Caffrey le feasibility 11 23-2010

LAKE EVE RESORT FEASIBILITY STUDY

Matt Caffrey

REAL 576 – Real Estate Valuation &Analysis Prof. Nate Gundrum

Drexel University

November 23, 2010

LAKE EVE RESORT, ORLANDO, FL FEASIBILITY STUDY

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I. Market Analysis

Area Overview

Lake Eve Resort is located within Orange County, FL just minutes from downtown Orlando, an area that is

world renowned as a destination location for tourists. Orlando is arguably best known for its most popular attraction and largest employer, Walt Disney World Resort, however the central Florida location, tropical

climate, and affordable cost of living [Table 1] has lead to significant increases in population and major

investments by employers. From 1990 to 2009, population in the region increased by over 42%, and increase of

almost 900,000 people. Within the next five years, the population in the Orlando region is expected to increase

an additional 10.8% [Table 2].

Lake Eve Resort is located on International Drive with convenient access to Interstate 4, the Florida Turnpike

(I-417), and is within 10 minutes to many of the areas most popular attractions including Walt Disney World

Resort, SeaWorld Orlando, Universal Orlando Resort. Additionally, Lake Eve Resort is less than 15 miles from

the Orlando International Airport (the 11th busiest airport in the nation), and less than 20 minutes from

Downtown Orlando. Additional airports in the region include the Orlando Sanford International Airport (3rd

most active international airport in Florida), Kissimmee Municipal Airport, Leesburg International Airport, and

Mid-Florida Airport. Lake Eve Resort is less than 1 hour from Port Canaveral, FL – a popular port for

launching cruise ships.

Orlando will soon be home to a new commuter rail system, SunRail, and the nation's first high speed rail system

linking Tampa and Orlando.

Regional Economy

The tourism and hospitality industry is without question the most prominent component of the economic engine

in the Orlando market, employing over 110,000 employees in the region as well as providing a major influx of

consumers and income from outside of the area [Table 3]. Fortunately, the tourism industry’s resilience has

been better than most nationwide. According to the Cushman and Wakefield 2Q10 Office Report, the largest

employment gains from January through May 2010 occurred in the lifestyle and hospitality industry, which gained 16,800 new jobs during that time frame.

However, the regional economy is comprised of much more than Mickey Mouse, as more than 150 international

companies, representing approximately 20 countries, have facilities in Metro Orlando. In actuality, the region

boasts significant growth in several industries, with special attention to technological research and development,

and a booming health care industry [Table 4].

According to the Orlando Economic Development Commission, Metro Orlando has a rapidly growing $13.4

billion technology industry employing 53,000 people, and has nationally recognized clusters of innovation in

digital media, agritechnology, aviation and aerospace, and software. Industry giant Electronic Arts - the world's

leading independent developer and publisher of interactive entertainment software - creates some of the world's

top-selling games in Metro Orlando, including the popular Madden NFL Football, NCAA Football, Tiger Woods PGA Tour and several other game series.

Metro Orlando has the 7th largest research park in the country (Central Florida Research Park) with over 1,025

acres. It is home to over 120 companies, employs more than 8,500 people, and is the hub of the nation’s military


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simulation and training programs. The University of Central Florida’s Institute for Simulation & Training

developed the nation’s first master's and PhD programs in simulation and human performance enhancement.

The University of Central Florida, now the 2nd largest university in the country with over $122 million in

research, is located in Orlando and is gaining international reputations in innovations in lasers/optics and

hospitality; and a newly opened medical school.

Additionally, with respect to the Health Care Industry, Orlando is home to an emerging 'medical city' at Lake

Nona with a new University of Central Florida College of Medicine, Sanford-Burnham Medical Research Institute and M. D. Anderson – Orlando Cancer Research Institute. Coming by 2012 is the Nemours Childrens'

Hospital, Orlando VA Medical Center, and a University of Florida research center. By year 10, the life science

cluster could create 30,000 jobs with $7.6 billion in economic impact.

Per the Cushman Wakefield Year-End 2009 Orlando Multifamily Report, despite the national economic

slowdown, the Orlando MSA began to show indications of economic stabilization in the last quarter of 2009, as employment increased 9,500 from September to December 2009. Further growth is anticipated, particularly in

the sectors of trade, transportation & utilities, leisure and hospitality services, professional and business

services, education, and health services are forecasted to grow by more than 2.4% annually through 2014.

Income and Employment

Orange County is the 12th

wealthiest county in Florida, with a median household income of $52,133 [Table 6],

although the area has been hit by the same economic downturn that has affected the majority of the country. The

labor force in the region is strong, and can offer in excess of 1.1M workers. Although the latest unemployment

rate (11.7%) is above that of the national average, it is still slightly better than that Florida average (12.0%).

Market Sectors

The Orlando markets are subdivided into many smaller submarkets. Lake Eve Resort is located within the

Tourist Corridor submarket, a suburban market outside of downtown Orlando [Table X].

Office

Like most markets nationwide, the office market in Orlando continues to struggle with today’s economy.

However, there are several indicators that point to the market bottoming-out, particularly in the Orlando Central Business District (CBD) where absorption is trending upward, with 59,061 square feet absorbed in the second

quarter 2010. Additionally, the vacancy rate dropped 80 basis points to end the second quarter at 17.9%.

According to the Orlando Economic Development Commission, Class A office space within the CBD is leasing

at $21.60/sq.ft. Given the high vacancy and low absorption, it is no surprise that tenants continue to be in the

driver’s seat as leases and renewals are being signed at shorter terms, with reduced rent rates, and additional concessions offered by landlords.

The CBD submarket is still starkly better than submarkets in the surrounding suburban areas, including the

Tourist Corridor, which are experiencing increased office vacancy and a decrease in absorp tion. Per the Grubb

and Ellis’ Office Trends Report for the 2nd

Quarter 2010, vacancy in the suburban markets are up to 20.3% and absorption is a negative 2,280 square feet. In particular, the Tourist Corridor has one of the highest vacancy

rates at 26.7%. This Tourist submarket and Southwest submarket combine for a total of 9,085,761 square feet of

office space, with an additional 48,500 currently under construction. By comparison, the Downtown/CBD


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market totals only 7,373,901 sq.ft., with an additional 105,000 sq.ft. under construction. Despite the surplus

of office space in the Tourist Corridor submarket, landlords are asking for higher-than-average rent rat es for Class A space at $23.33/sq.ft.

One of the bright spots for the office market has been sales activity, which nearly doubled from 231,395 sq.ft.

during the first half of 2009, to 427,703 sq.ft. during the same time period in 2010. There were two office sales

of significant size in the Orlando market: the sale of the Southpoint Executive Center in the Maitland submarket and the University Corporate Center III purchase by TA Associates Realty in the University/Research Park

submarkets. These transactions were $7,400,000.00 ($54.01/sq.ft.) and $16,500,000.00 ($158.66/sq.ft.)

respectively.

Looking to the future, according to Cushman & Wakefield, the growth in professional and business services should improve but will otherwise still be negative, resulting in high vacancy through 2010 and into 2011.

Vacancy rates are expected to ease gradually through 2011, although rental rates will remain flat.

Retail

The Orland MSA retail market continues to look bleak; although the worst may be over, with record high

national unemployment and economic malaise, recovery is still a long ways off. Although the worst of the retail

store closing may be over, overall retail vacancy rate is expect to slowly tick further upward – ultimately

leveling off by the end of 2010. This is particularly disturbing as retail trade comprises 10% of the employment

in the Orlando market, with an additional 5% based on warehousing and transportation.

Vacancy rates have continued to rise for the past three years, while rental rates continue to decline. In 2010,

vacancies were around 23%, with an average rental rate around $15.00/sq.ft . More desirable centers and

locations, such as the Sandlake Road area, have commanded rents at $30.00/sq.ft. (down from rent highs in

2008 of $52.00/sq.ft.). Less desirable locations or centers without an anchor tenant are seeing rents as low as $4.00/sq.ft. for large boxes and as low as $8.00/sq.ft. for smaller users.

