11,211 11,491 11,778 12,073 12,374Reserves 15,301 570 2,803 2,873 2,945 3,018 3,094

Subtotal Operating Expenses 184,380 6,864 33,772 34,616 35,482 36,369 37,278

Net Operating Income 4,062,943 39,243 191,970 195,641 199,380 203,191 3,233,518

A&D ExpensesPre Acquisition 82,861 82,861 82,861Acquisition 222,817 222,817 222,817Pre Development 165,722 165,722 165,722Development 1,408,637 1,408,637 1,408,637

Subtotal A&D Expenses 1,880,037 82,861 1,797,176

Capital ExpensesCapital Reserves 743 3,708 3,858 4,014 4,176 4,345Tenant ImprovementsLeasing Commission

Subtotal Capital Expenses 20,844 743 3,708 3,858 4,014 4,176 4,345

Cash Flow Before Debt and Taxes 2,162,062 (82,861) (1,758,675) 188,262 191,783 195,366 199,014 3,229,173Construction DebtLoan Draw (1,501,463)Interest Payment (41,691)Loan Pament 1,543,153Final Loan PayoffEnding BalancePermanent Debt 1Payment MonthLoan Draw 940,018 (940,018) (940,018)Interest Payment 335,491 21,893 65,007 63,943 62,802 61,579 60,267Loan Payment 322,238 20,140 60,420 60,420 60,420 60,420 60,420Final Loan Payoff 953,272Ending Balance (941,772) (946,359) (949,883) (952,265) (953,424) (953,272)

Permanent Debt 2Loan Draw 603,135 (603,135) (603,135)Interest Payment 305,707 20,065 59,527 58,447 57,254 55,935 54,479Loan Payment 282,111 17,632 52,896 52,896 52,896 52,896 52,896Final Loan Payoff 626,731Ending Balance (605,568) (612,199) (617,751) (622,108) (625,148) (626,731)

Net Cash Flow Before Taxes 1,479,174 (82,861) (294,984) 74,946 78,467 82,051 85,699 1,535,855

Equity 1Equity Balance 376,007 (82,861)Equity PaymentEnding Balance 293,146

Base Criteria Summary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10IncomeResidential Revenue 979,938 37,008 181,192 184,816 188,512 192,282 196,128Residential Vacancy (48,997) (1,850) (9,060) (9,241) (9,426) (9,614) (9,806)Sale of Property 2,306,267 2,306,267

Subtotal Income 3,237,208 35,158 172,132 175,575 179,086 182,668 2,492,588

Operating ExpensesInflation FactorResidentialCommon Area Maintenance 58,541 2,179 10,723 10,991 11,266 11,547 11,836Insurance 24,002 894 4,396 4,506 4,619 4,734 4,853Property Tax 46,833 1,744 8,578 8,793 9,012 9,238 9,469Reserves 11,708 436 2,145 2,198 2,253 2,309 2,367

Subtotal Operating Expenses 141,085 5,252 25,842 26,488 27,150 27,829 28,524

Net Operating Income 3,096,123 29,905 146,291 149,087 151,937 154,840 2,464,064

A&D ExpensesPre Acquisition 63,159 63,159 63,159Acquisition 161,593 161,593 161,593Pre Development 126,317 126,317 126,317Development 1,073,696 1,073,696 1,073,696

Subtotal A&D Expenses 1,424,764 63,159 1,361,606

Capital ExpensesCapital Reserves 566 2,828 2,942 3,061 3,184 3,313Tenant ImprovementsLeasing Commission

Subtotal Capital Expenses 15,894 566 2,828 2,942 3,061 3,184 3,313

Cash Flow Before Debt and Taxes 1,655,465 (63,159) (1,332,267) 143,463 146,145 148,876 151,655 2,460,751Construction DebtLoan Draw (1,137,856)Interest Payment (31,302)Loan Pament 1,169,157Final Loan PayoffEnding BalancePermanent Debt 1Payment MonthLoan Draw 712,382 (712,382) (712,382)Interest Payment 254,248 16,591 49,265 48,459 47,594 46,667 45,673Loan Payment 322,238 20,140 60,420 60,420 60,420 60,420 60,420Final Loan Payoff 644,392Ending Balance (708,834) (697,679) (685,718) (672,892) (659,139) (644,392)

Permanent Debt 2Loan Draw 427,429 (456,775) (456,775)Interest Payment 231,522 15,196 45,082 44,264 43,360 42,362 41,259Loan Payment 282,111 17,632 52,896 52,896 52,896 52,896 52,896Final Loan Payoff 406,187Ending Balance (454,339) (446,525) (437,894) (428,358) (417,824) (406,187)

Net Cash Flow Before Taxes 1,138,392 (63,159) (232,183) 30,148 32,830 35,560 38,340 1,296,856

Equity 1Equity Balance 284,953 (63,159)Equity PaymentEnding Balance 221,794

A3-R A-4 Financial Analysis

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CONCLUSION As the neighborhood continues to undergo a transition, it is evident that there is a shift from the Single Family Residential to Multi-Family Condominiums and Apartments in the area. The Riverside/Sunset Village will not only revitalize the neighborhood but also provide a place for community interaction. N.Act Development strives to provide the Young Professionals and Empty Nesters with a place to live that is close to the many restaurants on Mill Avenue in addition to the amenities that Riverside/Sunset Village will provide. N.Act Development team strongly believes that the Riverside/Sunset Village would be a beneficial project not only for the residents but also for the city of Tempe, as we will promote the use of the bicycle and create a pedestrian friendly environment. The financials of this project offer a acceptable rate of return when evaluated on a cash-on-cash basis. There will initially be some challenges with the retail but once constructed will offer our residents amenities that will make their daily life easier. N.Act Development strongly believes that by creating a socially responsible development, we can integrate our development with the surrounding communites, therefore providing an environment that fosters social interaction.

Conclusion