Argus Challenge 2019 - Team Johns Hopkins

ARGUS UNIVERSITY CHALLENGE 2019
PROJECT: ARGUS
Northeasternville, New York
TABLE OF CONTENTS
1. Executive Summary 4
2. National Economic & Market Overview
U.S. Economic Overview 6
U.S. Commercial Real Estate Overview 10
3. Local Market Overview
Northeasternville 18
4. Property Overview
The Facility 26
Tenant Mix 28
5. Financial Model & Underwriting
Theory of Development: Strategy 32
Assumptions 38
Scenario Analysis 46
Recommendation 50
6. Appendix
Argus Report Scenario A 52
Argus Report Scenario B 59
Site Plan Scenario A 67
Site Plan Scenario B 69
Works Cited 72
S.H.I.E.L.D. Dossiers 73
Argus University Challenge 2019 page 2

Executive
Summary
EXECUTIVE SUMMARY
As life in New York City has been frenetic and increasingly out-of-reach, financially
speaking, calamitous events have taken a toll in already weary residents. While su-
perheroes tried to keep residents safe, their properties might not be so lucky. Recent
destructions from a great battle between aliens from another dimension and our he-
roes have inadvertently raise property insurance premium in the city. In turn, resi-
dents, mostly younger families, have opted to move back to their suburban neigh-
borhood. This pattern of migration is also observable within our agency. Many
younger S.H.I.E.L.D. agents follow the wider behavioral pattern of moving back out-
side the city center. The agency is considering to look into one of the suburban
neighborhoods, the town of Northeasternville, New York, to acquire a mixed-use
property and capitalize on it for a future undisclosed project.
Our team examines available data, both macro and micro, to determine the
best course of action for our agency with regard to the subject property. Three op-
tions are considered:
 Option A
Invest in the subject property and hold until market improves before selling at a
profit.
 Option B
Invest in the subject property, make improvements to upgrade the building, and
sell at a profit before market downturn.
 Option C
Decline this investment opportunity.
We came to the conclusion that while Scenario A offers a good return over the hold-
ing period, Scenario B yields a stronger return provided by a clear strategy executed
with a burst of energy. With a clear exit plan Scenario B also presents the opportuni-
ty to invest during the downtown with the cash proceeds received from the sale of
Rambeau Residences entitled land and The Facility improvement.
Gross Sale Proceeds from Holding Unleveraged Leveraged

Price Sale Period IRR IRR
SCENARIO A $4,297,091 $3,167,708 10 Years 19.00% 37.56%
SCENARIO B $3,688,599 $1,485,914 2 Years 28.98% 96.06%
SCENARIO C $0 $0 O Year NA NA
Our Final Recommendation: Choose Scenario B.

National
Economic &
Market
Overview
U.S. ECONOMIC OVERVIEW
We concur with our agency economist that the longest economic expansion in U.S.
history would continue. Beginning in July of 2009 following the 2008 financial crisis,
the U.S. economy’s growth phase is nearly 117 months old now – double the length
of the average post-World War II expansion period of 58.4 months.1 Many investors
and market observers have come to the reasonable conclusion that we are in a pre-
carious and increasingly risky point in the economic cycle.
While anxiety among market participants is growing, most major indicators
remain stable or positive. Gross Domestic Product (GDP) annual growth was 2.9% in
2018 and is projected to continue its upward trend in 2019, with the British-based
Economist Intelligence Unit (EIU) and the Federal Open Market Committee (FOMC)
forecasting in January that U.S. GDP growth would decelerate to 2.3% in 2019 and
flatten to 1.8% by 2021.2
Source: Authors’ charts, data from The Economist Intelligence Unit Limited,
2019.
Job creation and absorption nationally continue to outperform historical av-

erages resulting in the drop of the unemployment rate to 3.7% – near a 50-year low
for the measure – in the third quarter of 2018, ticking up only slightly to 4.0% in Jan-
uary. Looking ahead, it is widely expected that the U.S. economy should prolong into
2019 the longest expansion period in its history with moderate growth in GDP and
wages while maintaining low historical levels of unemployment.
1 National Bureau of Economic Research, Inc. (2010, September 9). US Business Cycle Expansions and Contrac-
tions. Retrieved from https://www.nber.org/cycles
2 The Economist Intelligence Unit Limited. (2019). Country Report for the United States of America. Retrieved
from http://country.eiu.com/united-states

Source: Authors’ charts, data from The Economist Intelligence Unit Limited, 2019.
As is the case for mere mortals who are not in possession of the Time Stone, inves-
tors are less certain what the medium-to-long-term future will bring. Opinions
vary, but the general consensus of capital market participants holds that a reces-
sion of some severity is inevitable. Growth in GDP and declining unemployment
would definitionally go in opposite directions given a recession. One plausible
cause of a recession could be tied, directly or indirectly, to possible future interest
rate increases.
BELLWETHERS OF RECESSION
Since then-Chairman of the Federal Reserve Ben Bernanke informed the public of
the Fed’s intent to begin unwinding the Troubled Asset Relief Program (TARP) –
the central bank’s initiative for purchasing “troubled” asset – and incrementally
raise interest rates back in May 2013, the interest rate environment has been
among the most commonly cited potential catalysts of a future downturn.3 It is for
good reason that investors are so attentive when the Fed meets every six-eight
weeks; as an increase in the cost of borrowing impacts almost every aspect of the
economy. Higher interest rates make it more expensive for businesses to finance
new resources and expand their reach and footprint; for consumers to buy homes
and cars and start new businesses; for private equity firms to finance leveraged
buyouts, and so on.
3 Kenny, T. (2013, June 13). Fed Tapering's Impact on Investors. Retrieved from https://www.thebalance.com/
fed-tapering-impact-on-markets-416859

These new realities subsequently impact performance and values for any type of real
estate. As one real estate investor told joint-publishers PWC and ULI in the organiza-
tions’ 2019 Emerging Trends in Real Estate report, “We have been used to easy mon-
ey and very low rates for so long. Now is the time to harvest, to hedge, to be cau-
tious.”4 Investor caution can turn into a panic under the right circumstances, turning
a recession into a crisis.
In March, the Federal Reserve gave businesses, investors, and consumers a
pleasant surprise by revealing its expectation that no additional increases in the fed-
eral funds rate will be coming this year.5 While lower interest rates boost to econom-
ic activity, the Fed’s decision to maintain current interest rates is not necessarily a
ringing endorsement of current conditions and our position in the economic cycle.
Holding rates low indicates that the central bank has a more bearish outlook on the
present and future economic conditions. (Ferreira, 2019)
Even if interest rates remain stable, other looming threats to future economic
growth could produce the same result. These factors include U.S. foreign trade poli-
cy – particularly pertaining to China – and the high federal deficit.6,7
ECONOMIC CYCLE COMMENTARY & OUTLOOK

As noted above, the duration and severity of the expected decline are unknown. A
recession is typically defined as a minimum of 2-3 consecutive quarters of negative
growth; therefore, an arrival of recession does not necessitate the massive losses of
capital, employment, and businesses that accompanied the recession that preceded
the current growth period.
Ultimately, our view of the current national economic situation holds that,
sometime over the next 2-3 years, a mild downturn is likely to occur. This roughly
matches the most commonly held beliefs among interviewees in the PWC & ULI re-
4PricewaterhouseCoopers (PWC), & Urban Land Institute (ULI). (2019). Emerging Trends in Real Estate - US and
Canada 2019. Retrieved from http://www.pwc.com/us/en/industries/asset-wealth-management/real-estate/
emerging-trends-in-real-estate.html. p. 4
5 Ferreira, J. (2019, March 20). Fed Sees Rates Unchanged in 2019. Retrieved from https://
tradingeconomics.com/united-states/interest-rate
6 The Economist Intelligence Unit Limited. (2019). Country Report for the United States of America. Retrieved
from http://country.eiu.com/united-states
7 Deloitte Center for Financial Services. (2019, March 12). 2019 Commercial Real Estate Industry Outlook. Re-
trieved from https://www2.deloitte.com/us/en/pages/real-estate/articles/commercial-real-estate-industry-
outlook.html

port who expressed their belief that “coming off peak does not automatically mean
a sharp correction… ‘Plateau is a word often used regarding expectations.” (PWC
& ULI, 2019, p. 5) Investor sentiment aside, a potentially forthcoming recession
nonetheless represents a considerable risk to real estate investors across the U.S.
and it must continue to be monitored in the months and years ahead. Financial cri-
ses tend to arise precisely because market participants failed to see them coming.
Investors and analysts claiming to have learned a difficult lesson from the
housing bubble note the absence of mania behavior that has boosted asset values
to unreasonable levels in the past. Forecasts from sources ranging from the Feder-
al Reserve to internet news outlets suggest that, nationally, the drivers of rental
growth still indicate forward push despite likely deceleration.
Using the analogy of a Quinjet plane, moving upward at slower speed could
make it last longer as it burning less fuel, rather than boosting faster and exhaust-
ing more fuel which will make for a shorter trip. Nevertheless, the Quinjet still has
to watch for its surrounding, as unfavorable weather pattern could cause a shorter
trip despite fuel efficiency.

U.S. COMMERCIAL REAL
ESTATE OVERVIEW
OFFICE MARKET
In the aggregate, the U.S. office market is a stable, comparatively low-yielding asset
class. Though rents have increased up to 3% annually, vacancy and higher interest
rates have contributed to a modest decline in returns over the past five years.8 A
considerable supply of existing space nationally coupled with technological innova-
tions and sociological shifts have lead to declining office space requirements per
capita. Even as employment has swollen in recent years, office sector vacancy na-
tionally has remained at or near 13% since 2017.9
Source: Authors’ charts, data from NCREIF’s National Property Index
While the office sector has lost some of its allure, it remains a core asset class
and investors gaze shifting away could portend opportunity. As Integra Realty Re-
search’s (IRR) report, Viewpoint 2019, notes, [the office sector] “may still retain the
capacity to surprise.” (Integra Realty Research, 2019, p. 19)
Pleasant surprises may be most likely found in suburban areas, given their
relative lack of investment and efficiency. The further away from metropolitan
downtown areas, the more likely various types of obsolescence become. IRR sug-
gests that agility of developers and investors will become increasingly important in
8Integra Realty Research. (2019). Viewpoint 2019: Commercial Real Estate Trends Report. Retrieved from
https://www.irr.com/reports/Viewpoint%202019.pdf
9 PWC & ULI, 2019, p. 67

the years ahead. As pointed out in Viewpoint 2019, “not so long ago, the multi-story
urban warehouse industry was labeled [as past its prime just like office now] —and
then became the solution to the “last mile” logistics problem.” (Integra Realty Re-
search, 2019, p. 20)
NCREIF provides two sources of data valuable for investors aspiring to take
the temperature of a given property type: (1) the NCREIF Property Index (NPI), an
index dedicated to tracking the performance of institutionally-held core properties,
and (2) the NCREIF Market Performance Report, a more comprehensively reported
database for major U.S. metro areas and property types. NCREIF Property Index
(NPI)Analysis of performance among office properties comprising national index of
– comprising 757 reveals that suburban office in the NPI has outperformed their
counterparts downtown.
Source: Authors’ charts, data from NCREIF’s National Property Index.
The value investor, the contrarian, and the yield-seeker alike would do well
to look toward the suburbs to seek buy-low opportunities. With limited new supply,
businesses possible suburban expansion to attract lower-cost labor and reach new
suburban/secondary markets, and the Marvelous Return of young adults increas-
ingly heading back toward their suburban homes, suburban office becomes increas-
ingly attractive.
RETAIL
Amazon, the iPhone, and the ever increasing price and time savings consumers re-
ceive by abstaining from traditional in-store shopping has left an indelible mark on
retail properties. The sector continues to face significant challenges from e-
commerce proliferation as consumer behavior has shifted toward online shopping
and catalyzed the retail Armageddon that has left many shopping malls empty na-

tionwide. In his market cycle forecast, Glenn Mueller forecasted that the retail mar-
ket is at its last expansionary stretch and edging toward hypersupply quadrant.
Mueller clarifies that hypersupply in this case refers primarily to declining demand,
not construction and delivery of new space flooding the market.
Belatedly, retail tenants and landlords have begun adapting. Survival orient-
ed innovations in retail include short-term and pop-up leases; repurposing once-
vacant space; non-traditional tenant mixes embracing discount, or “off-price,” retail-
ers.10,11,12
10Sisson, P. (2018, December 26). The 10 top emerging trends that will shape real estate in 2019. Retrieved from
https://www.curbed.com/2018/10/10/17959984/real-estate-trends-2019-housing-affordability-investment
11 Thomas, L. (2016, July 12). Enough with the doom and gloom: Retail and its real estate have bright spots. Re-
trieved from https://www.cnbc.com/2018/01/23/enough-with-the-doom-and-gloom-retail-real-estate-has-
bright-spots.html
12CBRE Group, Inc. (2018, January 25). CBRE Forecast: US Retail Real Estate to See More Evolution, Gains in
2018. Retrieved from https://www.cbre.us/about/media-center/2018-retail-outlook

