Case
Teaching Notes
Supplementary Resources
Abstract
In January 2010, Benedict Clarke, general partner of a small real estate private equity venture, faced difficulty with one of his properties. When purchased in early 2007, Tulaberry Plaza was a thriving retail shopping center outside Orlando, Florida. The financial crisis and severe economic downturn forced Tulaberry's anchor tenant into bankruptcy and weakened the other tenants in the plaza. Clarke now faces pressures placed on him by his limited partners, who were shown rosy projections of the returns they would receive, and by his lender, who is presently taking most of the property's cash flow to satisfy required debt service. Clarke must devise a plan that presents the most logical and profitable way forward, while also justifying his actions to elicit the necessary support from the others involved in the transaction. The case asks students to make decisions from the perspective of Clarke, giving them an appreciation not only of the details of strategic decision-making in real estate leasing, but also of the interplay between lenders and equity partners when managing a commercial property in distress.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Southeast Submarket of Orlando, Florida
Source: REIS.
Exhibit 2: Arial View of Tulaberry Plaza
Source: CoStar.
Note: Property outlined in yellow.
Exhibit 3: Aggregate Statistics: Southeast Orlando Submarket, Neighborhood Shopping Centers
Year | Full Year (Y) or Quarter Number | Inventory (SF) | Completions | Vacancy Rate (%) | Vacant Stock (SF) | Occupied Stock (SF) | Net Absorption (SF) | Asking Rent ($ per SF) | Eff Rent ($ per SF) |
1995 | Y | 4,148,000 | 34,000 | 8.2 | 340,000 | 3,808,000 | –51,000 | $12.54 | $11.19 |
1996 | Y | 4,148,000 | 0 | 7.6 | 315,000 | 3,833,000 | 25,000 | $12.93 | $11.60 |
1997 | Y | 4,559,000 | 411,000 | 6.1 | 278,000 | 4,281,000 | 448,000 | $13.08 | $11.85 |
1998 | Y | 4,559,000 | 0 | 5.0 | 228,000 | 4,331,000 | 50,000 | $13.81 | $12.55 |
1999 | Y | 4,588,000 | 29,000 | 6.0 | 275,000 | 4,313,000 | –18,000 | $13.69 | $12.36 |
2000 | Y | 4,711,000 | 123,000 | 4.2 | 198,000 | 4,513,000 | 200,000 | $14.48 | $13.12 |
2001 | Y | 4,741,000 | 30,000 | 7.7 | 365,000 | 4,376,000 | –137,000 | $14.96 | $13.28 |
2002 | Y | 4,868,000 | 127,000 | 5.3 | 258,000 | 4,610,000 | 234,000 | $15.68 | $14.36 |
2003 | Y | 5,182,000 | 314,000 | 6.6 | 342,000 | 4,840,000 | 230,000 | $16.24 | $14.89 |
2004 | Y | 5,319,000 | 137,000 | 6.1 | 324,000 | 4,995,000 | 155,000 | $16.71 | $15.32 |
2005 | Y | 5,367,000 | 48,000 | 4.3 | 231,000 | 5,136,000 | 141,000 | $17.80 | $16.22 |
2006 | Y | 5,485,000 | 118,000 | 6.5 | 357,000 | 5,128,000 | –8,000 | $18.79 | $17.02 |
2007 | Y | 5,727,000 | 242,000 | 5.7 | 326,000 | 5,401,000 | 273,000 | $19.03 | $17.12 |
2008 | Y | 6,057,000 | 330,000 | 8.9 | 539,000 | 5,518,000 | 117,000 | $18.50 | $16.17 |
2009 | 1 | 6,165,000 | 108,000 | 11.7 | 721,000 | 5,444,000 | –74,000 | $18.27 | $15.87 |
2009 | 2 | 6,165,000 | 0 | 12.2 | 752,000 | 5,413,000 | –31,000 | $18.16 | $15.57 |
2009 | 3 | 6,165,000 | 0 | 12.1 | 746,000 | 5,419,000 | 6,000 | $17.98 | $15.32 |
2009 | 4 | 6,265,000 | 100,000 | 14.6 | 915,000 | 5,350,000 | –69,000 | $17.70 | $14.97 |
2009 | Y | 6,265,000 | 208,000 | 14.6 | 915,000 | 5,350,000 | –168,000 | $17.70 | $14.97 |
Source: REIS Q4 2009 Report.
