The Gramercy Club Cooperative

~Valuation & Settlement~

Opportunity Advisors, LLC

The Gramercy Cooperative Club of Edina

VALUATION

SETTLEMENTISSUES

STAKEHOLDER PRESENTATION

SETTLEMENTPROPOSAL

VALUATION

SETTLEMENTISSUES

SETTLEMENTPROPOSAL

STAKEHOLDER PRESENTATION

Model Format: Discounted cash flow model Buy units today Sell units over time Factor in selling costs, carry costs Solve for value based on required return

VALUATION MODEL

Assumptions: 90 units (128,250 total square feet) purchased 1,425 average square feet per unit Sell all units over 48 month period Gross sales price: $158 psf ($225,000 per unit) Selling costs: 8.2% of gross sales price Capex: $4,275 per unit Taxes: ~$300 per unit per month Dues: ~$500 per unit per month Property management fees: ~$10,700 per month Required investor IRR: 24%

VALUATION MODEL

Original sales price of ~ $253 per square foot (~$240 psf adjusting for

upgrades)

Sales Price Considerations: General market decline

VALUATION MODEL

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10100

120

140

160

180

200

MSPUS

MSP 29%

US 29%

Source: Standard & Poor’s

S&P / CASE-SHILLER HOME PRICE INDEX

Original sales price of ~ $253 per square foot (~$240 psf adjusting for upgrades)

Sales Price Considerations: General market decline Tarnished project image Suburban Condo Large unit size Rentals Re-sales Last 10 units

Updated sales price of ~$158 per square foot Decline of 34%

VALUATION MODEL

Conclusion: Assumptions dictate a bulk purchase price of

~$10,000,000

Assumes: • Taxes current• Conversion to condominiums• Adequate reserves• Standard basket of declarant rights

VALUATION MODEL

SKYSCAPE vs. GRAMERCY

LocationDemographic

Image

SKYSCAPE EXPERIENCE

SkyscapeMinneapolis, MN

Purchased 72 units in January of 2010

Bought in bulk at 45% discount to current prices

Sellers were BofA and Wells Fargo

SUMMERCREST vs. GRAMERCY

LocationDemographic

Image

Just bought a unit at $88 psf

SUMMERCRESET EXPERIENCE

STAKEHOLDER PRESENTATION

VALUATION

SETTLEMENTISSUES

SETTLEMENTPROPOSAL

Time value of moneyHuge and continuing legal feesEliminate continuing risks

Collateral value Litigation risks

SETTLEMENT – WHY SETTLE

A-Banks

B-Banks

Frana (et al)

Resident owners

SETTLEMENT – PRIMARY STAKEHOLDERS

Primary Issues:Treatment of resident ownersSubordination of B-BanksFrana priority

Secondary Issues:Nancy NicholsTitle Insurer

SETTLEMENT – ISSUES

SETTLEMENT – KEY ASSUMPTIONS

Collateral is 90 units90 units valued at ~$10 million in bulk‘A’ Banks’ investment: ~$20 million‘B’ Banks’ investment: ~$4 millionFrana’s services: ~$1.2 million

SETTLEMENT – POSSIBLE SCENARIOS

‘B-Banks’ subordination: Subordination 100% 50% 0%

Frana’s recovery: Recover

$1,200,000 (100%) $600,000 (50%) $0 (0%)

SUMMARY: B-BANKS

   

FRANA RECOVERY

$0 $600,000 $1,200,000

 B-BANKS

% SUBORDINAT

E 

Fully subordinate

d 0.0% 0.0% 0.0%Half

subordinated 22.7% 21.4% 20.0%

Pari passu 41.7% 39.2% 36.7%

‘B-Banks’ Potential Recovery

SUMMARY: FRANA

Frana’s Potential Recovery

   

FRANA RECOVERY

$0 $600,000 $1,200,000

 B-BANKS

% SUBORDINAT

E 

Fully subordinate

d 0.0% 50.0% 100.0%Half

subordinated 0.0% 50.0% 100.0%

Pari passu 0.0% 50.0% 100.0%

SUMMARY: A-BANKS

‘A-Banks’ Potential Recovery

   

FRANA RECOVERY

$0 $600,000 $1,200,000

 B-BANKS

% SUBORDINAT

E 

Fully subordinate

d 50.0% 47.0% 44.0%Half

subordinated 45.5% 42.7% 40.0%

Pari passu 41.7% 39.2% 36.7%

VALUATION

SETTLEMENTISSUES

SETTLEMENTPROPOSAL

STAKEHOLDER PRESENTATION

?

??

A-BanksB-BanksFrana

How do we split up the pie?

SETTLEMENT – PRIMARY QUESTION

Resident owners36 unit holders retain units, butAgree to:

Conversion to condominiums Per unit assessment at $7,500 Declarant rights for purchaser

SETTLEMENT PROPOSAL

Frana receives: 50% on amount owing

B-Banks receive: 50% treatment as an ‘A-Bank’

Title insurer pays $250,000

Nancy Nichols pays $250,000

SETTLEMENT PROPOSAL

Assuming: $10mm pie Frana owed $1.2mm A-Banks owed $20mm B-Banks owed $4mm

Frana gets $600,000 (50% on amount owed) A-Banks get $8,636,364 (43.2% on amount owed) B-Banks get $863,636 (21.6% on amount owed)

SETTLEMENT PROPOSAL

All stakeholders allowed to participate as investors, at their option, on same terms as our partners

Up to $5mm in aggregateAllocated, if necessary, based on original

participation amount

PARTICIPATION

10% preferred return80/20 profit split until 15% IRR70/30 profit split thereafter

PARTICIPATION

If you agree, then: Indicate leadership support Get constituency support Enter into agreements to sell interests to Opportunity

Advisors Close in 30 days

Opportunity Advisors will lead process

IMPLEMENTATION

The Gramercy Club Cooperative

~Valuation & Settlement~

Opportunity Advisors, LLC