The few bright spots in the retail market are the addition of several new restaurant chains into the market, and

the expansion of several existing franchises. Additionally, affordable shop ping stores such as Dollar General,

Dollar Store, and Dollar Tree continue to thrive with plans to expand or open new stores throughout Florida and nationwide.

However according to Cushman & Wakefield, a more clear evidence of recovery will be present in 2012. Retail

development construction levels are expected to continue to drop, however an increase in building activity

could begin as early as 2012. The return of credit and capital, along with an uptick in marketing and advertising activity, could be a much-welcomed shot in the arm for local retail real estate.

Multi-Family Residential

One sector that has fared better than most has been the multi-family residential market which by year end of 2009 had shown signs of improvement in both absorption and occupancy levels, resulting in increased rental

rates throughout the region. By the end of 2009, vacancy was down to 6.0% on average, with rents fast

approaching $1.00 per sq. ft.

While the collapse of the housing market can attribute for some of the influ x of renters to the market, population increases are the main driver behind the multi-family market. The Orlando MSA has consistently added 60,000


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new residents annually for the past 10-years, and is expected to increase an additional 10% in the next five

years. According to the US Census Bureau, almost 60% of the total housing units in Orange County, FL were rental units, totaling 53,053 units [Table 7]. Of those rented units, the median rent was $977/unit [Table 8]. The

number of units is projected to increase by approximately 12,000 units (approx. 23%) by the end of 2010 as

outlined below.

Increased population and employment in the region points to further growth within the multi-family market, and stability after the housing market recovers, however much of that will depend on the inventory of new and

proposed projects. Seven projects, totaling 2,176 units were added to the Orlando inventory in 2009, and an

additional 9.700 total units slated for delivery in the greater metro area in 2010. Most of the units are proposed

in the Maitland/Winter Park submarket (3,400 units) and the Southeast/Airport submarket (1,400 units). The

pipeline beyond those projects appears to be drying up.

In 2009, there were a total of 16 transactions of multi-family residential assets totaling $222 million [Table 9].

Although this was a decline from the sales volume of 2008, the dramatic decreases are partially attributable to

the distressed nature of the overall market, as well as the fact that many of the sales are fractured or partial sales

of larger projects. On average, the transaction price ranged between $28,873 to $97,995 per unit, with a median price of $54,213 per unit.

Cushman & Wakefield project markets to show slight signs of stabilization to Net Operating Incomes ( NOI),

which would bode well for future transactions of properties. More dour forecasts, such as the regional outlook

for Multifamily Executive, point to soft fundamentals in the market that will continue to weigh on NOI, pushing down values and creating distress. Cap rates for stabilized assets may start at 8.5% or more, but sales of

underperforming or distressed properties tend to distort pricing trends.

Hotel

As previously mentioned the leisure and hospitality markets comprise a significant portion of the overall

economic activity in the Orlando market. Despite the downturn in the economy, the tourism market still resulted

in $13.6 Billion in annual wages for the region in 2009. Although these figures are a decrease from years past, it

is a testament to the popularity of the area and a strong indicator for future growth as visitor volume is project to

increase to over 47 Million in 2010.

Of the 46.6Million visitors to the Orlando area in 2009, approximately 60% (27 Million) required overnight

lodging. Demand for 2010 appears to be surpassing 2009. In Orange County, there is a 9.5% increase in

demand, which translates to a 70.0% occupancy rate (a 4.6% increase from the previous year). However there is

still a stark difference between supply and demand (f avoring demand), which results in both decreased Average Daily Rate and Revenue Per Available Room (RevPAR) caused by increased competition among the existing

hotel providers. Average Daily Rate and RevPAR are down 5.3% and 0.9% respectively to $100.42/room and

$70.29/room. While these figures exclude Disney-owned hotels, they far surpass both the National and Florida

averages during the same time period. According to the Hospitality Real Estate Counselors, Inc., the RevPAR

in Florida has significantly increased during the first quarter of 2010.

Recent sales of existing hotel properties have largely comprised been limited service properties, although there

have been some larger sales of older, full-service properties. In the Orlando market recent sales include the

Altamonte Springs, a 210-room Hampton Inn that was acquired by 3H Group Hotels for $10.0MM

($47,619/key) and the Sheraton Downtown Orlando, which was foreclosed upon and subsequently acquired by Glenmont Capital Management for $8.0MM ($23,500/key).


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Table 1

CITY GROCERY HOUSING

Atlanta, GA 96.0 96.3 89.9

Austin, TX 95.0 90.6 84.4

Denver, CO 103.4 99.5 108.8

Miami, FL 105.2 109.8 107.5

New York, NY 209.7 153.0 365.2

ORLANDO, FL 97.1 97.1 85.3

Raleigh, NC 98.5 104.4 88.3

Richmond, VA 104.4 102.4 105.3

Seattle, WA 120.2 115.7 137.3

COST OF LIVING INDEX

COMPOSITE INDEX

Source: C2ER The Council For Community of Economic Research

(formerly ACCRA) - 2nd Quarter 2010

Table 2

1990 Census 2000 Census 2009 Estimate 2014 Projection 1990 to 2000 2000 to 2009 2009 to 2014

Total Population 1,224,851 1,644,561 2,124,270 2,354,381 34.3% 22.6% 10.8%

Population Density (Pop/Sq

Mi)305.4 410.1 529.7 587.0 34.3% 22.6% 10.8%

Total Households 465,277 625,248 774,210 816,857 34.4% 19.2% 5.5%

Demographic Detail Summary Report

Population Demographics

Percent Change

Metro Orlando

Source: Metro Orlando Economic Development Commission

Table 3

Accommodations & Food Service, Management of

Companies2%

Administrative Support

1%

Finance & Insurance

3%

Health Care & Social Assistance

13%

Information5%

Leisure & Hospitality

40%Manufacturing

1%

Professional, Scientific & Technical Services

4%

Real Estate & Leasing2%

Retail Trade10%

Transportation & Warehousing

5%

Utilities0%

Government4%

Education9%

Corrections1%

ORLANDO AREA EMPLOYMENT BY INDUSTRY


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Table 4

0 20,000 40,000 60,000 80,000 100,000 120,000

Transportation & Warehousing

Retail Trade

Professional, Scientific & Technical Services

Leisure & Hospitality

Information

Health Care & Social Assistance

Government

Education

ORLANDO AREA MAJOR EMPLOYMENT INDUSTRIES

Employees

Table 5

Total Households 91,679.00 (X)

Less Than $10,000 7,030.00 7.7%

$10,000 to $14,999 5,187.00 5.7%

$15,000 to $24,999 10,915.00 11.9%

$25,000 to $34,999 11,602.00 12.7%

$35,000 to $49,999 16,604.00 18.1%

$50,000 to $74,999 17,168.00 18.7%

$75,000 to $99,999 9,394.00 10.2%

$100,000 to $149,999 8,003.00 8.7%

$150,000 to $199,999 2,484.00 2.7%

$200,000 or more 3,292.00 3.6%

Median Household Income (dollars) 52,133.00$ (X)

Mean Household income (dollars) 62,842.00$ (X)