Exhibit 4: Historical and Forecasted Economic Trends
Source: REIS Q4 2009 Report, Moody's Economy.com.
Note: Actual data through 2009. Forecast from 2010 through 2014.
Exhibit 5: Disaggregated Statistics: Southeast Orlando Submarket, Neighborhood Shopping Centers
Nonanchor Asking Rent Distribution ($ per SF) | Anchor Asking Rent Distribution ($ per SF) | ||||
Low | 9.12 | Low | 6.92 | ||
25% | 13.85 | 25% | 9.01 | ||
Mean | 17.70 | Mean | 11.59 | ||
Median | 15.88 | Median | 12.00 | ||
75% | 21.15 | 75% | 13.37 | ||
High | 40.78 | High | 19.58 | ||
Nonanchor Asking Rent Growth Rate Distribution | Vacancy Rate Distribution | ||||
Low | –16.70% | Low | 0.00% | ||
25% | –0.50% | 25% | 1.40% | ||
Mean | –1.60% | Mean | 14.60% | ||
Median | –0.40% | Median | 6.50% | ||
75% | 0.00% | 75% | 22.90% | ||
High | 0.10% | High | 90.30% |
Source: REIS Q4 2009 Report.
Exhibit 6: Historical Realized Cash Flows of Tulaberry Plaza ($)
2007 | 2008 | 2009 | |
Gross potential rent | 1,480,734 | 1,418,700 | 1,457,065 |
Vacancy | 78,293 | 106,485 | 100,948 |
Effective gross income | 1,402,441 | 1,312,215 | 1,356,117 |
Other income | — | — | — |
Expense reimbursements | 298,631 | 270,825 | 272,458 |
Total operating revenue | 1,701,072 | 1,583,040 | 1,628,575 |
Operating expenses | 337,427 | 347,549 | 357,976 |
Net operating income | 1,363,646 | 1,235,491 | 1,270,599 |
Total capex, TIs, and leasing commissions | 85,287 | 87,294 | 94,983 |
Property before tax cash flow | 1,278,359 | 1,148,197 | 1,175,616 |
Source: Created by the author for discussion purposes only.
Exhibit 7: Site Plan
Source: Tulaberry Plaza LLC.
Exhibit 8: Current Rent Roll, Tulaberry Plaza
Unit | Tenant | Industry | Size (SF) | Lease End Date | Current Rent per SF ($) | Current Annual Rent ($) | Lease Type | Current Expense Reimbursements ($ per SF) | Annual Rent Adj. (%) | |
1 | B-1 | Quizno's | Submarine sandwich/salad restaurant | 1,400 | 12/31/16 | 32.00 | 44,800 | NNN | 6.31 | 2 |
2 | B-2 | Vacant | 1,400 | |||||||
3 | B-3 | Papa John's | Pizza take-out/delivery | 1,400 | 12/31/12 | 30.00 | 42,000 | NNN | 6.31 | 2 |
4 | B-4 | Jamba Juice | Drink-oriented restaurant | 1,400 | 12/31/11 | 30.00 | 42,000 | NNN | 6.31 | 2 |
5 | B-5 | Great Clips | Unisex hair salon | 1,260 | 12/31/10 | 30.00 | 37,800 | NNN | 6.31 | 2 |
6 | B-6 | Nature's Table Café | Café-style restaurant | 1,790 | 12/31/16 | 30.00 | 53,700 | NNN | 6.31 | 2 |
7 | A-1-5 | Outback Steakhouse | Restaurant | 6,401 | 12/31/23 | 10.15 | 65,000 | Ground | 3.20 | 2 |
8 | A-6 | Pike & Co. | Title and mortgage company | 1,400 | 12/31/13 | 28.00 | 39,200 | NNN | 6.31 | 2 |
9 | A-7 | Polo Cleaners | Dry cleaners | 1,400 | 12/31/11 | 32.00 | 44,800 | NNN | 6.31 | 2 |
10 | A-8 | Pak Mail | Shipping and packaging | 1,400 | 12/31/12 | 28.00 | 39,200 | NNN | 6.31 | 2 |
11 | A-9 | Deep Nine Salon & Spa | Hair salon and day spa | 1,400 | 12/31/14 | 28.00 | 39,200 | NNN | 6.31 | 2 |
12 | A-10 | Vacant | 1,386 | |||||||
