1407 Park Avenue Project Description

Project Pro Forma Rev. (9/8/06)

I. Project Description:

1407 Park Avenue Condominiums, 1406 Park Avenue is a Bolton Hill
four-storey 5-unit, 19th century brick building, at the end of a group
of townhomes and multifamily buildings. The subject, because
of the hipped roof, is taller than the surrounding buildings and
features marble steps, carved wood doors and much of the original
mouldings and architectural detail. There is a large 2 bedroom/2 bath
duplex unit on the terrace level, 2 one bedroom/1 bath units on the second,
a large 2 bedroom/1 bath flat on the third, and a 1 bedroom/1 bath studio
unit on the 4th floor. All units have separate forced air heat and utility
metering. There is a deep rear yard and substantial off-street parking.

The proposed project would consist of three phases: Phase I. Buy and Hold, Phase II. Renovate and Convert, and Phase III. Sellout.

Phase I: 2 years
Acquisition:
· Purchase $665,000
· Closing 15,000
· Equity ­__(400,000)
Mortgage $280,000

Income & Expense:
Year 1
· Income $51,300
· Expense (9,696)
· Debt Service (23,708)
· Reserves/Mgt. (5,000)

Net Operating $ 12,896 3% return

Year 2
· Income $53,865 (5% increase)
· Expense (10,035) (3.5% increase)
· Debt Service (23,708)
· Reserves/Mgt (5,175) (3.5% increase)

Net Operating $ 14,947 4% return

At the end of Phase I, when the conversion is complete and historic tax exemption and plans are approved, the project is refinanced to fund construction for Phase II.


Phase II: 1 year

Acquisition $665,000
Construction 450,000
Soft Costs 90,000
Legal 20,000
Carrying $620,000 @ 8% 49,600
Sales ­­__ 90,000
Total Development Cost $1,364,600

Phase III: 1 year

Option 1 Immediate Sellout
· 1-2 bedroom/2.5 bath terrace level flat (1500 sf) $325,000
· 2-2 bedroom/2.5 bath flats w/deck (1500 sf) 730,000
· 1-2 bedroom/1.5 bath duplex w/roof deck (1050 sf) 350,000
· 1-1 bedroom/1 bath duplex w/deck (950 sf) 325,000
Total Sellout $1,705,000

Profit $340,400

10 Equity Shares
($40,000 initial investment)

Return of $40,000 initial equity plus
$34,040 per share (85%) overall cash-on-cash return


Option 2 Lease-Option (24 months)
§ 1-2 bedroom/2.5 bath terrace level flat $2000
§ 2-2 bedroom/2.5 bath flats w/deck 5000
§ 1-2 bedroom/1.5 bath duplex w/roof deck 2500
§ 1-1 bedroom/1 bath w/deck 1500
Total Rental Income $132,000
Estimated Expenses ($71,600)

Net Operating Income $60,000 or 15% per year
Sellout Prices
§ 1-2 bedroom/2.5 bath terrace level flat $300,000
§ 2-2 bedroom/2.5 bath flats w/deck 670,000
§ 1-2 bedroom/1.5 bath duplex w/roof deck 320,000
§ 1-1 bedroom/1 bath w/deck 307,000
Total Sellout $1,597,000

Profit $232,400

10 Equity Shares
($40,000 initial investment)

Return of $40,000 initial equity plus
$23,240 per share (58%) overall cash-on-cash return

Option 3 Straight Lease
§ 1-2 bedroom/2.5 bath terrace level flat $1500
§ 2-2 bedroom/2.5 bath flats w/deck 4000
§ 1-2 bedroom/1.5 bath duplex w/roof deck 2000
§ 1-1 bedroom/1 bath w/deck 1000
Total Rental Income $102,000
Estimated Expenses ($71,600)

Net Operating Income $30,400 or 7.6% per year

First floor unit has a patio and parking space. Upper units have decks and one off-street parking space each.

Project Summary

Phase I. Buy & Hold:

The three-stage project starts at the acquisition of the property. Investors will put up an initial deposit of $10,000 each to be placed as earnest money on the offer to purchase. The offer will provide for a contingency period of 60 days to secure the requisite financing and to form the LLC. Lou Steadwell and Christine Swearingen, investors and project managers, will sign for the loan and the LLC will take over as fee-simple owners and managers of the property at settlement. We will seek historic designation for the property which, at a minimum, under Maryland state law, will allow us to freeze our property tax rate for 10 years. Other historic benefits may include sale of a façade easement or national landmark designation, with a 20% tax credit for renovation (five years holding period).

Phase II. Renovate and Convert:

We will begin immediately after settlement to draw plans and documents for conversion of the building to condominium. The holding period will likely range from 1 year to 18 months. As leases expire or units become vacant, we will start the renovation. Exterior renovation, including the construction of the decks and breakfast rooms in the abandoned rear stairwell could be done, if necessary, with tenants in place. From “As Completed” plans for the conversion, the LLC will borrow approximately $620,000 to pay off the first mortgage and to finance the renovation.



Phase III. Sellout

The ideal scenario is pre-sale or immediate sellout at completion. Units are priced in the range of $243 - $342 per square foot and are priced very competitively with units being sold in the current market. If an immediate sale is not possible, the units can be sold on a lease with option to buy. Under this scenario, the purchaser signs a lease for two years at the prices shown in Option 2. Half of the amount paid in rent is credited toward the purchase at the end of the lease. If the option is not exercised, the unit is sold or leased to another purchaser. Option 3 represents the last resort, long term rental lease.