INCOME AND BENEFITS

Source: US Census Bureau, 2006-2008 American Community

Survey


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Table 6

Rank County Income

1 St. Johns County, Florida $ 63,927

2 Clay County, Florida $ 61,909

3 Collier County, Florida $ 60,133

4 Seminole County, Florida $ 59,317

5 Nassau County, Florida $ 59,072

6 Okaloosa County, Florida $ 57,111

7 Monroe County, Florida $ 56,984

8 Santa Rosa County, Florida $ 54,718

9 Palm Beach County, Florida $ 54,301

10 Martin County, Florida $ 54,182

11 Broward County, Florida $ 53,236

12 Orange County, Florida $ 52,133

13 Lee County, Florida $ 51,599

14 Hillsborough County, Florida $ 50,384

15 Duval County, Florida $ 50,301

MEDIAN HOUSEHOLD INCOME BY COUNTY

Source: U.S. Census Bureau, 2006-2008 American

Community Survey

Table 7

Estimate Percent

Total Housing Units 108,901

Occupied Housing Units 91,679 84.2%

Owner-Occupied Housing Units 38,626 42.1%

Renter-Occupied Housing Units 53,053 57.9%

Vacant Housing Units 17,222 15.8%

Owner-Occupied Homes 38,626

Median Value (dollars) 241,600$

Housing Charateristics - 2008 US Census Estimates

Source: U.S. Census Bureau, 2006-2008 American Community

Survey

Table 8

Estimate Percent

52,102 (X)

525 1.0%

721 1.4%

2,032 3.8%

7,540 14.2%

16,833 31.7%

20,276 38.2%

4,175 7.9%

977$ (X)

951 1.8%

Source: U.S. Census Bureau, 2006-2008 American

Community Survey

Gross Rent

Occupied Units Paying Rent

Less than $200

$200 to $299

$300 to $499

$500 to $749

$750 to $999

$1,000 to $1,499

$1,500 or more

Median (dollars)

No rent paid


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Table 9

PROPERTY NAME CITY/SUBMARKET UNITS TOTAL PURCHASE PRICE PRICE PER UNIT

Promenade Crossing North Orlando/Winter Park/Mailand 212 20,775,000.00$ 97,995.28$

Stonebrook Sanford/Lake Mary 356 18,019,100.00$ 50,615.45$

Golf Brook Longwood/Altamonte Springs 195 17,752,020.00$ 91,036.00$

Chatham Harbor Longwood/Altamonte Springs 324 15,900,000.00$ 49,074.07$

Mosaic at Millenia South Orlando 256 14,800,000.00$ 57,812.50$

Sabal Park Longwood/Altamonte Springs 162 14,747,832.00$ 91,036.00$

Riverfront East Orlando/UCF 356 10,279,000.00$ 28,873.60$

Legacy Parc Kissimmee/St. Cloud 185 5,800,000.00$ 31,351.35$

Source: Cushman & Wakefield Orlando Multifamily Reprot Year-End 2009

SIGNIFICANT 2009 APARTMENT SALES TRANSACTIONS

Orlando Submarket Map


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Rank Company City Employment Industry

1 Walt Disney Co. (Walt Disney World) Lake Buena Vista 62,000 Leisure & Hospitality

2 Orange County Public Schools MSA 24,063 Education

3 Florida Hospital (Adventist Health System) Orlando 16,000 Health Care & Social Assistance

4 Publix Super Markets Inc. MSA 15,606 Retail Trade

5 Universal Orlando Orlando 13,000 Leisure & Hospitality

6 Orlando Health Orlando 13,000 Health Care & Social Assistance

7 Orange County Government MSA 7,426 Government

8 SeaWorld Orlando Orlando 7,290 Leisure & Hospitality

9 Lockheed Martin Corporation Orlando 7,200 Professional, Scientific & Technical Services

10 Seminole County Public Schools MSA 7,000 Education

11 Darden Restaurants Inc. Orlando 6,500 Accommodation & Food Service, Management of Companies

12 Osceola County Public Schools MSA 6,465 Education

13 Marriott International Inc. Orlando 6,312 Leisure & Hospitality

14 Starwood Hotels & Resorts Worldwide Inc. Orlando 5,369 Leisure & Hospitality

15 Central Florida Investments Orlando 5,000 Real Estate & Leasing

16 Walgreen Co. MSA 4,990 Retail Trade, Transportation & Warehousing

17 Lake County Public Schools MSA 4,353 Education

18 United Parcel Service Inc. Orlando 4,000 Transportation & Warehousing

19 CenturyLink Apopka 3,900 Information

20 City of Orlando Orlando 3,272 Government

21 Siemens Orlando 3,249 Manufacturing, Professional, Scientific, & Technical Services

22 Cendant Corp. Windermere 3,201 Leisure & Hospitality

23 SunTrust Banks Inc. Orlando 3,165 Finance & Insurance

24 Rosen Hotels And Resorts Orlando 3,000 Leisure & Hospitality

25 CVS Corp. Orlando 2,900 Retail Trade

26 Space Gateway Support Orlando 2,886 Transportation & Warehousing

27 Loews Hotels Corp. Orlando 2,800 Leisure & Hospitality

28 Northrop Grumman Corp. Orlando 2,659 Professional, Scientific & Technical Services

29 FedEx Corp. Orlando 2,600 Transportation & Warehousing

30 Lowes Cos. Inc. MSA 2,546 Retail Trade, Transportation & Warehousing

31 Cingular Wireless LLC Lake Mary 2,500 Information

32 Orange Lake Resort & Country Club Kissimmee 2,500 Leisure & Hospitality

33 Southwest Airlines Co. Orlando 2,332 Transportation & Warehousing

34 Hilton Hotels Corp. Altamonte Springs 2,100 Leisure & Hospitality

35 Leesburg Regional Medical Center Leesburg 2,093 Health Care & Social Assistance

36 The Villages The Villages 2,022 Real Estate & Leasing

37 Mears Transportation Group Orlando 2,000 Transportation & Warehousing

38 AirTran Airways Orlando 2,000 Transportation & Warehousing, Management of Companies

39 HCA Inc. Orlando 1,962 Health Care & Social Assistance

40 YMCA of Central Florida MSA 1,900 Health Care & Social Assistance

41 Bank of America Corp. Orlando 1,775 Finance & Insurance

42 Bright House Networks Orlando 1,724 Information

43 Osceola County Government MSA 1,715 Government

44 Orange County Corrections Department MSA 1,673 Corrections

45 Subway Restaurants MSA 1,600 Retail Trade

46 Gaylord Palms Resort & Convention Center Kissimmee 1,500 Leisure & Hospitality

47 Health Central Ocoee 1,500 Health Care & Social Assistance

48 Wachovia Corp. Orlando 1,422 Finance & Insurance

49 Tempus Resorts International Orlando 1,400 Leisure & Hospitality

50 Convergys Corp. Lake Mary 1,355 Professional, Scientific & Technical Services

Source: Nexis.com and Harris Info Source, Direct Company Contact, & OBJ Book of Lists

(By Employment)

Metro Orlando Major Employers


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II. Property Valuation

Included herein is a property valuation that was used to determine the value of the Lake Eve Resort property in

its current use as a upscale hotel. The property valuation consists of t hree different approaches that were

employed: the Sales Comparison approach which uses data from recent transactions of comparable properties to

determine value, the Cost approach which uses construction cost data to determine the replacement cost of reconstructing the property, and lastly the Income Approach which analyzes the income and expenditures of the

property operations to ultimate calculate a present value.

Based on the Sales Comparison Approach, the estimated value of the Lake Eve Resort is $12,054,226.

Using the Cost Approach, the value of the Lake Eve Resort was determined to be: $19,873,240. Lastly, the Income Approach derived a value of $19,763,339.

Detailed worksheets and further explanation are as follows.

Sales Comparison Approach

Many publications and reports have pointed to the softening of markets throughout the country, and the Orlando

hospitality market, while resilient, is also susceptible to the deterioration of the market. The implications of

these economic changes were discussed in the Market Analysis portion herein. The quantity and quality of

transactions in the region has declined from the peaks observed in 2007, however there are still a few examples of hotel properties that can serve as a basis for the analysis.

Lake Eve Resort is an upscale, full service hotel resort located in the highly desirable Tourist Corridor in the

Orlando market. The high rise building is ideally situated near many of the main theme parks and attractions,

and offers a variety of amenities including: swimming pool, fitness center, business center, spa, and dining area and boasts luxury suites with 1, 2, and 3 bedroom layouts. Although the comparable properties do not advertise

suites, they rooms were treated as equals between the subject property and comparison properties.