13 | A-11 | Total Family Care | Family medical practice | 1,337 | 12/31/17 | 28.00 | 37,436 | NNN | 6.31 | 2 |
14 | A-12 | Family Chiropractic | Chiropractic office | 1,400 | 12/31/10 | 28.00 | 39,200 | NNN | 6.31 | 2 |
15 | A-13 | Lakeside Pediatrics | Pediatric medical practice | 1,387 | 12/31/18 | 28.00 | 38,836 | NNN | 6.31 | 2 |
16 | A-14 | Vacant | 1,387 | |||||||
17 | A-15 | Vacant | 1,388 | |||||||
18 | A-16-19 | Vacant | 14,228 | |||||||
21 | A-20 | Chinese/Thai | Chinese and Thai restaurant | 1,984 | 12/31/17 | 28.00 | 55,552 | NNN | 6.31 | 2 |
22 | A-21 | Florida Fever | Clothing and home furnishings | 1,984 | 12/31/12 | 28.00 | 55,552 | NNN | 6.31 | 2 |
23 | A-22 | Animal Hospital | Veterinary medical facility | 1,984 | 12/31/16 | 28.00 | 55,552 | NNN | 6.31 | 2 |
24 | A-23 | Home Meal Replacements | Catering | 1,984 | 12/31/18 | 28.00 | 55,552 | NNN | 6.31 | 2 |
25 | A-24 | Insurance Office | Insurance office | 2,000 | 12/31/17 | 28.00 | 56,000 | 6.31 | 2 | |
26 | A-25 | Vision Center | Optometry, optical devices | 2,000 | 12/31/10 | 26.00 | 52,000 | NNN | 6.31 | 2 |
27 | A-26 | Dentistry Office | General dentistry office | 2,000 | 12/31/18 | 28.00 | 56,000 | NNN | 6.31 | 2 |
28 | A-27 | Sushi Style | Asian sushi restaurant | 2,000 | 12/31/20 | 28.00 | 56,000 | NNN | 6.31 | 2 |
Source: Created by the author for discussion purposes only.
Exhibit 9: Anchor Tenant Possibilities
Tenant | Walgreens | Harbour Freight | PetSmart | Planet Gym |
Tenant type | Anchor | Anchor | Anchor | Anchor |
Industry | Pharmacy | Hardware Store | Pet Store | Fitness |
Creditworthiness | S&P: BBB | S&P: B+ | S&P: BB | Franchisee |
Projected sales | $572/ft2 | $308/ft2 | $289/ft2 | $78/ft2 |
Tenant improvements requirement (per SF) | $35.00 | $27.00 | $28.00 | $44.00 |
Lease type | NNN | NNN | NNN | NNN |
Term | 25 years | 15 years | 15 years | 15 years |
Base rent amount range (per SF) | $12.00 | $18.75 | $18.50 | $9.50 |
Rent escalations | 0% | 2% annual increase | 2% annual increase | 2% annual increase |
Target demographics | Male and female, all ages, all incomes | Male, ages 25–55, wide income range | Female, ages mid-20s and 50s | Male and female, ages 18–45, low to middle income |
Trade area | 37,000 people | 30,000 people, 30 min. drive | 247,000 people | 50,000 people |
Location preference | Near intersection/drive-through | Visible, inline or self-standing | Anchor | Anchor |
Parking requirement | Medium | Medium | Low | High (100 spaces) |
Size requirement | 10,800–15,000 | 12,000–15,000 | 18,000–27,500 | 12,000–20,000 |
Exhibit 10: Tenant Profile
Tenant | Starbucks | The Vitamin Shoppe | Ben's Tux Rental | Family Dollar |
Tenant type | Restaurant | Inline | Inline | Inline |
Industry | Coffee/food | Health and wellbeing | Formalwear rental | Value retail |
Creditworthiness | S&P: A1 | S&P: BB | N/A | S&P: BBB- |
Projected sales | N/A | N/A | N/A | N/A |
Tenant improvements requirement (per SF) | $39.00 | $25.00 | $20.00 | $22.00 |
Lease type | NNN | NNN | NNN | NNN |
Term | 10 years | 10 years | 5 years | 10 years |