Source: Authors’ charts, data from NCREIF’s National Property Index
DEMOGRAPHICS
The New York Tri-State area – excluding New York City – is home to an affluent,
aging population of nearly 9 million people, with the largest concentrations resid-
ing on Long Island in Nassau County and in Northern New Jersey, in Bergen, Hud-
son, and Essex Counties. According to data from Esri, the median age of the resi-
dent population in these counties will increase by roughly two years over the 14-
year period from 2010-2023, seemingly putting somewhat in doubt the promised
Marvelous Return Home of millenials. A closer look at the data reveals that while
the median age may tick up, population growth in the 20-39 year-old demograph-
ic remains strong.
The population’s median household income remains well above the nation-
al average and future growth forecasted. In Nassau county, the median income is
a robust $107,422 and projected to rise close to 10% annually over the next five
years. Their return will provide considerable savings on housing compared to

New York City, though still among the nation’s most expensive.
Chart compiled by authors using data from Esri.
Charts and tables compiled by authors using data from Esri (left) and the Economic and Housing
Research Freddie Mac House Price MSA Indices, December 2018 Release.

EMPLOYMENT & INDUSTRIES
For twelve of the thirteen counties, the healthcare industry is the largest source of
employment. Retail trade and educational services fill out the top three industry
sectors by employment in the non-NYC tri-state area. Despite its already consid-
erable size, health care – which includes pharmaceuticals – continues to grow.
Universities are also large employers in our study area. Many of the industry sec-
tors are in some way dependent on or reflective of the state of local employment
and the economy in the New York City market.
NEW YORK REAL ESTATE MARKETS: RETAIL & OFFICE

Demand for office space, driven among other things by employment, trends higher
with closer proximity to New York City, illustrated by higher rents nearer to the
City. On a county level this illustrated on Long Island where Nassau County is
posts rents better than $3/square foot higher than Suffolk County, and the west-
ern submarkets of each county surpass the eastern submarkets by over
20%. Employment and access the NYC are not the only factors on rents, as the
lack of new supply – averaging less than 1% growth in square feet of office space –
also helps push rents higher.

Source: CoStar
Retail has benefited from strong employment, a growing population, and limited
new supply. Rent growth is anticipated to grow above the ~$30/square foot aver-
age from 2018; it is projected to surpass the historical peak in 2019, per CoS-
tar. Like office, retail rents are boosted by low vacancy, driven by little construction
and high employment.
Source: Author’s charts using CoStar data.
Transactions remain robust for retail and cap rates have declined due, in part, to the
market’s perceived resilience to downturn produced by the strong base of employ-
ers; CoStar notes that in Henry Schein (medical supplier) and Cablevision Systems
(telecommunications company), Long Island is home to two Fortune 500 compa-
nies. (CoStar) Office lags behind retail, but cap rates are declining and transaction
volume is picking up as investors see potential in New York City’s shadow, perhaps
in part due to the Marvelous Return. As with the retail sector, compressed vacan-
cies, limited new space deliveries, and largely predictable employment, population,
and income growth has attracted investors who see somewhat limited downside.

Local Market
Overview
NORTHEASTERNVILLE
Northeasternville is located in Golden County, has approximately 1.5 million resi-
dents. The density of the city is approximately 6,500 per square mile. Local residents
can travel via rail approximately 30-to-45 on Strange Urban Railroad (SURR) into
New York City. It is becoming a more desirable place to live in recent years because
of continuous community improvement, inclusion and revitalization (The Marvelous
Return Home).
TRIANGULATION METHOD
New York City firms provide a wealth of data for the surrounding and suburban are-
as. Hence, we decided to focus the data collection for Northeasternville and Golden
County. To narrow the area of evaluation, we employed a triangulation method in
our analysis. Our team, the Dark Defenders, plotted different municipalities to un-
cover possible patterns across the tristate area in order to borrow their real estate
records and comparables.
Modeling Northeasternville, we looked at municipalities within 30-45
minutes of commuter rail time from midtown Manhattan. We chose three similar-
timed-distance suburban areas: Central/Northern New Jersey, Long Island, and
Westchester/Southeastern Connecticut.
We inventoried towns to these reachable by commuter rail, with limited con-
sideration for bus transit because our subject property lay directly across from a
Source: Authors’ charts, map from Google

train station. Our team shows the initial process for New Jersey in the transit map
below that roughly circumscribes the stations by rail commuting time. We then un-
dertook the same process for Metro-North in Westchester/Southeastern Connecti-
cut and the Long Island Railroad for Nassau County.
NEW JERSEY
In New Jersey, the initial culling included towns such as Kingsland Madison, South Orange and -
just barely - Metuchen.
With 17,001 residents, South Orange moderately fit the descriptors provid-
ed in the case and possesses a small, but growing, downtown. Housing prices in
this township may be considered moderate in the region considering the Niche
school rating of A- for the South Orange Maplewood district. However, a school
segregation lawsuit plague the ideals of diversity and integration lauded in the case
prompts.

South Orange and other similar
towns that approximate North-
easternville, such as Madison
and Metuchen, all published
master plans emphasizing in-
vestment and continuing revi-
talization of their respective
downtowns. They created busi-
ness development districts, and
where possible, upzoning.
Source: Wall Street Journal
WESTCHESTER | SOUTHEASTERN CONNECTICUT

A few municipalities in Westchester meet
most of the requirements of the case
prompt. For example, in December 2017,
the New York Times indicated that the
Village of Tuckahoe, a 26-minute train
ride from midtown poised itself to grow
from the current population of 6,600. The
Village of Tuckahoe sits inside of, and
shares some schools with, the Town of
Source: Wall Street Journal
Eastchester. The strong educational perfor-
mance stands as a feature for buyers. Recent denser development in the village ap-
pears to moderate housing
price increases.
Less affordable but
diversifying towns that con-
tinue to attract residents
include Rye, NY and the ad-
jacent Greenwich, CT. How-
ever, these locales hold
more than 40,000 residents,
placing them outside of the
Source: Zillow realm of consideration.

The Town and Village of Pelham, despite being a 35-minute commute from Grand
Central Terminal, possesses little remaining room to densify after upzoning of a
large plot of land immediate to the train station approximately 15 years ago. The
steeply increasing housing prices demonstrate the inability to maintain affordabil-
ity for new residents who desire to move to the highly-ranked Pelham school sys-
tem.
Additionally, the time to repair the infrastructure damage sustained by the
Metro-North at Grand Central Terminal during the heroes’ battle (against an evil
sentient artificial intelligence) reduce the likelihood that Westchester and South-
eastern Connecticut would present as strong alternatives to New Jersey Transit or
the Long Island Railroad (LIRR) or the Strange Urban Railroad (SURR).
42nd and Vanderbilt (← looking east) at the onset of the battle; 42nd and Vanderbilt (↑ looking
west), later that day.
(Credit thanks to MGM - the Taking of Pelham 123 and Marvel Studios)
LONG ISLAND
Nassau County in Long Island fared better during the exodus because, like New Jer-
sey Transit, LIRR and SURR trains leave from Pennsylvania Station, an area mostly
untouched during the epic fight. Long Island developed in a more rural manner
compared to close-in Westchester and New Jersey, with more space to grow up and
out in the downtowns. Nassau County noted these as contributing factors in their
Master Plan, published in conjunction with Sustainable Long Island and assistance
from Long Island Regional Planning Council. This document provides a vision and
guidelines for county/regional growth. The stated objectives promote smart growth
and recommend development centered around bus and rail transit and transfer sta-
tions.

A Modern Long Island (http://www.amodernli.com/project/thirdtrack) - rendering of LIRR Expan-
sion Project Floral Park to Hicksville
Nassau County holds hamlets, villages, towns, and incorporated as well as unincor-
porated areas and many fit the commuting timing parameters. Nassau county is de-
veloped with evident sprawl afforded, in some communities, by wealth. Places like
Hewlett Bay Park, which ranks 18 on the top 20 list of highest-income locations in
the United States, and Saddle Rock Estates, each maintain a population of under 500
people, none of whom fall under poverty level. Both the Village Woodburgh and the
Hamlet of North Lynbrook each hold fewer than 800 souls. However, many munici-
palities passed the first round of inquiry including New Hyde Park, Floral Park,
Westbury, Valley Stream, Mineola, North Bellmore, and New Cassel. We show the
rail crossings of two of those downtowns below.
Source: New York Times “Next Generation: Mineola Wants You” (12/23/2007); LIRR Expansion Project
“Westbury LIRR”

Based on the demographics, density, and distance, we selected 26 similar towns
from the above three suburban areas and built a chart, combined with school rating
which we shall explain shortly, to narrow the scope of our datasearch.
SCHOOL RATING AND HOME APPRECIATION

Half of the homebuyers with children un-
der 18 consider the quality of the school
district as a major influencing factor when
choosing a neighborhood (National Asso-
ciation of Realtors). Thus, housing price
levels should benefit from a high-
performing school district.
Our team plotted a measure of val-
ue for prospective residents in terms of
housing prices from Zillow and school Source: Authors’ chart
rankings from Greatschools.org. If a town's price level is not consistent with its
school rating (close to or on the line), it has a potential for the price increase if it
falls below the line; similarly, towns that plot above the line indicate a richly priced
house based on its school rating.
Source: Authors’ chart, data from Zillow and Greatschools.org

The attraction of Northeasternville described in the Marvelous Return Home indi-
cates this would be a motivating factor for new residents. Therefore, we can use this
measurement to find valuable towns and whittle down the range of potential op-
tions of probable municipalities to anchor our real property, economic, and market
leasing assumptions.
LOCATION ASSUMPTION
Our team wanted to contribute to Golden County's space-making effort that would
promote affordability, inclusion and speak to our own motto of "business with hu-
manity in mind," which emphasizes equitable and sustainable development. To
maintain affordability and good schools, a town would need, and be willing, to allow
the addition of more residential units to the market. To promote access, densifica-
tion would be occur primarily around transit stations.
Western Nassau County blue-ribboned as the best comparator for Golden
County after we considered quantitative and qualitative measures such as amenities,
political willingness to upzone with a stated desire to expand mixed-use near the
train station and, potentially, serve as a bus linkage pilot site for Nassau Inter-
County Express (NICE). Westbury fits Marvelous Return Home criteria and demon-
strates strong housing value when compared to school ranking. Additionally, the
municipality has published documents indicating a desire to promote diversity
(which grows dramatically if we were to include the adjacent New Cassel), and re-
make their downtown near the train. Westbury, therefore, serves as a stand-in and
source of representative data collection and comparative value purposes for North-
erneasternville.