Three transactions of properties within the Orlando market with characteristics and attributes comparable to the

Lake Eve Resort were identified and included in the sales comparison. The closest comparable property appears to be the Sheraton Downtown Orlando property, which was recently acquired through foreclosure. The property

is similar in size and structure to the Lake Eve Resort, and is relatively close in proximity at 8.1 miles from the

subject property. Much like the Lake Eve Resort, the Sheraton is a high-rise hotel property that offers a highly

desirable location; whereas the former resides in the highly traffic Tourist Corridor, the latter offers visitors the

ability to stay right in Downtown Orlando.

Because the Sheraton Downtown Orlando was acquired in an unconventional manner (via foreclosure), it can be

rationalized that the property has a significantly higher value than the $8MM purchase price. Realistically, in

today’s market this project is likely worth between 25% and 30% more than the acquisition price. This

adjustment, along with a major adjustment to compensate for the Sheraton parking garage, is reflected in the Sales Comparison Report. From there, it was determined that the Total Adjusted Value for the Sheraton

Property was $10,093,500, or $34,805 per key.

The next closest comparable used in the analysis was the Renaissance Orlando Airport Hotel, in which 60% of

the shares were sold between the Joint Venture partners in January 2010. Although this was not a conventional transaction, the estimated value of the property was $35MM. The Renaissance is located approximately 15


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miles from the subject property, but still offers a desirable location near the Orlando International airport;

although it was determined that that Tourist Corridor is still much more desirable than the Airport sub-market, which was adjusted for, in addition to adjusting for some of the amenities that the Lake Eve Resort offers that

are not present at the Renaissance property. Because this transaction was not a typical arm’s length deal, the

sale price may not reflect fair market value. In fact, for the purpose of this analysis, it was assumed that the

property was overvalued by $1.2M which was adjusted accordingly. In total, the adjusted value for the

Renaissance was $34,613,500, or $116,153 per unit.

Lastly, this property valuation also include the Hampton Inn property in Altamonte Springs, FL which was sold

in a conventional, arm’s-length transaction in September 2009. The comparable property serves as a great basis

because of the typical nature of the transaction, however the location (24.6 miles from the subject property), the

less desirable sub-market, the timing of the transaction, and the many differences between the properties required significant adjustment to be comparable to the Lake Eve Resort. Most notably, the property’s suburban

location and building style (Garden style) needed to be accounted for, in addition to the many lacking amenities

featured at the Lake Eve Resort that are absent at the comparable property. The total adjusted value for the

Hampton Inn was $11,947,500 or $56,893 per key.

The adjusted per unit values of the comparable properties were averaged together, equating to $69,284/unit.

Based on the 176 units at the Lake Eve Resort, the result of the Sales Comparison analysis is a value of

$12,054,226.02.

Cost Approach

The second analysis conducted to determine the current value of the Lake Eve Resort utilized the Cost

Approach. Using the RS Means Building Construction Cost Data, 68th Edition, the subject property can be

valued based on the cost of reproducing or replacing the existing property with an identical, new construction.

The RS Means Building Construction Data provided did not have construction costs for a hotel, however because the Lake Eve Resort consists of 1, 2, and 3 bedroom suites, the High-Rise data was used.

Furthermore, two sets of data were considered: the first being the square feet cost to reconstruct the gross living

area ($115 per sq. ft.) and the second was to consider a per unit construction cost provided ($114,000/unit). It

was calculated that the Living Area of the hotel (comprised exclusively of the units) was 196,016 sq. ft., which equates to $22,541,840 if reconstructed using the data provided. This does not account for the 153,984sq. ft. of

non-living areas, so it can be deduced that based on an itemized construction basis the value would be

significantly greater.

Alternatively using the per unit assessment, the 176 units totals $20,064,000. Because the per unit cost also includes the mechanical, electrical, and plumbing, the latter option was employ ed as it was more encompassing.

Similarly, the per unit cost does not take into consideration the net area that is uninhabitable or is service-based,

so the value could be even greater. However, given the general state of the economy, the cost of construction

may be inflated, especially as many contractors are doing work at minimal margins slightly above cost.

After accommodating for physical depreciation (calculated at 6.5%) and adding a value for the site and site

improvements, the estimated value of the Lake Eve Resort was determined to be $19,873,240.


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Income Approach

Lastly, the third analysis conducted to determine property value was the Income Approach. This methodology

analyzed the potential revenue and operating expenses of the income producing property, and used a terminal

capitalization rate to estimate value.

The formula to determine the terminal value used is:

Terminal Value (TV) = Net Operating Expenses / Terminal Capitalization Rate

To determine the terminal value required to first calculate the Net Operating Expenses (NOI). The formula for

calculating NOI is as follows:

Potential Gross Income (PGI)

- Vacancy & Collection Loss (VC)

= Effective Gross Income (EGI)

- Operating Expenses (OE) - Capital Expenditures (CAPX)

=Net Operating Income

Potential Gross Income for the property was derived by determining the Average Daily Rate (ADR) per Room,

and then multiplying the ADR for each room (174 units) for 365 days to get the Potential Income from Revenue. Profit and Loss (P&L) statements for March, April, May, and June which were provided, and

included additional sources of income such as: food & banquet, beverage, telephone, and other miscellaneous

income. The data for the months was averaged, and the revenue of the four month set was annualized to get

estimated yearly totals that were added to the Potential Gross Income.

Monthly occupancy rates were also provided for the aforementioned range of months, from which the monthly

vacancy and collection loss could be determined. Similarly, the average of the months were annualized and the

percentage of vacancy and loss was identified and applied to the Potential Gross Income to determine the

Effective Gross Income.

The P&L statements also included the operating costs for a variety of expenditures, as were Capital Expenditure

reserves, which were also annualized to identify Operating Expenses and CAPX. By subtracting the OE and

CAPX from the EGI, the resulting Net Operating Income could be established.

In reviewing the P&L statements for the Lake Eve Resort, the year-to-year occupancy rates were dras tically increased from 2008 to 2009. This could be the result of being a new property that was recently opened, or the

fruits of better management for the property. As a result, it was difficult to extrapolate these same increases for

the following years. According to the Hotel Valuation Index (HVI), the Orlando Market was identified as

having extremely low volatility in the market and project substantial increases in per-room value over the next 3

years, before tapering off to minimal increases. These values were then applied to the future net operating income for the next five years to determine the Net Operating Expenses throughout the holding period, which

would ultimately result in a highly profitable hotel operation.

Additionally, the Hotel Valuation Index estimated that a property comparable to the Lake Eve Resort cou ld see

a capitalization rate of between 8 and 9%. Furthermore, the HVI estimated Discount Rate between 11% and 12.5% for this type of property.


14

Finally, after taking into consideration selling expenses and accounting for a Discount Rate, the Net Present Value of the property was calculated to be: $19,763,339.

Final Reconciliation:

Each approach identified and applied herein relied heavily on the information and data that was either provided or collected, however each also required considerable assumptions to be made by the evaluator. The Cost

Approach and the Income Approach resulted in values that were almost identical (less than 1% difference),

which is positive reassurance that the assumptions made were at least consistent. However, the results of the

Sales Approach would indicate that either the comparables were too grim, reflections of the tight credit market

and better positioning for qualified buyers, or the adjusted values were too conservative. As a result, there is no clear and present methodology that is vastly superior than the other two, and the disparity between the Cost and

Income Approach with the Sales Approach indicates that an across-the-board averaging of the values would not

be prudent.

Instead, the property valuation was determined by weighing the three values in such a manner so that no one method has a majority weight. Overall, the value from the Sales Approach was deeply discounted, while the

heaviest emphasis was placed on the Income Approach. The final, reconciled value for the Lake Eve Resort has

been estimated at an even $18,700,000.00.