Base rent amount range (per SF) | $33.75 | $25.50 | $24.00 | $24.50 |
Rent escalations | 10% every 5 years | 10% every 5 years | 3% | 10% increase every 5 years |
Target demographics | Male and female, ages 25–40, mid-income ($75k or more) | Male and female, educated, health enthusiasts | Male, ages 18–30 | Male and female, low and middle income, wide age range |
Trade area | 29,000 people | 61,000 people | 75,000 people | 8,000 people |
Location preference | Urban or suburban, on commuting side of traffic patterns | Highly visible | Cheap | Food store anchored, neighborhood shopping center |
Parking requirement | Medium | Low | Low | Medium (25+ spaces) |
Size requirement | 1,700–2,700 | 3,000 | 1,200–1,500 | 7,000–10,000 |
Tenant | Salons | Payless Shoes | Local Furniture Boutique | Five Guys |
Tenant type | Inline | Inline | Inline | Restaurant |
Industry | Hair salon and day spa | Footwear | Home furnishings | Food |
Creditworthiness | 3-month security deposit | BB+ | 3-month security deposit | Franchisee |
Projected sales | N/A | N/A | N/A | N/A |
Tenant improvements requirement (per SF) | $22.00 | $19.00 | $20.00 | $48.00 |
Lease type | NNN | NNN | NNN | NNN |
Term | 5 years | 15 years | 5 years | 5 years |
Base rent amount range (per SF) | $25.50 | $23.50 | $25.50 | $33.75 |
Rent escalations | 3% | 10% increase every 5 years | 3% | 3% |
Target demographics | Female, middle income | Female, ages 18–44, household income less than 75k | Male and female, ages 18-45, low to middle income | Young adults |
Trade area | 12,000 people | 97,000 people | 30,000 people | 105,000 |
Location preference | None | None | None | Corner or end cap ideal, but will consider inline |
Parking requirement | Low | Low | Low | Medium (35 spaces) |
Size requirement | 1,200–1,500 | 6,000–15,000 | 1,200–1,400 | 2,000–3,000 |
Tenant | GameStop | Ricardo's Bon Voyage | Plato's Closet | Verizon |
Tenant type | Inline | Inline | Inline | Inline |
Industry | Gaming | Travel agency | Clothing retail | Wireless service |
Creditworthiness | S&P: BB+ | 3-month security deposit | 3-month security deposit | S&P: A- |
Projected sales | N/A | N/A | N/A | N/A |
Tenant improvements requirement (per SF) | $35.00 | $25.00 | $24.00 | $37.50 |
Lease type | NNN | NNN | NNN | NNN |
Term | 5 years | 5 years | 10 years | 10 years |
Base rent amount range (per SF) | $30.00 | $25.50 | $25.50 | $40.00 |
Rent escalations | 3% | 3% per year | 3% per year | 0% |
Target demographics | Male, ages 15–30 | Male and female, ages 35–55 | Male and female, ages 12–24 | Male and female, ages 25 and older |
Trade area | 71,000 | 100,000 people | 80,000 people | 150,000 |
Location preference | None | None | None | Outlier/inline/endcap |
Parking requirement | Medium | Low | Medium | Low |
Size requirement | 1,200–1,400 | 1,200–1,400 | 2,800–3,600 | 2,600–4,600 |
Exhibit 11: Demographic Information
Distance from Tulaberry Plaza | |||
1-Mile Radius | 3-Mile Radius | 5-Mile Radius | |
Population | |||
1990 census | 96 | 703 | 3,775 |