Property
Overview
THE FACILITY
The subject property, codenamed “The Facility”, is located at the intersection of
Main Street and Railroad Avenue consisting of a 0.5-acre (21,780 square foot) im-
proved site. On the site are a mixed-use 3-stories building - where the first level is
used for retail and the next two levels are used for office space - and a parking lot.
We found discrepancies in the subject’s actual data and data found in Marvelous Re-
turn Home, and adjusted for them.
ADJUSTMENTS FOR DISCREPANCIES

We found four tenants who signed 10-year leases. Two of them have 1-year remain-
ing on their lease, which means they have been in the building for 9 years. We con-
clude the Facility was not built 5 years ago and assume that the building is 9 years
old. Furthermore, the low rate paid by Stark Bank & Trust, as the Facility’s first ten-
ant, should confirm our hypothesis.
Additionally, the first level footprint is 250 sqft less than the second and third
level floorplates. We believe Titan Fine Gems has not been assigned the correct
leased space which should have been 1,500 sqft instead of 1,250 sqft. As such, we
increased the leased square footage for this space to 1,500 sqft and its annual rent to
$52,500, based on the dollar per sqft rental rate provided.
BENEFITS FROM TRANSIT ORIENTED DEVELOPMENT

The Facility benefits from transit-oriented development (TOD) centering around a
proximate rail station. The Facility is located within a half-mile radius from the rail
station and commuters pass it by every working day. As such, it creates location ben-
efit of a captive market segment being the daily commuters.
The federal government’s Partnership for Sustainable Communities deline-
ates TOD into an initiative to coordinate housing, transportation, utilities, and infra-
structure investment in order to make neighborhoods prosperous, allow residents
to live closer to their jobs, save households the time and money, and make a more
sustainable environment by reducing pollution.13
Further, the TOD initiative synchronizes with tenants demand of office space
in the primary business area of Main Street, as upzoning made possible by TOD cre-
ates the market for multi-family residential in the area. The objective of increased
13 Nassau County Infill Redevelopment Feasibility Study

walkability in Northeasternville downtown area, as facilitated by TOD initiative
near our subject property has created a virtuous combination of sustained demand
for office space, a captive market of commuters, and the creation of residential ten-
ants consumer, which we believe bodes well for the agency’s plan.

TENANT MIX
MEASURING RETAIL POTENTIAL THROUGH LEAKAGE/
SURPLUS
In considering the site’s viability and potential in continuing as a retail space, we
looked for signals in supply and demand in the area’s retail landscape, utilizing data
from Esri. A comparative measure of sales potential - as represented by the consum-
er residents annual expenditures on goods from a given industry from that area -
and actual sales - as shown through actual gross sales from businesses within the
same industry and area - is made. In areas where sales potential is greater than actu-
al sales, a case can be made that the market has demand for retail goods greater than
the amounts available to them through local merchants.
Demand outpacing supply by a significant amount represents an opportunity
to prospective retail tenants and owners of retail-use real estate. Consumers will
consistently choose to shop in proximity to where they live, if differences in availa-
bility, variety, and quality of products and services offered are removed. Esri's U.S.
Retail MarketPlace contains data measuring this relationship at the census block lev-
el. Per Esri, “A positive Leakage/Surplus Factor represents a market with some retail
potential that is lost to other areas.”14 A positive Leakage/Surplus Factor indicates a
corresponding degree of demand is leaking out from the area – an indicator to retail-
ers that opportunity exists to capture more local demand.
The data surrounding our market area shows considerable potential for re-
tailers to improve their sales, as 23.2% of the population’s annual retail expendi-
tures occurs outside the market.
ACCOUNTING FOR CONSUMER TRENDS

In consideration of our tenant mix, we also consider current consumer market
trends in the US. Notably, we take the following trends in deciding our plan for ten-
ant mix:
 Younger Demography
The surging birth rate in the 1980s and 1990s, as caused by the earlier birth
surge of baby boomers in mid-1940s through 1960s, had created a second wave
14Retail MarketPlace Data Note Leakage/Surplus Factor (http://downloads.esri.com/esri_content_doc/dbl/us/

LeakageSurplusDataNote2014.pdf)

of distinct population subcategory. This descendant of the baby boomers,
dubbed “millennials”, are adept with media and technology as they had grown
together with the advent of the internet. Despite being distinctively skilled with
gadgets, the millennials as a consumer segment seek to satisfy demand some-
what similar to their older parents such as healthier lifestyle, financial guid-
ance, and experience-based spending.
 Increased Health Consciousness
Recent Nielsen health and wellness survey reveals that consumer lifestyle shift
toward healthy alternative products has been sustained. As it presents a funda-
mental change, what was previously seen as an alternative lifestyle has grown
to become mainstream in the retail sector. Across the board, generational
health needs create demand for healthy products and services. Older segments
aspire for aging healthy in their retirement age while the younger segments
seek sustainable products with low environmental footprint such as plant-
based food.
 Increased Financial Literacy
The Great Recession of 2008 has
brought consumer awareness of
the importance of financial plan-
ning and literacy. As noted,
younger families moving to
Northeasternville are conscious
of their need to provide educa-
tion for their offspring, as they
look into positive educational ex-
perience provided by the school
system. Higher education, by ex-
tension, requires more careful
planning which creates demand
for financial guidance. Older indi-
viduals, on the other hand, need
financial guidance to navigate
their retirement years.

 The Growth of Experience-Based Spending
The pursuit of a happier life during retirement is expected to drive the older gen-
eration to spend more on experience-based goods. On the other hand, the young-
er generation value experience-based goods in part for their shareable social me-
dia factor or, in the opposite, need for real connection outside social media.
 E-Commerce Proliferation
Since the invention of the iPhone in 2007, e-commerce has grown leaps and
bound. Back then, e-commerce only comprised 5% of total retail sales, according
to Internet Retailer data. In 2018, e-commerce comprised 14.3% of total retail
sales. Evidently, e-commerce proliferation is likely to persist going forward. Ten-
ant mix for the subject property would have to be mindful of this trend.

Financial Model &
Underwriting
THEORY OF DEVELOP-
MENT: STRATEGY
A strict reading of Scenario A (Buy and Hold) led our group to only consider mini-
mal, tenant-generated changes to the property during the period of analysis. We
worked to increase revenue and retain tenants, as well as accommodate new offer-
ings with more promise for longevity given the changing demographics and antici-
pated recession. Several tenants will experience a lease turnover in the two years
previous to the expected economic downturn. As such, we expect some changes in
tenancy as well as tenant requests so they can accommodate their customers and
clients, many of whom seek to acquire secondary or backup space outside of the city
boundaries at this juncture after the epic battle shook Midtown Manhattan.
SCENARIO A
Stark Bank & Trust
Our first tenant and anchor is occupying the corner location, Stark Bank & Trust, and
has an intention to continue leasing in the location and maximize their space. They
recently requested a Vibranium Vault on the premises as a condition of renewing
their lease, which expires in the first year of acquisition. We agreed to perform a
basement underpinning, digout, poured floor their existing space in which to install
the vault and provide a training room that will, if necessary, serve as a refuge. This
provides us with the opportunity to deepen our relationship with the bank, while
ensuring their renewal and elevating their lease rate.
Based on contracting prices, considering the perimeter and depth of the pro-
ject, at a contractor estimate of approximately $450 per linear square foot including
waterproofing and finishes totaled $225,000. Were we to capitalize this cost for the
term of a new 10-year lease at a 10% would be yield an additional $2,975 per month
or $1.75 per square foot on the original 1,695 sqft of space. Although we need to ex-
pend efforts and cash to perform the work, we are able to negotiate a substantial in-
crease in rental rate, to an annual $55 per square foot. Furthermore, because this
capital expense will be for a credit tenant, we were able to finance the tenant im-
provement and upgrades via a secondary loan.
BiFrost Transit
BiFrost Transit, along with other transportation advocates, align with Golden Inter-
County Express to pilot a train to bus transfer program, similar to what was

achieved in a nearby community. Golden County, as a member of the NY-CT Sus-
tainable Communities Consortium, searched for an operational partner to partake
in their Pilot Station Area Plans. They selected Northeasternville as one of their
Station Area Neighborhoods that would integrate with The Hub destination. Re-
ports from Partnership for Sustainable Communities substantiates the claim that
younger people drive less and own fewer cars. Furthermore, many Boomers want
pied-a-terres in transit oriented communities so they can rely less on vehicles.
To advance this opportunity, we expect BiFrost Transit to request our agen-
cy to allocate parking for 20 buses, which would require about 10,000 square feet
of The Facility’s half-acre (21,780 sqft) lot. This is based on a the size of a New
York City Mass Transit Bus of 42 feet long by 8 feet wide which would require ap-
proximately 495 square feet of space per bus, with 3 feet of parking space between
each bus. Navigation and turning room would be shared with the general parking
area. Parking for cars in the private lot run $90 monthly; we agreed to an office
lease renewal with guarantee, and a flat monthly rate of $4,000, equivalent to $200
per space per bus. The cost to The Facility owners totals about $25,000 for repav-
ing and restriping of the lot.
Visionary Vanguard
A reliable tenant and first mover to The Facility, Visionary Vanguard maintains
plush offices and would likely desire to remain in this convenient location to draw
in new clients. As oppose to Stark Bank & Trust, Visionary Vanguard had requested
for landlord’s development on their premise, hence the higher rental rate. Continu-
ing forward, they would likely to expand their expertise, knowledge to involve
mortgages, insurance and savings. After 10 years, this long-term lessee would de-
sire an upgrade to their space to which we would contribute in exchange for a re-
newal with personal guarantee from one of the partners.
Titan Gems
This changing demographic effects different businesses in myriad ways. With con-
sumers continually moving away from in-person jewelry shopping with a concomi-
tant shift toward experiential activities, Titan Gem decided to close up and move to
an online, in-home model and exit their lease early. At no cost to our agency, they
found an acceptable replacement tenant that dovetails with the idea of a liveable
downtown: Le Cafe Pepper Potts. This local tenant received technical assistance
and financial support in the form of the backstop from the economic development

agency. Their renewal terms will stagger after they takeover and complete Titan
Gems’ lease.
Travel Agency
Knowhere To Go, similarly impacted by the changing retail landscape, apparently,
had somewhere to go. Lacking the foresight of Titan Gems, the travel agency would
likely exit their lease early and abandon their space. Jitters regarding an impending
recession would stall the replacement process by an anticipated six months. We ex-
pect they would be replaced by Walters & Murdock Real Estate Attorneys at Law,
who would find synergy with the brokerage, bank, retirement and financial services,
and renovation businesses. These industries would refocus somewhat during a
downturn toward foreclosures, bankruptcies and staging or sealing properties for
resale.
In terms of physical layout and condition, the travel agency would closely
match the needs of the incoming tenant, whose term would start at the start of a re-
cession at a rate of $27.50 per sqft. With minimal work needed, a one month free-
rent allowance would permit the incoming tenants to arrange their space with no
contributed improvement costs from our agency. However, the landlord would need
to compensate the leasing agents at a rate of 5% for new leases, paid at lease incep-
tion.
Cell Phone Tower

As a result of the battle, some cell phone towers lost power or were destroyed, dis-
rupting service in general. Combined with new technology and a desire to increase
redundancy, BansheeTel, contacted our agency to negotiate a lease on The Facility
because of the unobstructed location immediate to the station. They pay rates simi-
lar to large communications companies, such as Verizon, and agreed to a contract
rate of $1,200 per month for roof access and installation.
SCENARIO B
Scenario B, in addition to the buy and hold strategies adopted within the first two
years of Scenario A, leverages the location and land of The Facility. The consensus
that a downturn will occur about two years from acquisition compels a fast and cor-
rect execution. During our pre-purchase planning and outreach, we would find and
contact existing tenants who want to open new locations, as well as corporate-
backed franchisees looking for a desirable TOD site.

Our team elected to expanding vertically down, adding below grade uses, and up,
constructing a rooftop bar/restaurant. Furthermore, this plans calls for monetizing
the land before resale, a process which, according to the Department of Planning,
takes about 18-months, with some fast-tracking available from the Golden County
concierge for TOD projects.
Romanoff Bike & Box

In addition to the below-grade vault requested by Stark Bank & Trust, we underpin
the entire ground floor and create an additional below grade space with open win-
dow wells for a fitness gym. Romanoff Bike & Box expanded rapidly from Australia
and offers substantial financial backing to their American franchisees. The lease
term would be for an initial 5 years with a net lease rate of $21.00 (60% of the esti-
mated ground-floor market rate of $35.00).
Klaue Lounge and Restaurant

To maximize vertical space, we would split the estimated $200 psf improvement
costs for a 3,000 sqft restaurant lounge and bar that would likely feature a special
cocktail menu such as microbrew or micro-batch moonshine. This eatery would
come online subsequent to the completion of the below-grade retail space and, af-
ter several months of free rent, would command 80% of ground floor market rates,
or $28.00 psf.
Furthermore, because the below-grade capital expense would attached to
pre-leased credit tenants, we would be able to finance these capital improvements
and upgrades via a second loan. We estimate this junior amortizing loan would
have a 10-year term and carry a 6.25% interest rate, 200 basis points above the 30
-year senior purchase-money loan. It would cover the capital expenses and the
rooftop TIs.
Rambeau Residences
Lastly, the team would entitle the approximate 10,000 square feet of land used for
bus parking (where the lease permitted a 90-day notice to vacate) for the residen-
tial development of Rambeau Residences. This plot would be up-zoned from a 2 to
a 3 FAR, yielding 30,000 square feet buildable on a 7,500 square foot footprint,
with 2,500 square feet remaining for the smart-growth recommended maximum
parking requirement. We researched recently completed developments and to
quantify the value and price of a desired property that would offer unit sizes rang-

ing from 1-bedroom through 3-bedrooms and provided some common amenities.
Considering a 20% loss factor, approximately 27 units with an average of 950
square feet could be constructed.
The Nassau County assessment report for value add in TOD projects dis-
cussed the additional revenue associated with newly constructed taxable develop-
ment. Further, the Assessor pegged per square foot sales prices of residential be-
tween $300 and $350 per square foot several years ago. Working backwards from a
sales number of $325 to $375, we arrived at a price of $150 per buildable square
foot.
The entitlement process would require approximately 18 months and cost
the owners about $75,000 in architectural, engineering and filing fees. This project
would enhance the retail offerings and serve to maintain affordability in Northeast-
ernville by adding to existing supply. Selling this land at a double closing with The
Facility to separate buyers in December 2020 would offer the greatest return and
opportunity before the correction that we predict would occur in January 2021.
SCENARIO C
To determine condition for Scenario C, which is to decline both Scenario A and Sce-
nario B, we conclude that a certain “hurdle rate” is needed to be set. This rate shall
act as an alternative for either scenario to pass in order to be considered
"investment-worthy." In other words, the hurdle rate is the floor of which a scenario
would be deemed worthwhile for our agency to pursue.
Our team believes the hurdle rate should represent an alternative that rela-
tively easy to execute and yet capture the risk-return profile to our scenarios in con-
sideration as closely as possible. We turn to NAREIT indexes, specifically represent-
ing office property sector and retail free-standing property sub-sector. REITs have
relatively high liquidity for entry and exit. Moreover, the two sectors we pick repre-
sent the risk-return profile of the asset sub-class we want to capture.
Finally, we average the 10-year total return of each index and apply the ap-
propriate weight of each average index return in Scenario A and Scenario B, respec-
tively. The 10-year duration should be long enough to capture variability without
going over toward the black swan of the Great Recession. We implement the weight
because Scenario A and Scenario B each have different square footage of retail and
office, hence each needs the appropriate hurdle rate. Hurdle rate for Scenario A is
11.9% while hurdle rate for Scenario B is 12.6%. The following table summarises the

calculation.
Sqft Weight Benchmark Hurdle Rate

Scenario A Retail 6,390 40% 14.31% 5.8%
Office 9,390 60% 10.30% 6.1%
Total 15,780 11.9%
Scenario B Retail 12,390 57% 14.31% 8.1%

Office 9,390 43% 10.30% 4.4%
Total 21,780 12.6%
Sources: Authors’ calculation, data from NAREIT

ASSUMPTIONS
CAPITAL MARKET ASSUMPTIONS
Based on current market conditions, we assume a going-in cap rate of 7.5%. Upon
reversion, we assume an 8.5% exit cap rate, with the higher rate reflecting risks as-
sociated with the uncertainty created by time. For the same reason, we assume a
9.5% discount rate applied to projected cash flows in the calculation of present val-
ue. The hurdle rate, as calculated in Scenario C, is 11.9% for benchmarking to Sce-
nario A and 12.6% to Scenario B.
With the threat of recession in mind, we assume an interruption to the cur-
rent 3% market rent increases following year two of the holding period. Given our
expectations for the recession – that it will be relatively mild in severity and short-
lived in duration – juxtaposed against our conservative nature and the relative vola-
tility associated with suburban areas, we assume that office and retail rents will de-
cline 5% and 3% respectively in year three, then holding stable in year four before
resuming “normal” growth of 3% annually thereafter.
Because the schools need expansion, taxes may accelerate upward during the
near future. We assume that in scenario A, tax will increase 3% annually
and increase 5% from 2021 and last for 3 years, before returning to a 3% annual
increase for the remainder of the investment horizon. Other expenditures will in-
crease at a steady annual 3% inflation rate. In scenario B, property taxes will in-
crease in 2020 by 3% and in 2021 by 5%.
Scenario Analysis Start Date Holding Period

A 2019/1/1 10 Years
B 2019/1/1 2 Years
C NA NA
Term
Condition Type Scenario Tenant Leas. Start
(Yrs.)
Retail A&B Titan Fine Gems 2018/1/1 2.5
Leave Earlier
Office A&B Knowhere To Go 2014/1/1 6.5
A&B Le Cafe Pepper Potts 2021/1/1 2-3-5
Retail B Romanoff Bike & Box 2019/7/1 5
New B Klaue Lounge & Restaurant 2020/7/1 5
Office A&B Walters & Murdock Real 2021/1/1 5

TIMING ASSUMPTIONS
For Scenario A, the analysis starting date is set on 1/1/2019 and the holding peri-
od to forecast the cash flow is assumed to be 10 years. Two new tenants would be
reabsorbed to replace Titan Gems Fine Jeweler and Knowhere to Go Travel Service.
These two tenants are having difficulty to navigate the e-commerce marketplace.
Anticipating the foreseeable recessionary period, upgrades and renovations de-

sired by the tenants, such as Stark Bank’s Vibranium Vault, will be completed.
For Scenario B, the analysis starting date is set on 1/1/2019 and the holding peri-
od to forecast the cash flow is assumed to be only 2 years. Prior to recession, which
is foreseen in January 2021, The Facility will be sold. Two tenants, similar to Sce-
nario A above, would be reabsorbed. Another two new tenants will move in after
the completion of basement building and rooftop improvement.
MARKET RENT ANALYSIS

We reviewed recently executed leases from Costar, rental trends from CBRE Long
Island (Office Market 4Q2018), and lease rates reported on current for-sale prop-

erty listings. Our team analyzed this data and selected twenty-three retail and thirty-
four office leases similar to our property, all near a commuter train station in West-
ern Nassau County. From these sources we arrived at the following market rate rent-
al conclusions, guided by the comparables provided for Northeasternville and falling
within the various lease ranges.
Office Lease Summary Chart

Retail Lease Summary Chart
We also reviewed the suggested comparables. Like the market, vacancy rates are

low, though cap rates are higher than market averages. We are confident in our
research of reports from CoStar, JLL, and others.
Type Tenant Area Old New Other

SF Rent Rent Items
SF/yr SF/Yr
Scenario A & B
Existing Stark Bank & Trust 1650 (*2) $35 $55
Titan Fine Gems 1,500 $33 NA
Banner’s Green Machine Juices 1,500 $28 $34

New Le Cafe Pepper Potts 1,500 NA $32.5
Existing Knowhere To Go 1,565 $24.51 NA
Bifrost Transit Services 1,850 $23.2 $25 Parking: 20@$200/

mo.
Plant Your Groots Real Estate Agents 1,280 31.9 $32
Shield Strategies Ltd. 1,565 $29 $30
Visionary Vanguard 1,252 $34.8 $37
Mjolnir Renovations 1,878 $26.1 $27.5
New Walters & Murdock RE Attorney 1,565 NA $27.5
BansheeTel Cell Phone Towers $1,200/mo.
Scenario B
New Romanoff Bike & Box 3,000 NA 21
Klaue Lounge & Restaurant 3,000 NA 28
Rambeau Residences Sale: 30,000 sf @ $150/sf
RENTS AND OTHER INCOME ASSUMPTIONS

The following table in the next page shows the rent and other income assumptions
of our property.
The cost to build the vault for Stark Bank & Trust is $200/sf. The total cost of
Parking Lot Repave & Restripe is $25,000. Visionary Vanguard need $45,000 to
renovate. The Building Cost for Romanoff Bike & Box and Klaue Lounge & Restau-
rant are $75/sf and $100/sf, respectively. Entitlements for Rambeau Residence
require $75,000.

Scenario A Invest and Hold
Type Tenants Rnw Rent Vac Rent Free Lease

Prob /sf Mos Incr /Yr Rent Mos Com
new/ new/
renew renew
RETAIL
Renewal Stark Bank & Trust 100% $55 4 3% 0/0 4%/2%
Renewal Titan Fine Gems 0%
Renewal Banner’s Green Machine 80% $34 4 3% 4/2 5%/2.5%

Juices
New Le Cafe Pepper Potts 70% $32.5 4 3% 4/2 5%/2.5%
OFFICE
Renewal Knowhere To Go 0%
Renewal Bifrost Transit Services 80% $25 6 3% 0/0 4%/2%
Renewal Plant Your Groots Real 70% $32 6 3% 2/1 5%/2.5%

Estate Agents
Renewal Shield Strategies Ltd. 70% $30 6 3% 2/1 5%/2.5%
Renewal Visionary Vanguard 80% $37 6 3% 2/1 4%/2%
Renewal Mjolnir Renovations 70% $27.5 6 3% 2/1 5%/2.5%
New Walters & Murdock Real 60% $27.5 6 3% 1/0.5 5%/2.5%

Estate Attorney
MARKET LEASING ASSUMPTIONS

The following tables present the market leasing assumptions of two scenarios.

Scenario B Making Improvements: Upzoning and Build a Basement
Type Tenants Rnw Rent / Vac Rent Free Lease

Prob sf Mos Incr /Yr Rent Mos Com
new/ new/
renew renew
RETAIL
Renewal Stark Bank & Trust 100% $55 4 3% 0/0 4%/2%
Renewal Titan Fine Gems 0%
Renewal Banner’s Green Machine 80% $34 4 3% 4/2 5%/2.5%

Juices
New Le Cafe Pepper Potts 70% $32.5 4 3% 4/2 5%/2.5%
New Romanoff Bike & Box 70% $21 4 3% 4/2 5%/2.5%
New Klaue Lounge & Restau- 70% $28 4 3% 4/2 5%/2.5%

rant
OFFICE
Renewal Knowhere To Go 0%
Renewal Bifrost Transit Services 80% $25 6 3% 0/0 4%/2%
Renewal Plant Your Groots Real 70% $32 6 3% 2/1 5%/2.5%

Estate Agents
Renewal Shield Strategies Ltd. 70% $30 6 3% 2/1 5%/2.5%
Renewal Visionary Vanguard 80% $37 6 3% 2/1 4%/2%
Renewal Mjolnir Renovations 70% $27.5 6 3% 2/1 5%/2.5%
New Walters & Murdock RE 60% $27.5 6 3% 1/0.5 5%/2.5%

Attorney

DEBT FINANCING
At acquisition, a purchase-money mortgage will be encumber the property, and
schedule to begin on 1/1/2019 with monthly payments. Although interviews with
mortgage lenders in the area (Velocity and Ridgewood Savings) suggested a 50 to
100 basis point charge for fees and origination, we followed the suggested first po-
sition parameters of 75% loan-to-value at 4.75% over a 25-year term with no addi-
Scenario Loan Input Origination Term (Yrs) Interest
A Loan 1 LTV: 75% 1/1/2019 25 4.75%
B Loan 1 LTV: 75% 1/1/2019 25 4.75%
Renovation Amount:
B 7/1/2019 10 6.75%
Loan 525,000
tional costs for the rate lock. Additionally, for Scenario B only, the team also bor-
rowed to cover capital expenditures to add new space and perform some renova-
tions. This junior loan begins in June 2019 and commands a higher rate - 6.75% -
200 basis points more than the senior loan, also with points and fees rolled in.
INCOME, EXPENSES AND INFLATION

As shown above and in the appendix, upon lease expiry, the new base rent for each
lease in the property will be set by their individual MLA. Each lease will follow the
recession market level index for Scenario A, discussed formerly. In this scenario,
the rental rates are reduced for 2021, not increased for 2022, and climb again at a
rate of 3% annually for the remainder of the holding period. From potential gross
income (PGI) we apply a General Vacancy rate of 5% based on blended CoStar data
indicating office vacancy of 10% and retail vacancy of under 5% in the western
part of the county. To this, we further deducted a Credit Collection Loss of 2% giv-
en our mix of credit tenants and local shops.
We subtract vacancy and credit loss from potential gross income to arrive
at Effective Gross Income (EGI). From EGI, we deducted Expenses, provided to us,
which we expect to continue. Although we will retain Fury Management & Leasing

Company, they only oversee some property management and sale functions. There-
fore, where necessary and appropriate we applied Leasing Commissions modeled at
4% for new leases carrying a 10-year term and 5% for leases carrying a 5-year term
or less; renewals command half that amount. Except for property taxes, General,
Market and Expense Inflation rates stay fixed at 3% for the duration under both Sce-
nario A and Scenario B.
SELLING COST
In both Scenario A and B, the team used FM&LCo to broker the sale of the improve-
ment, and applied a 4% selling cost. The Facility owners dealt directly with a known
private residential developer in Golden County and did not apply this selling cost to
the Rambeau Residential transaction.

SCENARIO ANALYSIS
Scenario A: Invest in the subject property and hold until market improves before
selling at a profit.
Scenario B: Invest in the subject property, make improvements to upgrade the
building, and sell at a profit before market downturn.
Scenario C: Decline this investment opportunity.
Our team has analyzed different scenarios to assess determining factors that drive
our simulation as well as its break-even point. We have weighed the merits of the
three scenarios above given the projects attributes and context.
Scenario A represents a straightforward investment opportunity in that its
location is desirable and the current use is the most logical strong.
Scenario B means taking on added risk, placing an educated bet on current
market conditions persisting, and our ability to complete the renovation and resale
on a schedule. Population, employment and income are projected to grow. The light
rail transit lines within walking distance of the site will remain a popular mode of
transit. The economic activity in the county long term should be stable and relatively
downturn-resistant. We are confident in the long-term viability of the site as a com-
mercial real estate hub, at least by local measures.
PROJECT SUMMARY UNDER BASE CASE ECONOMIC CONDITIONS
Likewise, we are confident that the forthcoming downturn will refrain from
the lows that represent dangerous territory for our theoretical investment. Still, as
prudent, vaguely-super-heroic real estate investors, we have run sensitivity analyses
testing the resilience of returns under various scenarios.
Regarding economic conditions, we wanted to test the upside of the invest-
ment, and tested the project to gauge our upside. This, our best-case scenario, does

not register any downturn for the next 10 years. Although it may seem unlikely,
that scenario has occurred in real life. Australia has not experienced a recession in
27 years. As such, our current bull market may not seem that spectacular after all.
As a previously secluded wealthy and technologically advanced African country
called Wakanda shares their economic experience with the world, the US adapta-
tion of Wakandan economic policy may increase probability this scenario will oc-
cur.
We are risk-conscious as well, and tested the two active scenarios A and B
through a worst-case scenario that assumes demand would drop by 50% - instant-
ly, with the snap of a finger - immediately followed by a vacancy rate of 50%. We
think this unlikely scenario may come to pass if the superhero groups fail to defeat
a megalomaniac galactic being in their current battle to save the universe. Our em-
ployers believe that the supervillain has the means to wipe out world population
by half. This would obviously not bode well for our investment, or for almost any
investment for that matter, but it nevertheless needs to be acknowledged and
stressed tested.

SENSITIVITY ANALYSIS OUTCOME
Proceeds from Unleveraged

Gross Sale Price Leveraged IRR
Sale IRR
Optimistic Condition
SCENARIO A $5,073,397 $3,914,156 21.33% 41.51%
SCENARIO B $3,699,191 $1,496,098 29.17% 96.65%
Pessimistic Condition
SCENARIO A
If half population disappear,
SCENARIO B

Recommendation
RECOMMENDATION
We came to the conclusion that while Scenario A offers a good return over the hold-
ing period, Scenario B yields a stronger return provided by a clear strategy executed
with a burst of energy. With a clear exit plan Scenario B also presents the opportuni-
ty to invest during the downtown with the cash proceeds received from the sale of
Rambeau Residences entitled land and The Facility improvement.

Appendix
Appendix 01
SCENARIO A - ARGUS CASH FLOW REPORT
Cash Flow
Marvelous Mixed Northeasternville (Amounts in USD)

1, 2019 through 12, 2029
2019/3/25 12:44:23
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
For the Years Ending 12-2019 12-2020 12-2021 12-2022 12-2023 12-2024 12-2025 12-2026 12-2027 12-2028 12-2029 Total
Rental Revenue
Potential Base Rent 409,541 468,257 539,245 552,469 564,741 566,204 567,710 568,105 591,129 602,871 604,566 6,034,838
Absorption & Turnover Vacancy 0 0 0 0 0 0 0 -7,900 0 0 0 -7,900
Free Rent 0 -4,771 -23,517 -4,977 0 0 0 -25,283 -5,770 0 0 -64,318
Scheduled Base Rent 409,541 463,486 515,729 547,492 564,741 566,204 567,710 534,922 585,360 602,871 604,566 5,962,620
CPI Increases 0 0 -6,330 -5,921 7,153 22,847 39,012 34,488 42,109 58,241 76,379 267,976
Total Rental Revenue 409,541 463,486 509,399 541,570 571,894 589,051 606,722 569,409 627,468 661,111 680,945 6,230,597
Other Tenant Revenue

Total Expense Recoveries 14,001 17,783 33,705 37,036 39,903 41,838 43,832 40,765 46,703 50,076 52,317 417,959
Total Other Tenant Revenue 14,001 17,783 33,705 37,036 39,903 41,838 43,832 40,765 46,703 50,076 52,317 417,959
Total Tenant Revenue 423,541 481,268 543,104 578,607 611,797 630,889 650,554 610,175 674,171 711,188 733,262 6,648,556
Other Revenue
BansheeTel Cell Phone Towers 7,200 14,832 15,277 15,735 16,207 16,694 17,194 17,710 18,241 18,789 19,352 177,232
Parking Revenue
Reserved Parking - BiFrost Transit Services 0 0 50,923 52,451 54,024 55,645 57,315 59,034 60,805 62,629 64,508 517,334
Total Other Revenue 7,200 14,832 66,200 68,186 70,232 72,339 74,509 76,744 79,046 81,418 83,860 694,566

Appendix 01
SCENARIO A - ARGUS CASH FLOW REPORT (Cont’)
Potential Gross Revenue

430,741 496,100 609,304 646,793 682,029 703,228 725,063 686,919 753,217 792,606 817,122 7,343,122
Vacancy & Credit Loss

Vacancy Allowance -21,537 -24,805 -30,465 -32,340 -34,101 -35,161 -36,253 -28,898 -37,661 -39,630 -40,856 -361,708
Credit Loss -8,615 -9,922 -12,186 -12,936 -13,641 -14,065 -14,501 -13,738 -15,064 -15,852 -16,342 -146,863
Total Vacancy & Credit Loss -30,152 -34,727 -42,651 -45,276 -47,742 -49,226 -50,755 -42,636 -52,725 -55,482 -57,199 -508,571
Effective Gross Revenue 400,589 461,373 566,653 601,517 634,287 654,002 674,309 644,282 700,492 737,123 759,924 6,834,551
Operating Expenses
Insurance 6,479 6,673 6,874 7,080 7,292 7,511 7,736 7,968 8,208 8,454 8,707 82,983
Utilities & Heat 60,566 62,382 64,254 66,182 68,167 70,212 72,318 74,488 76,723 79,024 81,395 775,711
Common Area Maintenance 25,916 26,694 27,495 28,320 29,169 30,044 30,946 31,874 32,830 33,815 34,829 331,932
Structural Repairs & Maintenance 17,184 17,699 18,230 18,777 19,340 19,921 20,518 21,134 21,768 22,421 23,093 220,085
Management & Leasing 20,029 23,069 28,333 30,076 31,714 32,700 33,715 32,214 35,025 36,856 37,996 341,727
Reserves 4,789 4,933 5,081 5,233 5,390 5,552 5,718 5,890 6,066 6,248 6,436 61,335
Real Estate Taxes 130,286 134,195 140,905 147,950 155,347 160,008 164,808 169,752 174,845 180,090 185,493 1,743,678
Legal and Professional 3,803 3,917 4,035 4,156 4,280 4,409 4,541 4,677 4,817 4,962 5,111 48,707
Total Operating Expenses 269,052 279,562 295,205 307,772 320,701 330,356 340,301 347,997 360,281 371,870 383,061 3,606,159
Net Operating Income 131,537 181,811 271,448 293,745 313,586 323,646 334,008 296,285 340,211 365,253 376,863 3,228,392
Leasing Costs
Leasing Commissions 0 48,785 32,096 7,304 9,323 0 0 32,670 8,467 0 0 138,644
Total Leasing Costs 0 48,785 32,096 7,304 9,323 0 0 32,670 8,467 0 0 138,644
Total Leasing & Capital Costs 0 48,785 32,096 7,304 9,323 0 0 32,670 8,467 0 0 138,644
Cash Flow Before Debt Service 131,537 133,026 239,352 286,441 304,263 323,646 334,008 263,615 331,744 365,253 376,863 3,089,748

Appendix 01
SCENARIO A - ARGUS CASH FLOW REPORT (Cont’)
Debt Service
Interest
Debt 61,873 60,508 59,077 57,577 56,002 54,353 52,622 50,809 48,906 46,911 0 548,638
Total Interest 61,873 60,508 59,077 57,577 56,002 54,353 52,622 50,809 48,906 46,911 0 548,638
Principal
Debt 28,117 29,482 30,913 32,413 33,988 35,636 37,368 39,181 41,084 43,079 0 351,261
Total Principal 28,117 29,482 30,913 32,413 33,988 35,636 37,368 39,181 41,084 43,079 0 351,261
Total Debt Service 89,990 89,990 89,990 89,990 89,990 89,989 89,990 89,990 89,990 89,990 0 899,899
Cash Flow After Debt Service 41,547 43,036 149,362 196,451 214,273 233,657 244,018 173,625 241,754 275,263 376,863 2,189,849
Financing
Proceeds
Debt 1,315,371 0 0 0 0 0 0 0 0 0 0 1,315,371
Total Proceeds 1,315,371 0 0 0 0 0 0 0 0 0 0 1,315,371
Total Financing (Net) 1,315,371 0 0 0 0 0 0 0 0 0 0 1,315,371
Cash Flow Available for Distribution 1,356,918 43,036 149,362 196,451 214,273 233,657 244,018 173,625 241,754 275,263 376,863 3,505,220

Appendix 01
SCENARIO A - ARGUS PRESENT VALUE REPORT
Present Value Report

2019/3/25 12:58:14
Valuation (PV/IRR) Date: 1, 2019
Discount Method: Annual
P.V. of P.V. of P.V. of P.V. of P.V. of NOI to

Analysis Period Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Book
Period Ending Before Debt Service @ 8.50% @ 9.00% @ 9.50% @ 10.00% @ 10.50% Value
Year 1 12-2019 131,537 121,232 120,676 120,125 119,579 119,038 7.50%
Year 2 12-2020 133,026 112,999 111,965 110,945 109,939 108,946 10.09%
Year 3 12-2021 239,352 187,391 184,824 182,304 179,829 177,399 14.80%
Year 4 12-2022 286,441 206,689 202,922 199,241 195,643 192,126 15.95%
Year 5 12-2023 304,263 202,349 197,750 193,276 188,924 184,688 16.94%
Year 6 12-2024 323,646 198,377 192,980 187,752 182,690 177,786 17.48%
Year 7 12-2025 334,008 188,690 182,714 176,953 171,399 166,043 18.04%
Year 8 12-2026 263,615 137,256 132,300 127,543 122,978 118,597 15.73%
Year 9 12-2027 331,744 159,197 152,744 146,580 140,692 135,065 17.98%
Year 10 12-2028 365,253 161,546 154,287 147,385 140,821 134,577 19.30%
Totals 2,712,885 1,675,727 1,633,161 1,592,105 1,552,493 1,514,264
Property Resale @ 8.50% Cap Rate 4,131,818 1,827,443 1,745,325 1,667,247 1,592,995 1,522,364
Total Unleveraged Present Value 3,503,170 3,378,486 3,259,352 3,145,488 3,036,628
Percentage Value Distribution

Income 47.83% 48.34% 48.85% 49.36% 49.87%
Net Sale Price 52.17% 51.66% 51.15% 50.64% 50.13%
100.00% 100.00% 100.00% 100.00% 100.00%
* Results displayed are based on Forecast data only

Appendix 01
SCENARIO A - ARGUS VALUE MATRIX REPORT
Value Matrix Report

2019/3/25 12:55:49
Key Valuation Policies

Valuation (PV/IRR) Date: January, 2019
Date of Sale: December, 2028
Period to Cap (at Sale): Year of Sale
Value Matrix
Table Shows: 1) Unleveraged PV's 1) Net Sale Price 2) Exit Cap Rate
2) Unleveraged PV's $/SF 4,682,727 4,390,057 4,131,818 3,902,273 3,696,890
3) Going In Cap. Rates 7.50% 8.00% 8.50% 9.00% 9.50%
1) Cash Flow Discount Rate 8.50% 3,746,829 3,617,385 3,503,170 3,401,645 3,310,807
2) Resale Discount Rate 8.50% 266.02 256.83 248.72 241.51 235.06
3.51% 3.64% 3.75% 3.87% 3.97%
9.00% 3,611,196 3,487,569 3,378,486 3,281,524 3,194,768
9.00% 256.39 247.61 239.86 232.98 226.82
3.64% 3.77% 3.89% 4.01% 4.12%
9.50% 3,481,652 3,363,556 3,259,352 3,166,728 3,083,853
9.50% 247.19 238.80 231.41 224.83 218.95
3.78% 3.91% 4.04% 4.15% 4.27%
10.00% 3,357,887 3,245,050 3,145,488 3,056,988 2,977,804
10.00% 238.40 230.39 223.32 217.04 211.42
3.92% 4.05% 4.18% 4.30% 4.42%
10.50% 3,239,610 3,131,776 3,036,628 2,952,052 2,876,379
10.50% 230.00 222.35 215.59 209.59 204.22
4.06% 4.20% 4.33% 4.46% 4.57%

Appendix 01
SCENARIO A - ARGUS VALUE MATRIX REPORT (Cont’)
Sales Price Calculation

NOI To Capitalize 365,253 365,253 365,253 365,253 365,253
Divided by Cap Rate 7.50% 8.00% 8.50% 9.00% 9.50%
Gross Sales Price 4,870,037 4,565,659 4,297,091 4,058,364 3,844,766
Adjustments to Sale 0 0 0 0 0
Adjusted Gross Sales Price 4,870,037 4,565,659 4,297,091 4,058,364 3,844,766
Cost of Sales -187,309 -175,602 -165,273 -156,091 -147,876
Net Sale Price 4,682,727 4,390,057 4,131,818 3,902,273 3,696,890

Appendix 01
SCENARIO A - ARGUS LOAN AMORTIZATION REPORT
Loan Amortization Report

1, 2019 through 12, 2029
2019/3/25 13:43:16
Loan Name Debt 1

Loan Type Amortizing
Loan Start Date 2019/1/1
Loan Term 300 Months
Amortization Term 300 Months
Beginning Interest Amortized Interest Principal Balloon Ending

Date Balance Proceeds Rate Payments Payments Payments Payment Balance
2019 0 1,315,371 4.75% 89,990 61,873 28,117 0 1,287,254
2020 1,287,254 0 4.75% 89,990 60,508 29,482 0 1,257,772
2021 1,257,772 0 4.75% 89,990 59,077 30,913 0 1,226,859
2022 1,226,859 0 4.75% 89,990 57,577 32,413 0 1,194,446
2023 1,194,446 0 4.75% 89,990 56,002 33,988 0 1,160,458
2024 1,160,458 0 4.75% 89,989 54,353 35,636 0 1,124,822
2025 1,124,822 0 4.75% 89,990 52,622 37,368 0 1,087,454
2026 1,087,454 0 4.75% 89,990 50,809 39,181 0 1,048,273
2027 1,048,273 0 4.75% 89,990 48,906 41,084 0 1,007,189
2028 1,007,189 0 4.75% 89,990 46,911 43,079 964,110 0
Final Totals 0 1,315,371 4.75% 899,899 548,638 351,261 964,110 0

Appendix 02
SCENARIO B - ARGUS CASH FLOW REPORT
Cash Flow

1, 2019 through 12, 2021
2019/3/25 13:52:23
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
1 2 3 4 Total 5 6 7 8 Total 9 10 11 12 Total
For the Quarters Ending 3-2019 6-2019 9-2019 12-2019 12-2019 3-2020 6-2020 9-2020 12-2020 12-2020 3-2021 6-2021 9-2021 12-2021 12-2021 Total
Rental Revenue
Potential Base Rent 102,385 102,385 118,135 118,135 441,041 129,331 133,307 155,940 155,940 574,517 147,152 166,500 166,500 166,500 646,653 1,662,211
Free Rent 0 0 -15,750 -5,250 -21,000 -4,771 0 -21,630 -7,210 -33,611 -16,044 -3,964 0 0 -20,007 -74,619
Scheduled Base Rent 102,385 102,385 102,385 112,885 420,041 124,559 133,307 134,310 148,730 540,906 131,108 162,537 166,500 166,500 626,646 1,587,592
CPI Increases 0 0 0 0 0 0 0 -7 -7 -14 -1,485 -1,684 -2,805 -2,805 -8,779 -8,793
Total Rental Revenue 102,385 102,385 102,385 112,885 420,041 124,559 133,307 134,303 148,723 540,891 129,623 160,853 163,695 163,695 617,867 1,578,799
Other Tenant Revenue

Total Expense Recoveries 3,654 3,654 5,989 5,989 19,287 8,587 8,652 11,393 11,393 40,025 13,613 14,647 14,647 14,647 57,553 116,866
Total Other Tenant Revenue 3,654 3,654 5,989 5,989 19,287 8,587 8,652 11,393 11,393 40,025 13,613 14,647 14,647 14,647 57,553 116,866
Total Tenant Revenue 106,039 106,039 108,375 118,875 439,328 133,146 141,959 145,696 160,116 580,917 143,236 175,500 178,342 178,342 675,421 1,695,666
Other Revenue
BansheeTel Cell Phone Towers 0 0 3,600 3,600 7,200 3,708 3,708 3,708 3,708 14,832 3,819 3,819 3,819 3,819 15,277 37,309
Parking Revenue
Reserved Parking - BiFrost Transit 0 0 12,000 12,000 24,000 12,360 12,360 12,360 12,360 49,440 12,731 12,731 12,731 12,731 50,923 124,363
Total Other Revenue 0 0 15,600 15,600 31,200 16,068 16,068 16,068 16,068 64,272 16,550 16,550 16,550 16,550 66,200 161,672

Appendix 02
SCENARIO B - ARGUS CASH FLOW REPORT (Cont’)
Potential Gross Revenue 106,039 106,039 123,975 134,475 470,528 149,214 158,027 161,764 176,184 645,189 159,786 192,050 194,892 194,892 741,621 1,857,338
Vacancy & Credit Loss

Vacancy Allowance -5,302 -5,302 -6,199 -6,724 -23,526 -7,461 -7,901 -8,088 -8,809 -32,259 -7,989 -9,602 -9,745 -9,745 -37,081 -92,867
Credit Loss -2,121 -2,121 -2,479 -2,689 -9,411 -2,984 -3,161 -3,235 -3,524 -12,904 -3,196 -3,841 -3,898 -3,898 -14,832 -37,147
Total Vacancy & Credit Loss -7,423 -7,423 -8,678 -9,413 -32,937 -10,445 -11,062 -11,323 -12,333 -45,163 -11,185 -13,443 -13,642 -13,642 -51,913 -130,014
Effective Gross Revenue 98,617 98,617 115,296 125,061 437,591 138,769 146,965 150,440 163,851 600,026 148,601 178,606 181,250 181,250 689,707 1,727,324
Operating Expenses
Insurance 1,620 1,620 1,620 1,620 6,479 1,668 1,668 1,668 1,668 6,673 1,718 1,718 1,718 1,718 6,874 20,026
Utilities & Heat 15,141 15,141 15,141 15,141 60,566 15,596 15,596 15,596 15,596 62,382 16,063 16,063 16,063 16,063 64,254 187,202
Common Area Maintenance 6,479 6,479 6,479 6,479 25,916 6,673 6,673 6,673 6,673 26,694 6,874 6,874 6,874 6,874 27,495 80,105
Structural Repairs & Maintenance 4,296 4,296 4,296 4,296 17,184 4,425 4,425 4,425 4,425 17,699 4,558 4,558 4,558 4,558 18,230 53,113
Management & Leasing 4,931 4,931 5,765 6,253 21,880 6,938 7,348 7,522 8,193 30,001 7,430 8,930 9,062 9,062 34,485 86,366
Reserves 1,197 1,197 1,197 1,197 4,789 1,233 1,233 1,233 1,233 4,933 1,270 1,270 1,270 1,270 5,081 14,802
Real Estate Taxes 32,572 32,572 32,572 32,572 130,286 33,549 33,549 33,549 33,549 134,195 35,226 35,226 35,226 35,226 140,905 405,386
Legal and Professional 951 951 951 951 3,803 979 979 979 979 3,917 1,009 1,009 1,009 1,009 4,035 11,755
Total Operating Expenses 67,187 67,187 68,021 68,509 270,902 71,062 71,472 71,645 72,316 286,495 74,148 75,648 75,781 75,781 301,357 858,755
Net Operating Income 31,430 31,430 47,276 56,553 166,689 67,707 75,493 78,795 91,535 313,531 74,453 102,958 105,469 105,469 388,350 868,570
Leasing Costs
Leasing Commissions 0 0 14,700 0 14,700 48,785 0 20,188 0 68,973 21,743 0 0 0 21,743 105,416
Total Leasing Costs 0 0 14,700 0 14,700 48,785 0 20,188 0 68,973 21,743 0 0 0 21,743 105,416
Capital Expenditures
Gym Basement 0 0 225,000 0 225,000 0 0 0 0 0 0 0 0 0 0 225,000
Entitled Rambeau Residences Develop- 0 0 0 0 0 0 0 0 0 0 -4,500,000 0 0 0 -4,500,000 -4,500,000
Total Capital Expenditures 0 0 225,000 0 225,000 0 0 0 0 0 -4,500,000 0 0 0 -4,500,000 -4,275,000

Appendix 02
SCENARIO B - ARGUS CASH FLOW REPORT (Cont’)
Total Leasing & Capital Costs 0 0 239,700 0 239,700 48,785 0 20,188 0 68,973 -4,478,257 0 0 0 -4,478,257 -4,169,584
Cash Flow Before Debt Service 31,430 31,430 -192,424 56,553 -73,011 18,922 75,493 58,607 91,535 244,558 4,552,710 102,958 105,469 105,469 4,866,607 5,038,153
Debt Service
Interest
Debt 19,760 19,655 19,550 19,443 78,408 19,335 19,226 19,114 19,003 76,678 0 0 0 0 0 155,086
Renovation Loan 0 0 8,807 8,650 17,457 8,490 8,327 8,162 7,993 32,972 0 0 0 0 0 50,429
Total Interest 19,760 19,655 28,357 28,093 95,865 27,825 27,553 27,276 26,996 109,650 0 0 0 0 0 205,515
Principal
Debt 8,750 8,854 8,960 9,067 35,631 9,174 9,284 9,395 9,507 37,360 0 0 0 0 0 72,991
Renovation Loan 0 0 9,278 9,435 18,713 9,594 9,758 9,923 10,092 39,367 0 0 0 0 0 58,080
Total Principal 8,750 8,854 18,238 18,502 54,344 18,768 19,042 19,318 19,599 76,727 0 0 0 0 0 131,071
Total Debt Service 28,510 28,509 46,595 46,595 150,209 46,593 46,595 46,594 46,595 186,377 0 0 0 0 0 336,586
Cash Flow After Debt Service 2,920 2,921 -239,019 9,958 -223,220 -27,671 28,898 12,013 44,940 58,181 4,552,710 102,958 105,469 105,469 4,866,607 4,701,567
Financing
Proceeds
Debt 1,666,887 0 0 0 1,666,887 0 0 0 0 0 0 0 0 0 0 1,666,887
Renovation Loan 0 0 525,000 0 525,000 0 0 0 0 0 0 0 0 0 0 525,000
Total Proceeds 1,666,887 0 525,000 0 2,191,887 0 0 0 0 0 0 0 0 0 0 2,191,887
Total Financing (Net) 1,666,887 0 525,000 0 2,191,887 0 0 0 0 0 0 0 0 0 0 2,191,887
Cash Flow Available for Distribution 1,669,807 2,921 285,981 9,958 1,968,667 -27,671 28,898 12,013 44,940 58,181 4,552,710 102,958 105,469 105,469 4,866,607 6,893,454

Appendix 02
SCENARIO B - ARGUS PRESENT VALUE REPORT
Present Value Report

2019/3/25 14:16:00
Valuation (PV/IRR) Date: 1, 2019
P.V. of P.V. of P.V. of P.V. of P.V. of NOI to

Analysis Period Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Book
Period Ending Before Debt Service @ 8.50% @ 9.00% @ 9.50% @ 10.00% @ 10.50% Value
Quarter 1 3-2019 31,430 28,968 28,835 28,703 28,573 28,444 1.41%
Quarter 2 6-2019 31,430 28,968 28,835 28,703 28,573 28,444 1.41%
Quarter 3 9-2019 -192,424 -177,349 -176,536 -175,730 -174,931 -174,140 1.92%
Quarter 4 12-2019 56,553 52,122 51,883 51,646 51,411 51,179 2.30%
Quarter 5 3-2020 18,922 16,074 15,926 15,781 15,638 15,497 2.70%
Quarter 6 6-2020 75,493 64,128 63,541 62,962 62,391 61,828 3.01%
Quarter 7 9-2020 58,607 49,784 49,328 48,879 48,436 47,998 3.11%
Quarter 8 12-2020 91,535 77,755 77,043 76,341 75,649 74,966 3.62%
Totals 171,546 140,449 138,856 137,287 135,740 134,215
Property Resale @ 8.50% Cap Rate 3,546,730 3,012,788 2,985,212 2,958,012 2,931,182 2,904,715
Total Unleveraged Present Value 3,153,238 3,124,068 3,095,298 3,066,922 3,038,931
Percentage Value Distribution

Income 4.45% 4.44% 4.44% 4.43% 4.42%
Net Sale Price 95.55% 95.56% 95.56% 95.57% 95.58%
100.00% 100.00% 100.00% 100.00% 100.00%

Appendix 02
SCENARIO B - ARGUS VALUE MATRIX REPORT
Value Matrix Report

2019/3/25 14:22:19
Key Valuation Policies

Valuation (PV/IRR) Date: January, 2019
Date of Sale: December, 2020
Period to Cap (at Sale): Year of Sale
Value Matrix
Table Shows: 1) Unleveraged PV's 1) Net Sale Price 2) Exit Cap Rate
2) Unleveraged PV's $/SF 4,019,627 3,768,400 3,546,730 3,349,689 3,173,390
3) Going In Cap. Rates 7.50% 8.00% 8.50% 9.00% 9.50%
1) Cash Flow Discount Rate 8.50% 3,554,943 3,341,537 3,153,238 2,985,860 2,836,102
2) Resale Discount Rate 8.50% 252.39 237.24 223.87 211.99 201.36
4.69% 4.99% 5.29% 5.58% 5.88%
9.00% 3,522,096 3,310,644 3,124,068 2,958,222 2,809,835
9.00% 250.06 235.05 221.80 210.03 199.49
4.73% 5.03% 5.34% 5.63% 5.93%
9.50% 3,489,700 3,280,174 3,095,298 2,930,964 2,783,928
9.50% 247.76 232.88 219.76 208.09 197.65
4.78% 5.08% 5.39% 5.69% 5.99%
10.00% 3,457,746 3,250,120 3,066,922 2,904,078 2,758,376
10.00% 245.49 230.75 217.74 206.18 195.84
4.82% 5.13% 5.44% 5.74% 6.04%
10.50% 3,426,226 3,220,475 3,038,931 2,877,557 2,733,171
10.50% 243.25 228.65 215.76 204.30 194.05
4.87% 5.18% 5.49% 5.79% 6.10%

Appendix 02
SCENARIO B - ARGUS VALUE MATRIX REPORT (Cont’)
Sales Price Calculation

NOI To Capitalize 313,531 313,531 313,531 313,531 313,531
Divided by Cap Rate 7.50% 8.00% 8.50% 9.00% 9.50%
Gross Sales Price 4,180,412 3,919,136 3,688,599 3,483,677 3,300,325
Adjustments to Sale 0 0 0 0 0
Adjusted Gross Sales Price 4,180,412 3,919,136 3,688,599 3,483,677 3,300,325
Cost of Sales -160,785 -150,736 -141,869 -133,988 -126,936
Net Sale Price 4,019,627 3,768,400 3,546,730 3,349,689 3,173,390

Appendix 02
SCENARIO B - ARGUS LOAN AMORTIZATION REPORT
Loan Amortization Report

1, 2019 through 12, 2021
2019/3/25 14:30:26
Loan Name Debt 1


Qtr Ended: 3 - 2019 0 1,666,887 4.75% 28,510 19,760 8,750 0 1,658,137
Qtr Ended: 6 - 2019 1,658,137 0 4.75% 28,509 19,655 8,854 0 1,649,283
Qtr Ended: 9 - 2019 1,649,283 0 4.75% 28,510 19,550 8,960 0 1,640,323
Qtr Ended: 12 - 2019 1,640,323 0 4.75% 28,510 19,443 9,067 0 1,631,256
Total 2019 0 1,666,887 4.75% 114,039 78,408 35,631 0 1,631,256
Qtr Ended: 3 - 2020 1,631,256 0 4.75% 28,509 19,335 9,174 0 1,622,082

Qtr Ended: 6 - 2020 1,622,082 0 4.75% 28,510 19,226 9,284 0 1,612,798
Qtr Ended: 9 - 2020 1,612,798 0 4.75% 28,509 19,114 9,395 0 1,603,403
Qtr Ended: 12 - 2020 1,603,403 0 4.75% 28,510 19,003 9,507 1,593,896 0
Total 2020 1,631,256 0 4.75% 114,038 76,678 37,360 1,593,896 0
Final Totals 0 1,666,887 4.75% 228,077 155,086 72,991 1,593,896 0

Appendix 02
SCENARIO B - ARGUS LOAN AMORTIZATION REPORT (Cont’)
Loan Name Renovation Loan


Qtr Ended: 9 - 2019 0 525,000 6.75% 18,085 8,807 9,278 0 515,722
Qtr Ended: 12 - 2019 515,722 0 6.75% 18,085 8,650 9,435 0 506,287
Total 2019 0 525,000 6.75% 36,170 17,457 18,713 0 506,287
Qtr Ended: 3 - 2020 506,287 0 6.75% 18,084 8,490 9,594 0 496,693

Qtr Ended: 6 - 2020 496,693 0 6.75% 18,085 8,327 9,758 0 486,935
Qtr Ended: 9 - 2020 486,935 0 6.75% 18,085 8,162 9,923 0 477,012
Qtr Ended: 12 - 2020 477,012 0 6.75% 18,085 7,993 10,092 466,920 0
Total 2020 506,287 0 6.75% 72,339 32,972 39,367 466,920 0
Final Totals 0 525,000 6.75% 108,509 50,429 58,080 466,920 0

APPENDIX 03
SITE PLAN
SCENARIO A (1/2)
1
to parking →
2
10
11
12
13
14
Le Cafe Pepper Potts 15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
10
11
12
Banner's Green Juice

13
14
15
Machine
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
9
MAIN ROAD
10
11
12
13
14
15
Stark Bank and Trust Stark Bank and Trust

16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
1 1 2 3 4 5 6
RAIL ROAD
2
Basement
4
10
11
12
13
Level 1 - Street Level

APPENDIX 03
SITE PLAN
SCENARIO A (2/2)
Walters & Murdock LLP Shields Strategies

Insurance
Visionary Vanguard
Financial
Bifrost Transit Service
Mjolnir Renovations
Plant Your Groots Real
Estate
Level 2 Level 3

APPENDIX 04
SITE PLAN
SCENARIO B (1/3)
1
to parking →
2
10
11
12
13
14
Le Cafe Pepper Potts 15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Romanoff Bike & Box

1
10
11
12
Banner's Green Juice

13
14
15
Machine
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
9
MAIN ROAD
10
11
12
13
14
15
Stark Bank and Trust Stark Bank and Trust

16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
1 1 2 3 4 5 6
RAILROAD AVENUE
2
Basement
4
10
11
12
13
Level 1 - Street Level

APPENDIX 04
SITE PLAN
SCENARIO B (2/3)
Walters & Murdock LLP Shields Strategies

Insurance
Visionary Vanguard
Financial
Bifrost Transit Service
Mjolnir Renovations
Plant Your Groots Real
Estate
Level 2 Level 3

APPENDIX 04
SITE PLAN
SCENARIO B (3/3)
Amenity Area (incl.

BansheeTel Tower)
Klaue Lounge & Resto
Rooftop

APPENDIX 05
WORKS CITED
Ali, F. (2019, February 20). A decade in review: Ecommerce sales vs. retail sales 2007-2018. Digital Commerce
360. Retrieved from https://www.digitalcommerce360.com/article/e-commerce-sales-retail-sales-ten-year-
review
Deloitte Center for Financial Services. (2019, March 12). 2019 Commercial Real Estate Industry Outlook. Retrieved
from https://www2.deloitte.com/us/en/pages/real-estate/articles/commercial-real-estate-industry-outlook.html
Integra Realty Research. (2019). Viewpoint 2019: Commercial Real Estate Trends Report. Retrieved from https://
www.irr.com/reports/Viewpoint%202019.pdf
Nielsen Company. (2018). Fad or Fundamental: Health and Wellness 2018 [Webinar]. Retrieved from https://
www.nielsen.com/us/en/insights/webinars/2018/webinar-fad-or-fundamental-health-and-wellness-2018.html
NYU Furman Center. (2018, August 1). State of New York City’s Housing & Neighborhoods – 2017 Report. Retrieved
from http://furmancenter.org/research/sonychan
PricewaterhouseCoopers, & Urban Land Institute. (2019). Emerging Trends in Real Estate - US and Canada 2019.
Retrieved from https://www.pwc.com/us/en/industries/asset-wealth-management/real-estate/emerging-trends-in
-real-estate.html
Quittner, J. (2016, September 1). Why Americans are spending more on experiences vs buying stuff. Fortune. Re-
trieved from http://fortune.com/2016/09/01/selling-experiences
Retail MarketPlace Data Note Leakage/Surplus Factor. http://downloads.esri.com/esri_content_doc/dbl/us/

LeakageSurplusDataNote2014.pdf
Sisson, P. (2018, December 26). The 10 top emerging trends that will shape real estate in 2019. Retrieved from
https://www.curbed.com/2018/10/10/17959984/real-estate-trends-2019-housing-affordability-investment
Thomas, L. (2016, July 12). Enough with the doom and gloom, retail and its real estate have bright spots. Re-
trieved from https://www.cnbc.com/2018/01/23/enough-with-the-doom-and-gloom-retail-real-estate-has-
bright-spots.html
Mueller, G. R. (2019). Real Estate Market Cycle Monitor 4th Quarter 2018 Analysis [Webinar]. RealNex. Retrieved
from http://blog.realnex.com/market_cycle_monitor_q1_2019?utm_campaign=RealNex%
203.0&utm_medium=email&_hsenc=p2ANqtz--N43CqaDY1lMptp35O_KpyEupp-OQYiAEEMCm9oO2nrk-
C3waPrjcQ5Jj1bvlOLcCgyKvEP4G8hwctiDvg61-
HlcBuXg&_hsmi=70739335&utm_content=70739335&utm_source=hs_email&hsCtaTracking=2d409227-ea48-4eca-
ac3c-cbf512b63634%7C985ead57-94b8-4cb0-9733-9ee06c7798ba

S.H.I.E.L.D. DOSSIERS
Agent: Ericka Simmons
Alias: Luca Cage, Agent Q Team Unit: Dark Defenders
Gender: Female DOB: cryogenically resuscitated 2016
Hair: Black Eyes: Black
Languages: English
Education:
 Johns Hopkins University (2019), Master of Business Administration
 Columbia University's Columbia College in the City of New York (2004), Bachelor of Arts
in Economics: Math | Computer Science
Personal Bio:
Ericka has been a Junior S.H.I.E.L.D. agent since the age of 14, tracking evil doers in the
Bronx, Brooklyn and Manhattan. She worked in the financial sector as a former hedge fund
employee turned REIT analyst turned real estate private equity associate. For her under-
cover persona, she serves full time as COO a Crystal City-based real estate valuation
startup. In the evenings, to further perfect her covert training, she attends Johns Hopkins,
taking classes at the School of Advanced International Studies and Carey Business School.
Power Origin: Technology
Credit: Heroized.com
Special Power: Flight body armor. Drone engineer. Superhuman genius.
Agent: Briggs Davis

Alias: Irony Fist, The Pacifier Team Unit: Dark Defenders
Gender: Male DOB: classified
Hair: Dirty blond Eyes: Blue
Languages: English, Broken French, all dog languages
Education:
 Johns Hopkins University (2019), Master of Business Administration
 Middlebury College, Bachelor’s Degree in Political Science
Personal Bio:
He is a fan of his dog, Blue, the Washington Capitals, and the Ohio State Buckeyes.
Power Origin: Science

Special Power: Superhuman strength and agility. Martial artist. Gamma punch. Able to
Credit: Heroized.com speak with and organize dogs

S.H.I.E.L.D. DOSSIERS
Agent: Yoga Prakasa
Alias: DareDemon, Captain DD, Leviathan Team Unit: Dark Defenders
Gender: Male DOB: classified
Languages: English, Indonesian (Bahasa), Javanese
Education:
 Johns Hopkins University (2019), Master of Science in Real Estate and Infrastructure
 Indiana University (2004), Bachelor of Science in Business Process Management and
Bachelor of Arts in Islamic Finance
Personal Bio:
An investment professional currently on leave to pursue a graduate degree at the Johns
Hopkins Carey Business School. He has more than 12 years of experience in capital market
and alternative investment. His dynamic and multi-disciplinary background covered differ-
ent posts in research, business development, risk management, compliance, investment
management, and product development in both sell side and buy side.
Power Origin: Mutation
Special Power: Enhanced senses, speed, agility, and strength. Exhibits secondary mutation
Credit: Heroized.com of water element and molecule manipulation.
Agent: Yue Wang

Alias: Jessica Mogwai Team Unit: Dark Defenders
Gender: Female DOB: classified
Languages: English, Chinese (Mandarin)
Education:
 Johns Hopkins University (2019), Master of Science in Real Estate and Infrastructure
 Central University of Finance and Economics (2018), Bachelor of Project Management
Personal Bio:
A young elite international agent from mysterious China. Specially Appointed to assist the
S.H.I.E.L.D team. Yue has a cover identity as student for more than 15 years and published
three research articles about Evil Project Management and minority construction workers’
safety condition during her undergraduate.
Power Origin: Magic

Special Power: Interdimensional travel. Magical knack for electronics.
Credit: Heroized.com

ARGUS UNIVERSITY CHALLENGE 2019
PRESENTED BY:
Baltimore Campus: 100 International Dr., Baltimore MD 21202
DC Campus: 1625 Massachusetts Avenue, NW, Washington DC 20036
410-234-9200 (Baltimore) | 202-588-0597 (Washington, DC) | www.carey.jhu.edu

Argus Challenge 2019 - Team Johns Hopkins

Uploaded by

Document Information

Copyright

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Argus Challenge 2019 - Team Johns Hopkins

Uploaded by

Copyright:

ARGUS UNIVERSITY CHALLENGE 2019

Argus University Challenge 2019 page 2

Gross Sale Proceeds from Holding Unleveraged Leveraged

SCENARIO B $3,688,599 $1,485,914 2 Years 28.98% 96.06%

Our Final Recommendation: Choose Scenario B.

Argus University Challenge 2019 page 4

Job creation and absorption nationally continue to outperform historical av-

Argus University Challenge 2019 page 6

Argus University Challenge 2019 page 7

ECONOMIC CYCLE COMMENTARY & OUTLOOK

Argus University Challenge 2019 page 8

Argus University Challenge 2019 page 9

Source: Authors’ charts, data from NCREIF’s National Property Index

Argus University Challenge 2019 page 10

Source: Authors’ charts, data from NCREIF’s National Property Index.

Argus University Challenge 2019 page 11

Argus University Challenge 2019 page 12

Argus University Challenge 2019 page 13

Chart compiled by authors using data from Esri.

Argus University Challenge 2019 page 14

NEW YORK REAL ESTATE MARKETS: RETAIL & OFFICE

Argus University Challenge 2019 page 15

Source: Author’s charts using CoStar data.

Argus University Challenge 2019 page 16

Source: Authors’ charts, map from Google

Argus University Challenge 2019 page 18

Argus University Challenge 2019 page 19

WESTCHESTER | SOUTHEASTERN CONNECTICUT

Argus University Challenge 2019 page 20

Argus University Challenge 2019 page 21

Argus University Challenge 2019 page 22

SCHOOL RATING AND HOME APPRECIATION

Source: Authors’ chart, data from Zillow and Greatschools.org

Argus University Challenge 2019 page 23

Argus University Challenge 2019 page 24

ADJUSTMENTS FOR DISCREPANCIES

BENEFITS FROM TRANSIT ORIENTED DEVELOPMENT

13 Nassau County Infill Redevelopment Feasibility Study

Argus University Challenge 2019 page 26

Argus University Challenge 2019 page 27

ACCOUNTING FOR CONSUMER TRENDS

14Retail MarketPlace Data Note Leakage/Surplus Factor (http://downloads.esri.com/esri_content_doc/dbl/us/

Argus University Challenge 2019 page 28

Argus University Challenge 2019 page 29

Argus University Challenge 2019 page 30

Argus University Challenge 2019 page 32

Argus University Challenge 2019 page 33

Cell Phone Tower

Argus University Challenge 2019 page 34

Romanoff Bike & Box

Klaue Lounge and Restaurant

Argus University Challenge 2019 page 35

Argus University Challenge 2019 page 36

Sqft Weight Benchmark Hurdle Rate

Scenario B Retail 12,390 57% 14.31% 8.1%

Argus University Challenge 2019 page 37

Scenario Analysis Start Date Holding Period

Office A&B Walters & Murdock Real 2021/1/1 5

Argus University Challenge 2019 page 38

Anticipating the foreseeable recessionary period, upgrades and renovations de-

MARKET RENT ANALYSIS

Argus University Challenge 2019 page 39

within the various lease ranges.

Office Lease Summary Chart

Argus University Challenge 2019 page 40

Type Tenant Area Old New Other

Banner’s Green Machine Juices 1,500 $28 $34