Approach Indicated Value Weight (%) Weighted Value

Sales Comparison Approach: 12,054,226$ 15% 1,808,134$

Cost Approach: 19,873,240$ 45% 8,942,958$

Income Approach: 19,763,339$ 40% 7,905,336$

Total: 100% 18,656,428$

Value Rounded: 18,700,000$


15

FEATURE SUBJECT

Proximity to Subject: - 24.6 miles 8.1 miles 14.9 miles

Sale Price: 12,054,226.02$ $10,000,000.00 $8,000,000.00 $35,000,000.00

Sale Price/Room 68,490$ $47,619 $23,500 $114,460

VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION +/- ADJUSTMENTS DESCRIPTION +/- ADJUSTMENTS DESCRIPTION +/- ADJUSTMENTS

Sale or Finance Concessions: Conventional Typical Foreclosure $3,000,000 Share sale to JV Ptnr ($1,250,000)

Date of Sale: Sept. 2009 $150,000 Dec. 2009 $75,000 Jan. 2010 $60,000

Location/Submarket: Tourist Corridor Suburban $500,000 Downtown Airport $250,000

Design (Style): U-Shaped, High-Rise Mid-Rise $500,000 High Rise Mid-Rise $500,000

Laundry Equipment: Yes Yes Laundry/Valet Service

Available

$6,000 Valet Dry Cleaning $6,000

Room Count: 176 210 290 298

Dining Area: Yes Yes Yes Yes

Bar Area: Yes No $250,000 Yes Yes

Meeting & Banquet Facilities: Yes Yes Yes Yes

Pool: Yes Yes Yes Yes

Parking Lot/Garage: Yes Lot Garage ($1,000,000) Lot

Spa: Yes No $20,000 Yes Yes

Children's Pool: Yes No $10,000 Yes No $25,000

Fitness Center: Yes Yes Yes Yes

Video Game Room: Yes No $5,000 Yes No $10,000

Business Center: Yes Yes Yes Yes

Pantry/Market Area: Yes No $2,500 No $2,500 No $2,500

Sun Deck: Yes No $10,000 No $10,000 No $10,000

Net Adjustment (Total): 1,447,500$ 2,093,500.00$ (386,500)$

Total Adjusted Value: 11,447,500$ Total Adjusted Value: $10,093,500.00 Total Adjusted Value: 34,613,500$

Adjusted Value Per Room: 54,512$ Adjusted Value Per Room: 34,805$ Adjusted Value Per Room: 116,153$

Net Adjusted Value: 14% Net Adjusted Value: 26% Net Adjusted Value: -1.10%

Lake Eve Resort - 123888

International Dr. South Orlando, FL

Adjusted Sale Price of

Comparables:

UNIFORM APPRAISAL REPORT

COMPARABLE SALE NO. 3

Rennaisance Orlando Airport Hotel - 5445

Forbes Place, Orlando, FL

COMPARABLE SALE NO. 1 COMPARABLE SALE NO. 2

Hampton Inn - 151 N. Douglas Ave., Altamonte

Springs, FL

Sheraton Downtown Orlando - 5905

International Drive, Orlando, FL

SA

LE

S C

OM

PA

RIS

ON

AP

PR

OA

CH


16

Estimated REPRODUCTION OR X REPLACEMENT COST NEW

UNITS PRICE TOTAL

100,000$ 440,000.00$

176 114,000$ 20,064,000.00$

20,504,000.00$

Physical External

1,332,760$ -$ 1,332,760.00$

19,171,240.00$

120,000 $5.85 702,000.00$

19,873,240.00$

Site Area 4.4 Acres

Guestroom No. of Units Sq.Ft./Unit

1-Bedroom 14 713

2-Bedroom 108 1,092

2-Bedroom Corner 28 1,172

3-Bedroom 26 1,357

176 Total Livable Area: 196,016

Option 1: Gross Living Area (Sq. Ft.) 22,541,840$

Option 2: Total Unit Cost per Guestroom 20,064,000$ $114,000

Depreciation (6.5%)

CO

ST

AP

PR

OA

CH

9,982

117,936

32,816

35,282

Subtotal Sq.Ft.

"As-is" Value of Site Improvements

-$

Total Estimate of Cost New:

Less

$115.00

Depreciated Cost of Improvements:

INDICATED VALUE BY COST APPROACH:

UNIFORM APPRAISAL REPORT

Unit Cost per Guestroom

Source of Cost Data:

Functional

OPINION OF SITE VALUE

RS MEANS BUILDING CONSTRUCTION COST DATA, 68TH EDITION

(APARTMENTS -HIGH-RISE)


17

1 2 3 4 5

Potential Gross Income (PGI): 6,065,628$ 7,545,641$ 8,632,213$ 8,640,845$ 8,649,486$

- Vacancy & Collection Loss (VC): 1,206,453$ 1,266,776$ 1,330,115$ 1,396,621$ 1,466,452$

= Effective Gross Income: 4,859,174$ 6,278,865$ 7,302,098$ 7,244,225$ 7,183,034$

- Operating Expenses (OE): 4,002,565$ 4,202,693$ 4,412,828$ 4,633,469$ 4,865,143$

- Capital Expenditures (CAPX): 276,945$ 290,792$ 305,332$ 320,598$ 336,628$

= Net Operating Income: 579,664$ 1,785,379$ 2,583,938$ 2,290,157$ 1,981,263$

Rooms March April May June Average Annualized

Room Revenue (ADR x 365) 176 87.18$ 5,600,283$

Food & Banquet Revenue 18,079$ 16,558$ 15,522$ 11,826$ 15,496$ 185,955$

Beverage Revenue 1,841$ 2,373$ 2,031$ 2,222$ 2,117$ 25,401$

Telephone Revenue 50$ 537$ 327$ 243$ 289$ 3,471$

Other Income 27,953$ 19,788$ 12,798$ 22,967$ 20,877$ 250,518$

Potential Gross Income (PGI) 47,923$ 39,256$ 30,678$ 37,258$ 38,779$ 6,065,628$

Vacancy & Collection Loss (VC) (1 - Occ %) 13% 23% 28% 15% 20%

Vacancy & Collection Loss (VC) 6,422$ 8,856$ 8,627$ 5,768$ 1,206,453$

= Effective Gross Income (EGI) 41,501$ 30,400$ 22,051$ 31,490$ 4,859,174$

Expenditures March April May June Average Annualized

Rooms 101,601$ 97,055$ 80,417$ 84,294$ 90,842$ 1,090,101$

Food & Banquet 28,513$ 24,929$ 21,515$ 21,576$ 24,133$ 289,599$

Beverage 1,161$ 2,582$ (1,270)$ 1,651$ 1,031$ 12,372$

Telephone 1,281$ 2,197$ 1,839$ 1,893$ 1,803$ 21,630$

Admin & General 45,739$ 52,360$ 46,083$ 35,551$ 44,933$ 539,199$

Sales & Marketing 19,221$ 14,338$ 15,096$ 21,240$ 17,474$ 209,685$

Energy 35,216$ 37,509$ 13,398$ 43,180$ 32,326$ 387,909$

Management Fees 11,295$ 11,295$ 14,329$ 30,558$ 16,869$ 202,431$

Property Taxes 47,500$ 47,500$ 47,500$ 47,500$ 47,500$ 570,000$

Legal Fees -$ 159,409$ -$ 53,136$ 637,636$

Corporate Office Overhead 3,092$ 3,720$ 2,617$ 4,572$ 3,500$ 42,003$

-Operating Expenses (OE) 294,619$ 293,485$ 400,933$ 292,015$ 333,547$ 4,002,565$

-Capital Expenditures (CAPX) 33,524$ 12,633$ 46,158$ -$ 23,079$ 276,945$

=Net Operating Income (NOI) 261,095$ 280,852$ 354,775$ 292,015$ 297,184$ 3,566,211$