2000 census | 144 | 766 | 5,731 |
2008 estimated | 588 | 3,681 | 13,585 |
2013 projected | 846 | 5,305 | 18,059 |
Growth 2000–2008 | 308.46% | 380.62% | 137.05% |
Growth 2008–2013 | 43.81% | 44.10% | 32.93% |
Age | |||
2008 estimated median age | 36.41 | 41.59 | 39.42 |
2008 estimated average age | 36.2 | 38.4 | 38.0 |
Number of Households | |||
1990 census | 34 | 256 | 1,375 |
2000 census | 55 | 308 | 2,185 |
2008 estimated | 230 | 1,506 | 5,252 |
2013 projected | 336 | 2,187 | 7,022 |
Growth 2000–2008 | 318.71% | 389.04% | 140.38% |
Growth 2008–2013 | 45.76% | 45.21% | 33.69% |
Household Size | |||
2008 estimated average household size | 2.9 | 2.69 | 2.67 |
Income | |||
1990 census median per household | $43,696 | $47,503 | $35,140 |
2000 census median per household | $67,235 | $67,398 | $47,600 |
2008 estimated median per household | $76,479 | $79,310 | $62,355 |
2008 estimated average per household | $126,136 | $115,161 | $84,115 |
2013 projected median per household | $72,396 | $85,109 | $68,939 |
2008 estimated per capita | $43,475 | $42,728 | $31,368 |
Housing Units | |||
2008 estimated housing units | 296 | 1,684 | 5,999 |
2008 estimated occupied units | 230 | 1,506 | 5,252 |
2008 estimated vacant units | 65 | 178 | 747 |
2008 estimated owner-occupied units | 212 | 1,318 | 4,470 |
2008 estimated renter-occupied units | 18 | 189 | 782 |
2008 estimated median housing value | $253,364 | $332,615 | $246,637 |
2008 estimated average housing value | $447,935 | $445,088 | $313,645 |
2008 Estimated Households | 230 | 1,506 | 5,252 |
Income less than $15,000 | 18 (7.8%) | 56 (3.7%) | 299 (5.7%) |
Income $15,000 to $24,999 | 11 (4.8%) | 77 (5.1%) | 378 (7.2%) |
Income $25,000 to $34,999 | 15(6.5%) | 97 (6.4%) | 504 (9.6%) |
Income $35,000 to $49,999 | 46 (20.0%) | 187 (12.4%) | 815 (15.5%) |
Income $50,000 to $74,999 | 22 (9.6%) | 285 (18.9%) | 1,205 (22.9%) |
Income $75,000 to $99,999 | 54 (23.5%) | 282 (18.7%) | 863 (16.4%) |
Income $100,000 to $149,999 | 20 (8.7%) | 272 (18.1%) | 746 (14.2%) |
Income $150,000 to $249,999 | 12 (5.2%) | 102 (6.8%) | 203 (3.9%) |
Income $250,000 to $499,999 | 12 (5.2%) | 84 (5.6%) | 148 (2.8%) |
Income $500,000 and over | 21 (9.1%) | 64(4.2%) | 89 (1.7%) |
1990 census average household income | $46,464 | $55,446 | $43,695 |
2000 census average household income | $142,984 | $113,924 | $76,062 |
2008 estimated average household income | $126,136 | $115,161 | $84,115 |
2013 projected average household income | $127,035 | $123,655 | $92,066 |
2008 Estimated Households by Household Size | 230 | 1,506 | 5,252 |
1-person household | 39 (17.0%) | 244 (16.2%) | 986 (18.8%) |
2-person household | 75 (32.6%) | 589 (39.1%) | 1,933 (36.8%) |
3-person household | 38 (16.5%) | 262 (17.4%) | 961 (18.3%) |
4-person household | 46 (20.0%) | 267 (17.7%) | 832 (15.8%) |
5-person household | 23 (10.0%) | 108 (7.2%) | 364 (6.9%) |
6-person household | 6 (2.6%) | 24 (1.6%) | 110 (2.1%) |
7-or-more-person household | 4(1.7%) | 13 (.9%) | 66 (1.3%) |
