1004 Pier Avenue

Trojan Partners

Santa Monica, California * 3 Units$1,625,000

Location

Property Profile

Area/Property Analysis

• 10 minute walk to 3rd Street Promenade

• Conveniently located off I -10 freeway

• Walking distance to the beach

• $230,000 in renovations and upgrades

• 4.5% going in cap rate

• $541,667 price per unit

• $254 per sq. ft.

Financing Terms

• Debt Contribution: $650,000

• Equity Contribution: $1,014,000

• Total Investment: $1,657,500

Cash Flow Assumptions

• Lease: month-to-month / gross

• Vacancy: 5%

• Property Taxes: $19,500

• Insurance: $3,000

• Utilities: $4,868

• Maintenance: $6,000

• Property Mgt: $3,385

• Going In Cap: 4.4%

• Going Out Cap: 5.2%

• Annual Gross Rent: $112,860

• Acquisitions Cost: $32,500

• Origination Fee: $6,500

• Brokers Fee: 5%

• Levered Discount Rate: 11.58%

Expense Growth Rate: 2% Rent Growth Rate: 3%

Risk Benchmark

• Property Risk

• Tenant Risk

• Market Risk

• Competition

Unlevered IRR is estimated to be 11.5%

Discount Rate

The discount rate is determined by his/her circumstances, return requirements and risk aversion.

Levered IRR= Unlevered IRR + (Unlevered IRR - Cost of Debt)* (Debt/Equity)

Debt/Equity = average Debt/Equity = (starting D/E + Ending D/E)/ 2Starting D/E= Loan Amount/Equity ContributionEnding D/E= Outstanding Loan Balance/Net Cash Flows and Sale

Levered IRR= 11.55% + (11.55% - 4.5%)*( (650,000/1,014,000)+(266,719/2,015,533) /2)

Levered IRR= 11.577%

Cash Flow Assumptions

Cash Flow Assumptions

Sensitivity Analysis

Positives/Negatives

+• Santa Monica location• Trends show relatively stable

Santa Monica RE market• Low price/square foot• Current tenants plan to stay

-• Low going in cap rate will not provide enough cash flow to

meet levered discount rate of 11.5%• Struggling economy creates uncertainty for future• Strict lending standards

Conclusion

DO NOT INVEST:

• Willingness to Pay: $1,255,000• Asking Price: $1,625,000• NPV: - $369,891• Levered IRR: 6.2%

•Would need a significant price reduction (23%) to invest

•Because this is unlikely, we plan on looking into other investments that meet our criteria

Thank You!

Presenters:

• Elliot Hamilton• Shira Yomtoubian• Stephanie Castillo• Kai Lu• Elizabeth Vanhorne