Terminal Cap Rate: 8.00%

Net Operating Expenses: 1,981,263$

End of Year 5 Terminal Value: 24,765,792$

Sales Price (SP) 24,765,792$

-Selling Expenses (SE) 6% 1,485,947.51$

=Net Sales Proceeds (NSP) 23,279,844.29$

Discount Rate: 11.75%

NPV $19,763,339

Year 1 2 3 4 5

Annual Cash Flow 579,664$ 1,785,379$ 2,583,938$ 2,290,157$ 1,981,263$

Reversion Value 23,279,844$

579,664$ 1,785,379$ 2,583,938$ 2,290,157$ 25,261,108$

Hotel Valuation Index 2010 2011 2012 2013 2014 2015

18.0% 24.4% 20.4% 14.4% 0.1% 0.1%

IN

CO

ME

AP

PR

OA

CH

NET OPERATING INCOME

NET SALES PROCEEDS

ANNUAL PERCENTAGE CHANGES IN PER-ROOM VALUE

Orlando

TERMINAL VALUE

PRESENT VALUE OF FUTURE CASH FLOWS

YEAR


18

III. Highest and Best Use Analysis

The 4.4 acre Lake Eve Resort property is currently zoned to allow various uses, including: office, retail, multi-

family, and hotel. As a raw, undeveloped property, the owner would have a fairly wide range of development

options to determine the ultimate use of the site.

The owner expects to get a 30 year mort gage at 6.0%, for 60% of the development costs (60% loan-to-value

ratio), with 3.0% in total up-front financing costs and selling expenses of 3.0%.

All evaluations used constants for the Orange County, FL Property Tax Millage Rate for 2010 (21.3255), as

well as the assessed value which was estimated at 90% of the sales price.

Furthermore, all analyses included an ordinary income tax of 30%, a capital gains tax rate of 15%, and a

Depreciation recapture tax rate of 25%.

The highest and best use for the property would ultimately be determined based on the development that has the greatest Internal Rate of Return (IRR), the highest Net Present Value (NPV), using the market rents, vacancies,

and terminal capitalization rates identified in the Market Analysis included herein. The Discount Rate used was

11.75% per the Hotel Valuation Index report used for the property valuation included as section II of this report.

Option 1: 4-Story, 150-unit multi-family apartment complex

The first development option analyzed was a multi-family apartment complex, consisting of 50 studio

apartment units (500 sq.ft.), 50 one-bedroom units (700 sq.ft.), and 50 two-bedroom units (1,000 sq.ft.). The

market for apartment units in the Orlando region is relatively strong, and as inventory in the marketplace

dwindles there is a strong potential for increased demand. Currently, apartment rents in the area range around $0.90/sq.ft. For this analysis a slight premium was placed on the one-bedroom apartments, with a slight

discount on the studio apartments, therefore the resulting rental rates were: Studio: $425.00/mo; One-Bedroom:

$665.00/mo; Two Bedroom: $900.00/mo. Assuming zero vacancies, the potential income from rents for the

apartment complex would be $1,194,000.00/year. However in reality the current occupancy rate for apartments

in the region is around 94%, and as demand in the area increases the vacancy will decline while rental rates should increase.

According to the RS Means Construction Cost data, the approximate cost to construct a low-rise apartment

building is $94,000 per unit. For this development proposal, the total estimated cost of the building would be

$14,100,000. The owner is expecting a loan-to-value of 60%, therefore the initial equity required would be $5,460,000.

Operating expenses for the property were estimated to be around 20% per year, with an additional 5% reserved

for Capital Expenditures. Annual revenue growth was projected at 5%, reflecting slight increases in demand,

while operational expenses were estimated to increase by 3% annually, consistent with inflation.

Ultimately, this development option proposes the smallest IRR, at approximately 7%. The most likely reason

behind the very low return is the fact that the development costs are quite high compared to the annual rents

received, and the holding period is quite short. As a long-term investment, this option would make sense as it

generates a positive cash flow annually, but as a short-term investment the returns are simply not there.


19

Option 2: Single-story, 50,000 sq. ft. retail shopping center

The retail market in the Orlando region is quite bleak, particularly in submarkets that are less desirable or have

centers without an anchor tenant, which the Lake Eve property would likely be considered. These areas can

expect rent rates as low as $4.00/rsf for large boxes, and as low as $8.00/rsf for smaller users. Fortunately, over

the next few years the market is expected to recover.

For the purposes of this analysis, and for simplicity, the revenue for the shopping center was based only on the

base rent per square foot that was used ($8.00/sf) for a Potential Gross Income of $400,000 per y ear, however

there would be potential for additional income revenue if there is a percentage share in the lease between the

Tenant and Landlord. As the economy improves, that would result in more sales for the tenants, and a percent of

those overages would result in a greater Effective Gross Income.

Vacancy in the region remains high, estimated at around 25%, with higher vacancy the landlord would be

responsible for a greater portion of the Operating Expenses, which were estimated at 20%, and Capital

Expenses estimated at 2%.

The estimated development costs for a retail shopping center were estimated at $82.50 per square foot,

according to RS Means Building Construction Data, for a total development cost of $4,125,000. Despite lower

occupancy levels and higher Operating Costs, this development proposal could achieve a Net Operating Income

of around $2.7M. Assuming that there will still be lower demand for partially -stabilized shopping centers in five

years, the terminal cap rate was set at 10%.

Based on the NOI of approximately $105,000 and a capitalization rate of 10%, the sale of this property would

be around $1,107,500 which, after selling costs, would not be enough to cover the balance of the loan ultimately

resulting in the owner having to bring a check to settlement in the amount of $588,417. While there is upside

through decreased vacancy and percentage share arrangements with the Tenants, the short-term sale of this property does not seem to make any sense.

Option 3: High-Rise 500,000 sq.ft. office building with two levels of underground parking

Like most markets throughout the country the Class A office market in Orlando has been impacted by the declining economy, resulting in high vacancy and low absorption rates, with little sign of improvement in the

near future. This is especially pronounced in many suburban submarkets, including the Tourist Corridor

submarket that the Lake Eve Resort is located. In fact, the Tourist Corridor has even more office inventory than

the CBD district for Orlando, and has even higher rent rates! The asking price for Class A office space in the

Tourist Corridor is $23.33/sq.ft.

Evaluating this proposal option, the high supply of existing office space and absurdly high rent rates would

result in an even higher-than-normal vacancy rate which was estimated at 35%.

Development costs for a high-rise office building are quite expensive, and are estimated at $150/sq.ft. for a total of $75M in construction costs. Adding two levels of underground parking garage (approximately 84,000 sq.ft.

Total) would increase the total construction cost to over $82M . The owner would be responsible for more than

$33,000,000.00 in equity to cover the 60% LTV.

Aside from high vacancy, the biggest detriment to this development option is the exorbitant debt service.

Because of the high construction costs, the annual payment toward the mortgage is $3.6M, which means that great than 50% of the revenue from the rents will go toward paying down debt on the property.


20

On the positive side, there has been an increase in sales activity of office buildings in the Orlando Market, which would result in a better terminal capitalization rate for the sale of this property, estimated at 8%. It was

estimated that the proceeds from this sale of this property, if developed, would result in a profit . The estimated

IRR would be 12%, but the high amount of equity involved up front makes the project an unattractive

proposition. However, the influx of $82M in construction costs could help to create many jobs and stimulate the

local economy.

Option 4: 8 story, 180-unit Hampton Inn

The fourth development option considered was to develop the property as a Hampton Inn hotel with 180 guest

rooms. Considering the close proximity to major tourist attractions including the Walt Disney World Resort and Sea World Orlando, it is no surprise that this development option had the greatest IRR and NPV.

Hotel occupancy in Orange County increased in 2010 by 4.6% from the previous year, resulting in a vacancy

rate of 30%, with an Average Daily Rate of $100.42. As the economy continues to improve, the volume of

tourists to the area will inevitably recover, and vacancies should decline while providing for increased room rates.

According to the RS Means Construction Data, the cost to construct a high rise apartment was used to

determine the development costs. At $115 per square foot, the 110,000 sq.ft. Hampton Inn would cost $12.65M

to build, of which the owner would only have to provide $5M.

As tourism increases in the area, the demand for existing hotel properties will also increase, making the

proposition of selling the development after five years an attractive option. Considering a Cap. Rate of 8%, the

market value of this project is estimated to be around $25M. The initial equity investment of $5M, would result

in an IRR of 89%, and a Net Present Value of almost $24,732,000.

Option 5: Mixed-Use Development

The Hampton Inn proposal was hands-down the best option, although the other three proposals offered some

value as development options, but were limited by the struggling economy and oversupply of their respective markets. A fifth option considered was a mixed-use development consisting of first floor retail (50,000 sq.ft.),

second floor Class B office (50,000sq.ft.), and multi-family apartments on the third and fourth floors (75 units).

While the marketplace may not be able to sustain the volume of space proposed as separate uses, in smaller

supply they may be absorbed faster into the market place. Plus, the lack of comparable properties in the area could result in a novelty that would be desirable to future tenants, and to potential buyers of mixed-use

properties.

Lastly, by capitalizing on synergies that can be created among the different uses and users, resulting in lower

vacancies and operating costs. Furthermore, by diversifying the mixture of tenants, the property as a whole may be able to better sustain wholesale changes in the economic landscape. Because of these three factors, the

terminal capitalization rate for this property was slightly better than the previous development options, with an

estimated Cap Rate of 7%.

The IRR for this option was calculated to be 16%, which is greater than constructing only office, multi-family apartment, or office space, with an NPV of $1,065,440.


21

Summary:

In conclusion, the best development proposal is unequivocally the 180-unit Hampton Inn, which offers the

developer a much better Internal Rate of Return, has a better Net Present Value, and requires the 3 lowest

amount of equity.

Second to the hotel option is the development of a mixed-use property that combines retail, office, and apartments. Although the return is not nearly as great, the novelty of the product types and the variety offered

provides it with tremendous upside.

Lastly, if the owner was not interested in selling the property within five years and instead was looking to

provide a legacy property for their heirs, than the multi-family apartment component could be an attractive development option that results in a reliable source of income.

Use IRR NPV Proceeds from Sale Equity

Hotel: 89% $24,731,846.85 18,694,062.80$ $5,060,000

Mixed-Use: 16% $1,065,440.63 224,780.96$ $7,470,000

Office: 12% ($51,416.58) 16,361,675.72$ $33,083,333

Apartment: 7% ($423,000.00) ($4,038,269.82) $5,640,000Retail: 2% ($533,985.54) ($588,417.49) $1,650,000


22

INT 11.75%

NPV ($812,603.15)

Year 0 1 2 3 4 5

Annual Cash Flow (5,640,000)$ 1,122,360$ 1,178,478$ 1,237,402$ 1,299,272$ 1,364,236$

Financing Costs (423,000)$

Property Taxes (3,044)$ (3,044)$ (3,044)$ (3,044)$ (3,044)$

Operating Costs (15,761)$ (16,234)$ (16,721)$ (17,222)$ (17,739)$

Debt Service (614,610)$ (614,610)$ (614,610)$ (614,610)$ (614,610)$

Before-Tax Cash Flow 488,945$ 544,591$ 603,028$ 664,396$ 728,843$

Tax Liability 146,684$ 163,377$ 180,908$ 199,319$ 218,653$


(6,063,000)$ 342,262$ 1,252,558$ 1,386,963$ 1,528,111$ 3,262,311$

Unit Type Sq.Ft./Unit Rents/SF Rents QTY Total Potential Rents

500 $0.85 $425.00 50 $21,250.00

700 $0.95 $665.00 50 $33,250.00

1000 $0.90 $900.00 50 $45,000.00

Monthly PGI: $99,500.00

Low-Rise Apartment Annual: $1,194,000.00

RS Means Construction Data: Vacancy (6%) $71,640.00

Low-Rise Apartment $94,000.00 per unit Net Income: $1,122,360.00

Total Units: 150 units Operating Costs: 20%

Total Construction Cost: $14,100,000 Capital Expenditures: 2%

Total Development Costs $14,100,000

Equity $5,640,000

Terminal Cap Rate 8.0%

Sales Price $1,585,972

Loan Terms: Financing Costs $423,000

LTV 60%

INT 6.00%

Terms 30 year, fixed

Year: 1 2 3 4 5

Initial Balance: 8,460,000$ 8,352,990$ 8,239,560$ 8,119,324$ 7,991,873$

Payment: (614,610)$ (614,610)$ (614,610)$ (614,610)$ (614,610)$

Interest Portion: 507,600$ 501,179$ 494,374$ 487,159$ 479,512$

Principal Contribution: 107,010$ 113,430$ 120,236$ 127,450$ 135,097$

Ending Balance: 8,352,990$ 8,239,560$ 8,119,324$ 7,991,873$ 7,856,776$

Selling Price: $1,585,972.09 Orange County: 4.4347

Selling Costs: $47,579.16 Fire 2.2437

Net Sales: $1,538,393 Sheriff: 1.8043

Remaining Balance: 7,856,776$ School State 5.396

Before-Tax Equity Reversion (6,318,382.94)$ School Local: 2.498

Capital Gains Tax: (1,895,514.88)$ Library: 0.3748

Depreciation Recapture (25%) 384,598.23$ South Florida WMD: 0.624

Proceeds (4,038,269.82)$ Lake Buena Vista: 3.95

Total: 21.3255

NPV: ($423,000.00)

IRR: 7% Assessed Value Rate: 90%

Property Value: $1,585,972

Taxable Value: $1,427,374.88

Millage Rate: 0.00213255

Property Taxes: $3,043.95

OPTION 1: MULTI-FAMILY APARTMENTS

Studio Units:

1-Bedroom Units:

2-Bedroom Units:

Net Sale Proceeds: Property Taxes:


23

INT 11.75%

NPV ($533,985.54)

Year 0 1 2 3 4 5

Annual Cash Flow (1,650,000)$ 300,000$ 315,000$ 330,750$ 347,288$ 364,652$


Tenant Improvements (3,000)$ (3,150)$ (3,308)$ (3,473)$ (3,647)$

Property Taxes (1,889)$ (1,889)$ (1,889)$ (1,889)$ (1,889)$

Operating Costs (66,000)$ (67,980)$ (70,019)$ (72,120)$ (74,284)$

Debt Service (179,806)$ (179,806)$ (179,806)$ (179,806)$ (179,806)$


Tax Liability 14,791$ 18,652$ 22,718$ 27,000$ 31,508$


(1,773,750)$ 34,513$ 143,001$ 174,174$ 206,998$ 1,349,048$

Unit Type Sq.Ft. Rents/SF

50,000 $8.00

RS Means Construction Data: Vacancy 25%

Retail $82.50 per sq.ft. Vacancy Losses: $100,000.00

Total Office Space: 50,000 sq. ft. Net Income: $300,000.00

Total Construction Cost: $4,125,000 Tenant Improvements 1%

Operating Costs: 20%

Capital Expenditures: 2%


Equity $1,650,000

Loan Terms: Terminal Cap Rate 10%

LTV 60% Sales Price $1,107,488

INT 6.00% Financing Costs $123,750


Year: 1 2 3 4 5

Initial Balance: 2,475,000$ 2,443,694$ 2,410,510$ 2,375,334$ 2,338,048$

Payment: (179,806)$ (179,806)$ (179,806)$ (179,806)$ (179,806)$



Ending Balance: 2,443,694$ 2,410,510$ 2,375,334$ 2,338,048$ 2,298,525$

Selling Price: $1,107,488 Orange County: 4.4347

Selling Costs: 33,224.63$ Fire 2.2437

Net Sales: 1,074,263.06$ Sheriff: 1.8043



Capital Gains Tax: (367,278.54)$ Library: 0.3748

Depreciation Recapture (25%) 268,565.76$ South Florida WMD: 0.624

Proceeds (588,417.49)$ Lake Buena Vista: 3.95

Total: 21.3255

NPV: ($533,985.54)

IRR: 1.7% Assessed Value Rate: 80%


Taxable Value: $885,990.15




OPTION 2: RETAIL SHOPPING CENTER

Total Potential Rents

Retail Shopping Center $400,000.00


24

INT 11.75%

NPV ($51,416.58)

Year 0 1 2 3 4 5

Annual Cash Flow (33,083,333)$ 7,582,250$ 7,961,363$ 7,961,363$ 7,961,363$ 7,961,363$

Financing Costs (2,481,250)$


Property Taxes (90,018)$ (90,018)$ (90,018)$ (90,018)$ (90,018)$

Operating Costs (3,184,545)$ (3,280,081)$ (3,378,484)$ (3,479,838)$ (3,584,233)$

Debt Service (3,605,202)$ (3,605,202)$ (3,605,202)$ (3,605,202)$ (3,605,202)$


Tax Liability 187,999$ 271,934$ 242,413$ 212,007$ 180,689$


(35,564,583)$ 438,664$ 2,084,829$ 1,858,503$ 1,625,388$ 54,149,560$

Unit Type Sq.Ft. Rents/SF

500,000 $23.33


Office $150 per sq.ft. Vacancy Losses: $4,082,750.00

Total Office Space: 500,000 Net Income: $7,582,250.00

Office Construction Cost: $75,000,000 Tenant Improvements 1%

Garage: $92.50 per sq.ft. Operating Costs: 40%

Space per floor: 41,666.67 Capital Expenditures: 2%

Garage Total: 83,333.33

Garage Cost: 7,708,333.33$

Total Construction Costs: $82,708,333.33 Total Development Costs $82,708,333

Equity $33,083,333

Loan Terms: Terminal Cap Rate 8%

LTV 60% Sales Price $52,764,281

INT 6.00% Financing Costs $2,481,250


Year: 1 2 3 4 5

Initial Balance: 49,625,000$ 48,997,298$ 48,331,933$ 47,626,647$ 46,879,044$

Payment: (3,605,202)$ (3,605,202)$ (3,605,202)$ (3,605,202)$ (3,605,202)$

Interest Portion: 2,977,500$ 2,939,838$ 2,899,916$ 2,857,599$ 2,812,743$


Ending Balance: 48,997,298$ 48,331,933$ 47,626,647$ 46,879,044$ 46,086,584$


Selling Costs: 1,582,928.42$ Fire 2.2437



Before-Tax Equity Reversion 5,094,768.08$ School Local: 2.498

Capital Gains Tax: 1,528,430.43$ Library: 0.3748

Depreciation Recapture (25%) 12,795,338.06$ South Florida WMD: 0.624

Proceeds 16,361,675.72$ Lake Buena Vista: 3.95

Total: 21.3255

NPV: ($51,416.58)



Taxable Value: $42,211,425


Property Taxes:Net Sale Proceeds:

OPTION 3: HIGH-RISE OFFICE

Office Building W/Underground Garage $11,665,000.00



25

INT 11.75%

NPV $24,731,846.85

Year 0 1 2 3 4 5

Annual Cash Flow (5,060,000)$ 4,618,316$ 4,849,232$ 4,849,232$ 4,849,232$ 4,849,232$


Property Taxes (43,745)$ (43,745)$ (43,745)$ (43,745)$ (43,745)$

Operating Costs (1,477,861)$ (1,522,197)$ (1,567,863)$ (1,614,899)$ (1,663,346)$

Debt Service (551,405)$ (551,405)$ (551,405)$ (551,405)$ (551,405)$

Before-Tax Cash Flow 2,545,305$ 2,731,885$ 2,686,219$ 2,639,183$ 2,590,736$

Tax Liability 763,591$ 819,565$ 805,866$ 791,755$ 777,221$


(5,439,500)$ 1,781,713$ 6,283,335$ 6,178,303$ 6,070,121$ 31,599,745$

Unit Type No. of Units ADR

180 $100.42

Annual: $6,597,594.00

RS Means Construction Data: High Rise Apartment Vacancy 30%

Hotel $115.00 per sq.ft. Vacancy Losses: $1,979,278.20

Total Hotel Space: 110,000 sq. ft. Net Income: $4,618,315.80

Total Construction Cost: $12,650,000 Operating Costs: 30%

Capital Expenditures: 2.0%


Equity $5,060,000

Terminal Cap Rate 8%

Sales Price $25,641,052

Loan Terms: Financing Costs $379,500

LTV 60%

INT 6.00%


Year: 1 2 3 4 5

Initial Balance: 7,590,000$ 7,493,995$ 7,392,229$ 7,284,358$ 7,170,014$

Payment: (551,405)$ (551,405)$ (551,405)$ (551,405)$ (551,405)$



Ending Balance: 7,493,995$ 7,392,229$ 7,284,358$ 7,170,014$ 7,048,810$





Before-Tax Equity Reversion 17,823,010.96$ School Local: 2.498

Capital Gains Tax: 5,346,903.29$ Library: 0.3748


Proceeds 18,694,062.80$ Lake Buena Vista: 3.95

Total: 21.3255

NPV: $24,731,846.85



Taxable Value: $20,512,841.66




OPTION 4: HAMPTON INN HOTEL

OPTION 4: HAMPTON INN


8-Story, 180 unit Hampton Inn $18,075.60


26

INT 11.75%

NPV $1,065,440.63

Year 0 1 2 3 4 5

Annual Cash Flow (7,470,000)$ 1,757,200$ 1,932,920$ 1,932,920$ 1,932,920$ 1,932,920$



Property Taxes (13,902)$ (13,902)$ (13,902)$ (13,902)$ (13,902)$

Operating Costs (386,584)$ (398,182)$ (410,127)$ (422,431)$ (435,104)$

Debt Service (814,031)$ (814,031)$ (814,031)$ (814,031)$ (814,031)$


Tax Liability 157,533$ 206,243$ 202,659$ 198,968$ 195,166$


(8,030,250)$ 367,578$ 1,581,195$ 1,553,721$ 1,525,422$ 9,644,961$

Mixed-Use Commercial Development Sq.Ft./Unit Rents/SF

First Floor Retail 50,000 $8.00 $400,000.00

Second Floor Office 50,000 $23.33 $1,166,500.00

75 $700.00 12.00 months

Annual: $2,196,500.00


Office $150 per sq.ft. Vacancy Losses: $439,300.00

Total Office Space: 50,000 Net Income: $1,757,200.00

Office Construction Cost: $7,500,000 Tenant Improvements 1%

Retail Construction Cost: $82.50 per sq.ft. Operating Costs: 20%

Retail Space 50,000 Capital Expenditures: 2%

Retail Construciton Cost: 4,125,000$

Apartments Const. Cost: 94,000 per unit Total Development Costs 18,675,000$

Total No. of Apartments: 75

Total Apartment Const. 7,050,000$ Equity $7,470,000

Total Construction Costs: 18,675,000$

Terminal Cap Rate 7%

Loan Terms: Sales Price $8,148,687

LTV 60% Financing Costs $560,250

INT 6.00%


Year: 1 2 3 4 5

Initial Balance: 11,205,000$ 11,063,269$ 10,913,034$ 10,753,785$ 10,584,981$

Payment: (814,031)$ (814,031)$ (814,031)$ (814,031)$ (814,031)$



Ending Balance: 11,063,269$ 10,913,034$ 10,753,785$ 10,584,981$ 10,406,049$






Capital Gains Tax: (750,546.71)$ Library: 0.3748


Proceeds 224,780.96$ Lake Buena Vista: 3.95

Total: 21.3255

NPV: $1,065,440.63



Taxable Value: $6,518,950


OPTION 5: MIXED-USE DEVELOPMENT


Third & Fourth Floor Apartments $630,000.00