2008 estimated average household size | 2.9 | 2.69 | 2.67 |
2008 Estimated Households by Number of Vehicles | 230 | 1,506 | 5,252 |
Households with 0 vehicles | 3 (1.3%) | 27 (1.8%) | 163 (3.1%) |
Households with 1 vehicle | 82 (35.7%) | 401 (26.6%) | 1,705 (32.5%) |
Households with 2 vehicles | 65 (28.3%) | 667 (44.3%) | 2,251 (42.9%) |
Households with 3 vehicles | 47 (20.4%) | 266 (17.7%) | 791 (15.1%) |
Households with 4 vehicles | 31 (13.5%) | 117 (7.8%) | 269 (5.1%) |
Households with 5 or more vehicles | 3 (1.3%) | 28 (1.9%) | 75 (1.4%) |
2008 estimated average number of vehicles | 2.1 | 2.1 | 1.93 |
2008 Estimated Population by Race and Origin | 588 | 3,681 | 13,585 |
White population | 515 | 3,414 | 10,979 |
Black population | 36 | 76 | 852 |
Asian population | 2 | 26 | 220 |
Pacific Islander population | 0 | 3 | 7 |
American Indian and Alaska native | 1 | 23 | 71 |
Other race population | 25 | 68 | 1,023 |
Two or more races population | 9 | 71 | 434 |
Hispanic population | 245 | 528 | 3,758 |
White non-Hispanic population | 316 | 3,064 | 8,802 |
2008 Estimated Population by Age | 588 | 3,681 | 13,585 |
Ages 0 to 4 years | 51 | 242 | 891 |
Ages 5 to 9 years | 47 | 230 | 846 |
Ages 10 to 14 years | 39 | 239 | 881 |
Ages 15 to 17 years | 28 | 164 | 589 |
Ages 18 to 20 years | 18 | 145 | 524 |
Ages 21 to 24 years | 33 | 133 | 570 |
Ages 25 to 34 years | 70 | 337 | 1,600 |
Ages 35 to 44 years | 64 | 579 | 2,163 |
Ages 45 to 49 years | 49 | 409 | 1,263 |
Ages 50 to 54 years | 48 | 325 | 1,063 |
Ages 55 to 59 years | 46 | 295 | 954 |
Ages 60 to 64 years | 39 | 213 | 732 |
Ages 65 to 74 years | 39 | 244 | 923 |
Ages 75 to 84 years | 13 | 95 | 453 |
Ages 85 years and older | 4 | 29 | 132 |
2008 estimated median age | 36.41 | 41.59 | 39.42 |
2008 estimated average age | 36.2 | 38.4 | 38 |
2008 Estimated Population Over 25 by Educational Attainment | 373 | 2,528 | 9,284 |
Less than 9th grade | 20 | 27 | 300 |
High school, no diploma | 33 | 208 | 1,059 |
High school diploma | 111 | 778 | 3,023 |
Some college | 74 | 492 | 2,028 |
Associate degree | 17 | 202 | 725 |
Bachelor's degree | 65 | 596 | 1,590 |
Masters' degree | 22 | 100 | 290 |
Professional degree | 31 | 94 | 189 |
Doctoral degree | 0 | 32 | 78 |
Exhibit 12: Partnership Financial Projections
2006 | 2007 | 2008 | 2009 | 201 0 | 2011 | 2012 | |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | ||
Gross potential rent | 1,450,000.00 | 1,493,500.00 | 1,538,305.00 | 1,584,454.15 | 1,631,987.77 | 1,680,947.41 | |
Vacancy | 72,500.00 | 74,675.00 | 76,915.25 | 79,222.71 | 81,599.39 | 84,047.37 | |
Effective gross income | 1,377,500.00 | 1,418,825.00 | 1,461,389.75 | 1,505,231.44 | 1,550,388.39 | 1,596,900.04 | |
Other income | — | — | — | — | — | — | |
Expense reimbursements | 311,218.70 | 320,555.26 | 330,171.92 | 340,077.08 | 350,279.39 | 371,611.40 | |
Total operating revenue | 1,688,718.70 | 1,739,380.26 | 1,791,561.67 | 1,845,308.52 | 1,900,667.77 | 1,968,511.44 | |
