- 28 -
Contribution)." In this opinion, we refer to this payment
as the rental deficit contribution. Finally, the rental
purchase agreement provides, as a condition to the
purchaser's obligation to purchase the properties, that the
"purchaser shall have obtained an appraisal of each of the
Properties by a FNMA/FHLMC qualified appraiser * * * which
shall reflect the value of each Property equal to or
greater than the purchase price applicable to that
property".
EPIC made the following internal cash-flow analysis
of the transaction with Babcock:
Paseos Castellanos Year 1 Year 2 Year 3 Year 4 Total
Builder lease payments-0- -0- -0- -0- -0-
Tax, ins., HOA reimburse-0- -0- -0- -0- -0-
Tenant rental $243,873$246,792 $266,536$287,858 $1,045,059
Rental deficit contribution 659,929-0- -0- -0- 659,929
Interest income 62,531 37,533 12,514 -0- 112,578
Total revenue 966,333 284,325 279,050 287,858 1,817,566
First trust interest-424,784-424,784 -424,784-424,784 -1,699,136
Tax, ins., HOA expense-71,196 -71,196 -71,196 -71,196 -284,784
Repairs & maintenance-15,173 -15,173 -15,173 -15,173 -60,692
Property management fee-16,380 -16,380 -16,380 -16,380 -65,520
Audit fee -3,793 -3,793 -3,793 -3,793 -15,172
Interest on EPIC advances -39,259-39,259 -39,259 -39,259 -157,036
Total expenses -570,585-570,585 -570,585-570,585 -2,282,340
Anticipated cash deficit395,748 -286,260 -291,535-282,727 -464,774
As a percent of purchase13.04 -9.43 -9.61 -9.32 -15.32
price
As shown above, EPIC projected a cash deficit from the
transaction at the end of the fourth year of $464,774,
or 15.32 percent of the purchase price (viz $3,034,550).
EPIC further projected that the following appreciation
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