Update 8/2/2007

Progress To Date: August 2, 2007

Saskia has completed plans for the project and has started on the construction drawings (see attached). The construction drawings will allow the contractor to obtain reliable construction estimates for the project. The rental tenancy situation is stabilized, but issues of deferred maintenance seem to arise every month. In the last couple of months we have spent nearly $2000 in termite treatment, plumbing, and bathroom repair to prepare for incoming tenants. Our cashflow continues to be negative, but next month should be our breakthrough.

With the new tenancies on lease through August 2008, we anticipate construction to begin by Spring, 2009. The market in our part of Baltimore has been slow but compared to when we started, there is beginning to be significant condominium inventory on Bolton Hill. Since January, 2007, there are 9 actively listed condominium units on the Hill and 13 sold or under contract. The bulk of the sales have been in Bolton Park, the converted monastery renovated last year.

With the completed plans, we will present to the Bolton Hill preservation groups. Based on our earlier contact with them, we expect that we will receive their endorsement and “permission to proceed”. At that time, we will apply for certification of our project for tax abatement and façade easement.

That’s it for now. More later.

Lou S.

Update 4/6/2007

Saskia, our architect developed schematic drawings describing the proposed development of 5 units, 2 bedroom/1 bath flat in the basement, 2 bedroom/2 bath flats on the 1st and 2nd floors, 1 bedroom/1 bath unit on the 3rd floor rear, and a 2 bedroom/1.5 bath duplex on the 3rd and 4th floor front with roof deck.

Update 3/12

Ovation Development

1407 Park Avenue

Progress To Date: March 12, 2007

Our property manager started March 1st with a full plate. The 4th floor tenant is now 2 months behind on her rent (hers is the small 1 BR that rents for $550). Of the two 2nd floor tenants, one is great and pays on time and the other (the antique collector) pays late. He is actively seeking a senior housing unit, but is not eligible until June 15th. The 3rd floor unit has cleaned up nicely and is being shown to a number of very interested groups. Unfortunately, all of the current prospects are interested in August 2007 to August 2008. We are also showing the 1st floor unit. The tenant (in the duplex unit) has given notice that he will leave April 15, 2007.

Saskia, our architect, and I met with the Planner for the Historical and Architectural Preservation Division in what turned out to be a pre-pre-planning meeting. We laid out our schematic plans for the renovation and asked and answered questions about what would and would not be permitted. In general, we were assured that our building is considered an important asset of the Bolton Hill neighborhood and that our plans for the building would have their full support provided we did a quality renovation. We were told that we would start by scheduling a hearing with the Bolton Hill preservation council. The local council would review our plans ask questions and would pass their recommendations on to the Baltimore Department of Planning.

In a formal pre-planning session, we would present our plans based on the measured drawings to Code and Permit officials. From there we will be directed to the agencies that will oversee the development process. Saskia and I also walked through the building with our prospective contractor and discussed our schedule for the renovation. From their recommendations, the most favorable scenario is to start the work when the building is clear of tenants. The most likely schedule for starting development under these circumstances would be fall 2008.

That’s it for now. More later.

Lou S.

Ovation Development


Progress To Date: January 16, 2007


We own it! On Friday, January 12th Christine and I settled on the loan to purchase the property at 1407 Park Avenue. We learned, at settlement, that the tenant in Unit 3, the 3rd floor 2 bedroom apartment, moved out that day without paying the last month’s rent (we have her security deposit). We were handed an armload of keys, with tags and list of the remaining tenants and their scheduled payment dates. On MLK day, I wrote a letter of introduction to the tenants informing them of where to send the rent and Chris and I went to visit the property. We discovered that the front door lock was broken and that none of the keys opened the vacant unit. While we thought over what to do, we knocked on doors and found the 4th floor tenant and the 2nd floor tenants at home. In conversation we got a short list of repair requests from the tenants we spoke to and promised to get back to them. We found a locksmith and had the lock drilled on Unit 3 and went in (he was unable to repair the front door lock). The unit was in surprisingly good condition and is ready to rent. We posted a “For Rent” sign on the building, left the front door unrepaired and returned to D.C.

I plan to replace the front door lock and to take care of the short list of deferred maintenance this week. In other activities this week, I have set up the business account for the LLC and met with our architect, Saskia Van Groningen to start the design work required for the next stage. I will send you a copy of the settlement statement and the plan for historic certification, renovation, and conversion next week.

Please call me if you have questsions.

Yours in the spirit,


Lou Steadwell

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.