Operating expenses | 327,598.63 | 337,426.59 | 347,549.39 | 357,975.87 | 368,715.15 | 391,169.90 | |
Net operating income | 1,361,120.07 | 1,401,953.67 | 1,444,012.28 | 1,487,332.65 | 1,531,952.63 | 1,577,341.54 | |
Interest on mortgage | (625,966.75) | (616,733.41) | (606,783.26) | (596,060.66) | (584,505.64) | ||
Memo: Principal repayment | (118,936.36) | (128,169.70) | (138,119.84) | (148,842.45) | (7,865,931.66) | ||
Capital expenditures reserve | 14,775.00 | 15,070.50 | 15,371.91 | 15,679.35 | 15,992.94 | ||
Leasing costs | |||||||
Debt service | (744,903.11) | (744,903.11) | (744,903.11) | (744,903.11) | (8,450,437.29) | ||
Operating cash flows | 1,346,345.07 | 1,386,883.17 | 1,428,640.37 | 1,471,653.30 | 1,515,959.69 | ||
Reversion cash flow from sale | 13,144,512.85 | ||||||
Property before tax cash flow | 1,346,345.07 | 1,386,883.17 | 1,428,640.37 | 1,471,653.30 | 14,660,472.55 | ||
Acquisition cost | (12,000,000.00) | ||||||
Unlevered cash flow | (12,000,000.00) | 1,346,345.07 | 1,386,883.17 | 1,428,640.37 | 1,471,653.30 | 14,660,472.55 | |
Unlevered IRR | 13.29% | ||||||
Acquisition cost | (12,000,000.00) | ||||||
Debt proceeds | 8,400,000.00 | ||||||
Levered cash flow | (3,600,000.00) | 601,441.96 | 641,980.06 | 683,737.26 | 726,750.19 | 6,210,035.25 | |
Levered IRR | 24.77% | ||||||
Partnership splits | |||||||
Beginning balance | 3,600,000.00 | 3,600,000.00 | 3,286,558.04 | 2,907,502.62 | 2,456,365.56 | 1,926,124.62 | |
Preferred return | — | 288,000.00 | 262,924.64 | 232,600.21 | 196,509.25 | 154,089.97 | |
Total amount due | 3,600,000.00 | 3,888,000.00 | 3,549,482.68 | 3,140,102.83 | 2,652,874.81 | 2,080,214.59 | |
Payment made | — | 601,441.96 | 641,980.06 | 683,737.26 | 726,750.19 | 2,080,214.59 | |
Ending balance | 3,600,000.00 | 3,286,558.04 | 2,907,502.62 | 2,456,365.56 | 1,926,124.62 | — | |
Preferred return of capital | |||||||
General partner 8% | (360,000.00) | 60,144.20 | 64,198.01 | 68,373.73 | 72,675.02 | 208,021.46 | |
Limited partners 8% | (3,240,000.00) | 541,297.77 | 577,782.06 | 615,363.54 | 654,075.17 | 1,872,193.13 | |
Project | (3,600,000.00) | 601,441.96 | 641,980.06 | 683,737.26 | 726,750.19 | 2,080,214.59 | |
Excess cash flow | |||||||
General partner 30% | — | — | — | — | — | 1,238,946.20 | |
Limited partners 70% | — | — | — | — | — | 2,890,874.47 | |
Project | — | — | — | — | — | 4,129,820.67 | |
Net cash flow | |||||||
General partner | (360,000.00) | 60,144.20 | 64,198.01 | 68,373.73 | 72,675.02 | 1,446,967.66 | |
Limited partners | (3,240,000.00) | 541,297.77 | 577,782.06 | 615,363.54 | 654,075.17 | 4,763,067.59 | |
Project | (3,600,000.00) | 601,441.96 | 641,980.06 | 683,737.26 | 726,750.19 | 6,210,035.25 | |
General partner IRR | 42.63% | ||||||
Limited partners IRR | 21.88% | ||||||
Cash-on-cash project | 16.71% | 17.83% | 18.99% | 20.19% | 172.50% | ||
Cash-on-cash general partner | 16.71% | 17.83% | 18.99% | 20.19% | 401.94% | ||
Cash-on-cash limited partners | 16.71% | 17.83% | 18.99% | 20.19% | 147.01% |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved