17-19

E Main St
Commercial Mix-Use

Research Report
December 06, 2021

Recommendation: Buy
Purchase Price: $1,707,328
Value-added Pre-tax IRR: 17.94%

Andrew Koh | Jason Mao | Lawrence Li

 17-19 E Main St

TABLE OF CONTENTS
Property Overview………...…………………………………………………………………………………… 3
Surrounding Area……………………………………………………………………………………………… 4
Value Proposition.………………………………………………………………………………………… 4
Value Added Strategy………………………………………………………………………………………… 5
Valuation….…………………………………………………………………………………………………. 6
Catalyst and Risk………………………………………………………………………………………. 8
Conclusion…………………………………………………………………………………………………… 8
Reference …………………………………………………………………………………………………… 9
Appendix ……………………………………………………………………………………………… 10

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 17-19 E Main St

PROPERTY OVERVIEW
17-19 Main Street (“the property”) is a 3-storey mixed- unit. A paid laundry room is located on the second
use building constructed in 1900 and is located in the floor. Currently, the basement is unfinished, and the
heart of Welland, Ontario. The property currently “Renovation” portion will detail development plans
consists of a basement, 12 commercial units on the first for this space.
floor, and 12 residential units on the second and third
Exhibit 2.0
floors (6 per floor) for a total of 22,294 sqft. In addition, 1-Bedroom Floorplan
there are 14 parking spaces located behind the property.
The building is currently largely vacant with a
commercial occupancy rate of 50% and a residential
occupancy rate of 66% This is due to the expiration of
many current leases and no renewal will be given as the
building has been planned for a renovation.
Exhibit 1.0
Picture of the property

The first floor is a walk-in mall currently occupied by

several commercial tenants. These notably include Exhibit 3.0
Inspire Hair Design, Sharma Immigration Consultancy Standard 2-Bedroom
Inc., and James Takeo Tattoos. The tenants are all
successful local businesses with average customer
ratings of between 4.8 and 5 stars on Google and
Facebook. The back half of the first floor is currently
vacant and is proposed to undergo renovations, which
will be discussed in the “Renovation” section of this
report.

The second and third floors can be accessed via

internal stairwells, and each have 6 residential units
joined by a narrow hallway. Each unit has a living room,
4-piece bathroom, kitchen, and either 1 or 2 bedrooms;
7 units have 1 bedroom, while the remaining 5 have 2
bedrooms. In addition, all units are fitted with a water
heater, gas furnace, sub-panel, and dedicated HVAC

3

SURROUNDING AREA
Welland is an older established area with a population
of 62,390, last recorded in 2016. It is expected that the
population will continue to grow at a rate of 3.28% —
faster than the Niagara Region average — and add
20,000 new residents by 2034. The neighbourhood has
a Walk Score of 52, Transit Score of 38, and Bike Score
of 86. It has a low walk score as the system does not
consider the nearby farmers market as a certified
grocery store, thus understating the score. Despite
these average scores, the property is situated in a well-
developed downtown Welland neighbourhood and is
located on East Main Street, a major connecting route
to QEW and Highway 406. This prime location
exempts the building from the travel inconvenience
depicted through the scores. For example, restaurants,
gym, parks, schools, and groceries are all within
walking or commuting distance. The Welland Bus
Terminal is only a 5-min walk away from the subject
property, thus making this location relatively more
convenient compared to the rest of Welland. Finally,
Niagara College and Brock University are both
accessible through an 8 and 15-min drive respectively.
Exhibit 4.0
Location of Subject Property
Exhibit 5.0
Map of Surrounding Amenities
4
17-19 E Main St
VALUE PROPOSITION
The property’s location and mixed-use nature gives it a
few key value propositions. Firstly, the residential units
are ideal for students looking to attend one of the
nearby universities. This demographic provides stable
year-round occupancy and frequent opportunities to
revalue rent to the market rate. Acquisition costs also
tend to be lower for students since there is high
demand and they actively seek out units ahead of each
school year. In addition, the close proximity to
amenities described in the previous section makes this
property attractive for both commercial and residential
tenants. Finally, commercial units are leased by
successful and diverse tenants, eliminating the reliance
on a single anchor tenant. These tenants have
expressed their interest in remaining long-term,
providing a stable source of commercial income on the
first floor. For the current market price, this property
provides high potential for future earnings and exit,
particularly if renovations are performed.
Exhibit 5.0
Number of Enrolled Post Secondary Students
Brock University 19,100
Niagara College 10,500
0 5,000 10,000 15,000 20,000
Exhibit 6.0
Commercial Tenant Google Ratings
4.8 
4.8 
5.0 
 17-19 E Main St

VALUE ADDED STRATEGY

The large number of current vacancies have given us an opportunity to renovate the property and lease the units out
at market rate. We propose to convert some commercial units at the back of the ground floor (area boxed in blue in
Exhibit 7.0) into residential units as they are able to generate higher rental income per square foot. Also, to increase
customer footprint for our commercial tenants, we intend to relocate the doors to the front end that is facing the
main street. Secondly, for the basement, we plan to develop the basement into a storage facility to fully utilize the
space within the building. Finally, we will renovate the second and third floors’ washrooms, kitchen, and floors to
give it a new fresh look. Through quoting with a private constructor, this project has an estimated after-tax budget of
$1.06m and will increase our current valuation of the property from $1.7m to $3.0m after renovation.
Exhibit 7.0
Non-renovated Ground Floor Plan (Left), Rough Sketch of Renovated Floor Plan (Right)

Exhibit 8.0 Exhibit 9.0

Basement Renovation in Progress Bedroom Renovation Pictures

5

Exhibit 10.0
Football Field Chart (Value ranges in $Th CAD)
Purchase:
$1,707,328
DCF - Rennovated
Sales Comp - Rennovated
DCF $1,615 $1,789
Sales Comp $2,207
1,000 2,000
VALUATION
Two valuation metrics have been used, namely Sales
Approach (Comparable) and Income Approach (DCF).
For the Sales Approach, we have gathered 9
transactions from the appraisal but only 4 were chosen
for comparison based on their similarities to our
subject property. On the other hand, DCF outputs
shown in the appendix are set at base case to determine
the purchase price.
A football field chart is shown above in Exhibit 10.0 to
depict the output of different valuation ranges used by
the two metrics for both pre- and post-renovation. As
observed, the renovated Sales Comparable generated
the widest range of values because our comparable
have smaller property sizes and net leases, thus
contributing to a higher Price/SF. Contrarily, our DCF
outputs generally have a close range with DCF under
non-renovated scenarios yielding lowest estimates.
A. Comparable Transactions
To gauge the property’s relative value, 9 recently
transacted properties were listed as potential
comparable by the appraiser. We narrowed the final
17-19 E Main St
Purchase & Renovation:
$2,770,658
$2,937 $3,064
$2,385 $3,835
$2,385
3,000 4,000
comparable set down to 4 properties and rated them
on a variety of factors against our target property. A
negative adjustment in a category means that the
property performs unfavourably against the
comparable, while a positive score means the property
performs favourably (refer to appendix for more
details).
In the unrenovated case, we used 936 E. Main St and
3876 Main St as the appropriate comps. These
properties have an adjustment score of +1 and 0
respectively, meaning their overall value should be
similar to our property. On the other hand, the two
other buildings have significant negative adjustments.
This is largely due to those properties possessing better
qualities than the subject property, meaning it is
unrealistic to attain their value of $172 and $192 per SF.
As a result, the most feasible Price/SF was 935 E Main
St’s $99 and 3876 Main St’s $107, thus forming the
valuation ranges for Sales Comparable in the football
field.
For renovated case, we used an identical method to
determine which Price/SF is the most feasible option.
After analyzing and making the necessary adjustments,
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 17-19 E Main St

we believe 3876 Main St and 91 E Main St were the
closest comparable. As a result, this forms range of
Price/SF valuation from $107 to $172 for our
Renovated Sales Comparable. The football field in
Exhibit 10.0 shows the aggregate amount. Please refer
to appendix for more details on Sales Comparable.
B. DCF – Base Case
The DCF’s main assumptions revolve around revenue
and expenses. For residential rent in 2022, a 1.2%
growth rate under the base case scenario due to
Ontario government rent control. Beyond 2022, the
residential growth rate is set to grow at 1.74% as this
growth rate is the last 5-year average rent cap excluding
2020 in Ontario. For commercial rent, the rent growth
is expected to be a modest 3% per year. Looking into
expenses, most of our expenses are quoted from
brokers or appraisers which can be further looked into
in the notes of our Excel models. Some notable
expenses assumptions include Property Tax and
Insurance Premiums growing 3% per year from
previous figures.
C. DCF – Value Added Case
The value of the property increased to $3.0m post-
renovation. Some key assumptions were modified
under this scenario and will be highlighted. First,
residential rent is projected to have a 2% yearly increase
as any building that is newly renovated or built after
2018 is no longer restricted by Ontario government’s
rent control. Also, storage income serves as additional
income streams which contributed to the additional
valuation. On the expense side, we lowered the
insurance and maintenance cost as the newly renovated
building should have less breakdowns compared to
pre-renovation. Finally, we assumed CIBC’s loan
amount to grow $1.94m to account for renovation
costs. Overall, this gives us an Unlevered Before-Tax
IRR of 8.82% and a Levered Before-Tax IRR of
17.94%.
Exhibit 12.0
Increase in unlevered IRR through renovation

The purchase price of $1.71m as previously mentioned

was derived through a 7.5% Discount Rate and
Terminal Cap Rate of 6.5% (more details shown in
Appendix and Excel Model). This gives us an
Unlevered Before-Tax IRR of 6.54%. The reason why
Unlevered Before-Tax IRR does not equate to 7.5% is
because we deducted Acquisition Cost and Land
Transfer Fee. Removing these two costs will make the Exhibit 13.0
IRR equate to 7.5% (refer to model under Income Summary of Pre-Tax IRR
Approach – Unrenovated tab for calculation details). Before After
Through financing this purchase with a loan quoted by Renovation Renovation
CIBC with 70% LTV and 3.51% 5-year fixed term rate, Unlevered
6.54% 8.82%
IRR
we can increase the Before-Tax IRR to 12.14%.
Levered
12.14% 17.94%
Exhibit 11.0 IRR
CIBC Loan Information

Loan to Value (LTV) 70%

Amorticzation Period 30
Interest Rate 3.51%
Payments per year 12
Purchase Price 1,707,328
Loan Balance 1,195,130
Annual Payment 64,480

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 17-19 E Main St

CATALYSTS Exhibit 15.0

A. Omicron Cases Northern Gold Foods Manufacturing Plant
As Covid cases are on the rise again and work from
home will probably continue to persist for some period
of time, people may continue to look to move away
from Toronto to search for larger accommodation and
lower cost of living. According to an article on The
Standard1, real estate brokers have found that 80% of
their clients have been looking to leave the GTA for
Niagara in search of more space and a small-town feel.
RISKS
B. Infrastructure Investment
A. Construction Delays
Welland Transit has announced on November 9th that
Due to the Canadian economy suffering from supply
$345m will be invested into improving transit system
bottlenecks and increased prices, there’s a risk of
efficiently. This allows to keep public transportations’
construction delay or higher than estimated budget for
utilization rate lower and accommodate for increase in
the renovation. This will ultimately hurt our forecasts
population over the next coming years. At the same
and reduce the value of the property
time, with return to school policies being implemented
as early as Winter 2022, this creates better safety
B. Concentration Risk
measures, thus increasing the transit score as a whole.
The property’s tenant portfolio after renovation has a
C. Employment Opportunities high concentration with residential units. This leaves us
risks if the Ontario government decides to change or
There is an increasing amount of interest from
tighten the residential rent cap policies which might
industrial companies in Welland due to tax incentives.
not favour our 2% residential rent forecast.
City Hall stated that the tax assessment that was a low
point of $68m in 2014 has increased to $139m in 2021,
C. Employment Opportunities
thus showing the success in creating job opportunities.
Projecting 5 years into the future, there might be an
As the municipal government continues to plan urban
exit risk where the business cycle is experiencing a
developments strategically through creating dedicated
balance or decline. It could also be the case that
areas for these industrial companies, there will be a
residential properties are not the most favourable real
huge potential for agglomeration and spillover effects.
estate investment due to the real estate cycle.
Exhibit 14.0
General Electric Manufacturing Plant in Welland CONCLUSION
Our target purchase price prior to the property’s
renovation is at $1.71m. Along with a renovation
budget of $1.06m and financing the loan at 70% LTV,
we think the 5-year investment horizon will yield a
Before-Tax Levered IRR of 17.94%. Overall, we
provide a buy recommendation for this property.

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 17-19 E Main St

REFERENCES
1. Colliers International
2. Cushman & Wakefield
3. Canada Mortgage and Housing Corporation
4. Ontario.ca: Rent Control
5. PwC Emerging Trends in Real Estate 2022 Report
6. True Inspection
7. Form Structures
8. Real Estate and Investments 17e, Brueggeman
9. CRA: Class 1 CCA
10. StatCan: Census Profile, 2016 Census – Welland – Pellham
11. The Standard: Torontonians find living space and affordability in Niagara
12. Made in Welland: Welland’s residential boom is 'not all retired people'
13. Made in Welland: Adding to fleet an important step for Welland Transit
14. Renx: New Industry kicks development into high gear in Welland
15. CIBC Bank Loan

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 17-19 E Main St

APPENDIX A: KEY INPUT ASSUMPTIONS

Revenue Growth - Rennovated Rennovation Cost Estimate

Residential Commercial Procurement & Contract Req 22,000
Bear 1.74% 2.00% General Conditions 130,000
Base 2.00% 3.00% Existing Conditions 41,000
Bull 2.26% 4.00% Masonry 6,000
Chosen Rate 2.00% 3.00% Metals 24,000
Woods, Plastic & Composites 95,000
Thermal & Moisture Protection 11,000
Expense Assumptions Other Assumptions
Openings (Door, Windows, Skylight) 74,000
PM Fees 3.50%
Finishes 210,000
Repairs and Maintenance 2.00%
Specialties 9,000
Gas 4.00%
Equipment 18,000
Water + Hydro 7.00%
Plumbing 108,000
Property Tax Growth Rate 3.00%
Heating Ventilation and Air 48,000
Insurance Growth Rate 2.80%
Electrical 62,000
Miscellaneous Expenses 1.00%
Communications 4,000
Management Cost 70,000
Other Assumptions Locker Cost 9,000
Discount Rate 7.50% Project Cost Total (excl. HST 941,000
Terminal Cap Rate 6.50% HST (13%) 122,330
Selling Costs 5.00% Project Total 1,063,330
CCA Rate 4%
Land Allocation % 20%
Corproate Tax Rate 26.50%
Capital Gains Tax 25%
Recapture Tax 25%
Acquisition Cost 2%
Land Transfer Tax 35,318
Leasing Commission - 2022 6%
Leasing Commission 3%
 17-19 E Main St

APPENDIX B: SALES TRANSACTION DETAILS

Adjustments under No Rennovation
Comparable Properties
91 East Main St 936 East Main St 3876 Main St 114-139 St.Paul St
Sale Price 1,168,000 1,005,000 1,100,000 2,300,000
Building Size (SF) 22,294 6,788 10,140 10,275 12,000
Price/SF 172 99 107 192

Adjustments:
NOI/SF N/A Positive Adj. (+3) Positive Adj. (+3) Negative Adj. (-2)
Building Size (SF) Negative Adj. (-3) Negative Adj. (-2) Negative Adj. (-2) Negative Adj. (-1)
Location Neutral (0) Neutral (0) Positive Adj. (+2) Negative Adj. (-2)
YOC Neutral (0) Neutral (0) Neutral (0) Neutral (0)
Building Condition Negative Adj. (-4) Positive (+1) Neutral (0) Negative Adj. (-3)
Parking Positive Adj. (+2) Neutral (0) Negative Adj. (-3) Neutral (0)
Adjurment Results Negative (-5) Slight Positive (+1) Neutral (0) Negative (-9)

Price/SF Range Not Considering Higher than 99 Lower than 107 Not considering

Subject Property Value Range

Sales Approach Case Scenario
DCF Valuation
Bear Base Bull
Estimated Price/SF Range 79 99 103 107
Market Value 1,761,076 2,207,106 2,296,282 2,385,458

Adjustments under Rennovation

Comparable Properties
91 East Main St 936 East Main St 3876 Main St 114-139 St.Paul St
Sale Price 1,168,000 1,005,000 1,100,000 2,300,000
22,294 6,788 10,140 10,275 12,000
Price/SF 172 99 107 192

Adjustments:
NOI/SF N/A Positive Adj. (+3) Positive Adj. (+3) Negative Adj. (-2)
Building Size (SF) Negative Adj. (-3) Negative Adj. (-2) Negative Adj. (-2) Negative Adj. (-1)
Location Neutral (0) Neutral (0) Positive Adj. (+2) Negative Adj. (-2)
YOC Neutral (0) Neutral (0) Neutral (0) Neutral (0)
Building Condition Negative Adj. (-1) Positive Adj. (+4) Positive Adj. (+3) Neutral (0)
Parking Positive Adj. (+2) Neutral (0) Negative Adj. (-3) Neutral (0)
Adjurment Results Slight Negative (-2) Positive (+5) Positive (+3) Negative (-5)

Price/SF Range Considered Considered Considered Considered

Subject Property Value Range

Purchase Price + Sales Approach Case Scenario
DCF Valuation
Rennovation Cost Bear Base Bull
Estimated Price/SF Range 127 130 107 140 172
Market Value 2,824,406 2,906,967 2,385,458 3,110,013 3,834,568

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 17-19 E Main St

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 17-19 E Main St

APPENDIX C: DCF PRE-RENOVATION

Projected Net Operating Income DCF Analysis
2022 2023 2024 2025 2026 2027 Reversion Value 1,877,598
Income: Selling Costs (93,880)
Residential Income 111,798 113,743 115,722 117,736 119,784 121,868 Net Reversion Value 1,783,718
Commercial Income 115,096 118,549 122,106 125,769 129,542 133,428
PV Factor 0.70
Laundry Income 3,600 3,600 3,600 3,600 3,600 3,600
Storage Income 0 0 0 0 0 0
PV Reversion Value 1,242,464
Gross Rental Income 230,494 235,892 241,428 247,104 252,926 258,897
Less: Vacancy Rate 3.00% (6,807) (6,969) (7,135) (7,305) (7,480) (7,659) Sum of PV NOI 464,864
Less: Credit Loss 3.00% (6,807) (6,969) (7,135) (7,305) (7,480) (7,659) PV Reversion Value 1,242,464
Effective Rental Income 216,880 221,955 227,158 232,494 237,967 243,579 Value 1,707,328
Implied Change in Value 9.97%
Expenses:
Property Management Fees (7,591) (7,768) (7,951) (8,137) (8,329) (8,525)
Repairs and Maintenance (2,717) (2,763) (2,809) (2,857) (2,905) (2,954)
Gas (8,675) (8,878) (9,086) (9,300) (9,519) (9,743)
Water + Hydro (15,182) (15,537) (15,901) (16,275) (16,658) (17,051)
Property Tax (45,961) (47,340) (48,760) (50,223) (51,730) (53,281)
Insurance (12,251) (12,618) (12,997) (13,387) (13,788) (14,202)
Operating Expenses (2,169) (2,220) (2,272) (2,325) (2,380) (2,436)
Total Expenses (94,546) (97,124) (99,776) (102,503) (105,308) (108,192)

Capital and Leasing Costs

Leasing Commission (5,755) (5,927) (6,105) (6,288) (6,477) (6,671)
Tenant Improvement (5,755) (5,927) (6,105) (6,288) (6,477) (6,671)
Capital Expenditure (11,510) (11,855) (12,211) (12,577) (12,954) (13,343)

Net Operating Income (NOI) 110,825 112,976 115,172 117,414 119,705 122,044
PV Factor 0.93 0.87 0.80 0.75 0.70
PV NOI 103,093 97,761 92,709 87,920 83,381

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 17-19 E Main St

APPENDIX D: DCF POST-RENOVATION

Projected Net Operating Income DCF Analysis
2022 2023 2024 2025 2026 2027 Reversion Value 3,354,742
Income: Selling Costs (167,737)
Residential Income 207,090 280,688 286,302 292,028 297,868 303,826 Net Reversion Value 3,187,005
Commercial Income 44,891 46,633 48,457 50,362 52,352 54,430
PV Factor 1
Laundry Income 3,600 3,600 3,600 3,600 3,600 3,600
Storage Income (Basement) 4,500 4,500 4,500 4,500 4,500 4,500 PV Reversion Value 2,219,936
Gross Rental Income 260,081 335,421 342,859 350,490 358,320 366,356
Less: Vacancy Rate 2.20% (5,623) (7,280) (7,444) (7,612) (7,784) (7,961) Sum of PV NOI 779,427
Less: Credit Loss 2.00% (5,130) (6,636) (6,785) (6,938) (7,094) (7,255) PV Reversion Value 2,219,936
Effective Rental Income 249,329 321,504 328,630 335,940 343,442 351,140 Property Value 2,999,363
Implied Change in Value 11.85%
Expenses:
Property Management Fees (8,727) (11,253) (11,502) (11,758) (12,020) (12,290)
Repairs and Maintenance (4,040) (5,450) (5,558) (5,667) (5,779) (5,893)
Gas (9,973) (12,860) (13,145) (13,438) (13,738) (14,046)
Water + Hydro (17,453) (22,505) (23,004) (23,516) (24,041) (24,580)
Property Tax (45,961) (47,340) (48,760) (50,223) (51,730) (53,281)
Insurance (12,227) (12,569) (12,921) (13,283) (13,655) (14,037)
Operating Expenses (2,493) (3,215) (3,286) (3,359) (3,434) (3,511)
Total Expenses (100,874) (115,192) (118,177) (121,244) (124,397) (127,639)

Capital and Leasing Costs

Leasing Commission (2,693) (2,332) (2,423) (2,518) (2,618) (2,722)
Tenant Improvement (2,245) (2,332) (2,423) (2,518) (2,618) (2,722)
Capital Expenditure (4,938) (4,663) (4,846) (5,036) (5,235) (5,443)

Net Operating Income (NOI) 143,517 201,648 205,608 209,660 213,809 218,058
PV Factor 0.93 0.87 0.80 0.75 0.70
PV NOI 133,504 174,493 165,506 156,994 148,931

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APPENDIX E: PRE-RENOVATION CASH FLOW AND IRR ANALYSIS

Loan Summary Information
2022 2023 2024 2025 2026
Payment 64,480 64,480 64,480 64,480 64,480
Mortgage Balance 1,172,233 1,148,519 1,123,959 1,098,524 1,072,181
Interest 41,583 40,766 39,920 39,044 38,137
Principal 22,897 23,714 24,560 25,436 26,343

Levered Cash Flow from Operations Unleve

2022 2023 2024 2025 2026
Net Operating Income (NOI) 110,825 112,976 115,172 117,414 119,705
Less: Debt Service (64,480) (64,480) (64,480) (64,480) (64,480)
Before-Tax Cash Flow 46,345 48,495 50,691 52,934 55,225

Net Operating Income (NOI) 110,825 112,976 115,172 117,414 119,705

Less: Interest (41,583) (40,766) (39,920) (39,044) (38,137)
Less: Depreciation (54,635) (52,449) (50,351) (48,337) (46,404)
Taxable Income 14,608 19,760 24,900 30,033 35,164
Tax 3,871 5,236 6,598 7,959 9,318

Before-Tax Cash Flow 46,345 48,495 50,691 52,934 55,225

Less: Tax (3,871) (5,236) (6,598) (7,959) (9,318)
After-Tax Cash Flow 42,474 43,259 44,093 44,975 45,906

Levered Cash Flow From Sale Unlevered Cash

Sale Price (at 5th Year) 1,877,598
Selling Cost (93,880)
Mortgage Balance (1,072,181)
Before-Tax Cash Flow 711,537

Sale Price (at 5th Year) 1,877,598

Selling Cost (93,880)
Original Cost Basis (1,707,328)
Accumulated Depreciation (252,176)
Adjusted Basis (1,455,153)
Gain/(Loss) over Adjusted Basis 328,565
Depreciation Recapture 252,176
Price Appreciation 76,390

Tax on Price Appreciation (19,162)

Tax on Depreciation Recapture (63,044)
Total Capital Gains Tax (82,206)
After-Tax Cash Flow from Sale 629,331

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Levered Cash Flow Summary

2,021 2,022 2,023 2,024 2,025 2,026
Equity Investment (512,199)
Acquisition Cost (34,147)
Land Transfer Fee (35,318)
Before-Tax Cash Flow (581,663) 46,345 48,495 50,691 52,934 766,762
After-Tax Cash Flow (581,663) 42,474 43,259 44,093 44,975 675,237

Before-Tax Levered IRR 12.14%

After-Tax Levered IRR 8.93%

Unlevered Cash Flow Summary

2,021 2,022 2,023 2,024 2,025 2,026
Equity investment (1,707,328)
Acquisition cost (34,147)
Land transfer fee (35,318)
Before-Tax Cash Flow (1,776,793) 110,825 112,976 115,172 117,414 1,903,423
After-Tax Cash Flow (1,776,793) 95,935 96,936 97,994 99,109 1,752,492

Before-Tax Unlevered IRR 6.54%

After-Tax Unlevered IRR 4.22%

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APPENDIX E: POST-RENOVATION CASH FLOW AND IRR ANALYSIS

Loan Summary Information
2,022 2,023 2,024 2,025 2,026
Payment 104,639 104,639 104,639 104,639 104,639
Mortgage Balance 1,902,303 1,863,821 1,823,965 1,782,688 1,739,938
Interest 67,481 66,156 64,783 63,361 61,889
Principal 37,157 38,483 39,856 41,277 42,750

Levered Cash Flow from Operations Unleve

2,022 2,023 2,024 2,025 2,026
Net Operating Income (NOI) 143,517 201,648 205,608 209,660 213,809
Less: Debt Service (104,639) (104,639) (104,639) (104,639) (104,639)
Before-Tax Cash Flow 38,878 97,010 100,969 105,022 109,171

Net Operating Income (NOI) 143,517 201,648 205,608 209,660 213,809

Less: Interest (67,481) (66,156) (64,783) (63,361) (61,889)
Less: Depreciation (54,635) (52,449) (50,351) (48,337) (46,404)
Taxable Income 21,401 83,044 90,473 97,962 105,517
Tax 5,671 22,007 23,975 25,960 27,962

Before-Tax Cash Flow 38,878 97,010 100,969 105,022 109,171

Less: Tax (5,671) (22,007) (23,975) (25,960) (27,962)
After-Tax Cash Flow 33,207 75,003 76,994 79,062 81,209

Levered Cash Flow From Sale Unlevered Cash F

Sale Price (at 5th Year) 3,354,742
Selling Cost (167,737)
Mortgage Balance (1,739,938)
Before-Tax Cash Flow 1,447,067

Sale Price (at 5th Year) 3,354,742

Selling Cost (167,737)
Original Cost Basis (2,770,658)
Accumulated Depreciation (252,176)
Adjusted Basis (2,518,483)
Gain/(Loss) over Adjusted Basis 668,522
Depreciation Recapture 252,176
Price Appreciation 416,347

Tax on Price Appreciation (104,441)

Tax on Depreciation Recapture (63,044)
Total Capital Gains Tax (167,484)
After-Tax Cash Flow from Sale 1,279,582

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 17-19 E Main St

Levered Cash Flow Summary

2,021 2,022 2,023 2,024 2,025 2,026
Equity investment (512,199)
Acquisition cost (34,147)
Land transfer fee (35,318)
Before-Tax Cash Flow (900,662) 38,878 97,010 100,969 105,022 1,556,237
After-Tax Cash Flow (900,662) 33,207 75,003 76,994 79,062 1,360,791

Before-Tax Levered IRR 17.94%

After-Tax Levered IRR 13.77%

Incremental After-Tax Levered IRR

2,021 2,022 2,023 2,024 2,025 2,026
After-Tax CF (Rennovated) (900,662) 33,207 75,003 76,994 79,062 1,360,791
After-Tax CF (No Rennovation) (581,663) 42,474 43,259 44,093 44,975 675,237
Incremental After-Tax CF (318,999) (9,267) 31,744 32,901 34,086 685,554

IRR on Incremental CF 20.50%

Unlevered Cash Flow Summary

2,021 2,022 2,023 2,024 2,025 2,026
Equity investment (2,770,658)
Acquisition cost (34,147)
Land transfer fee (35,318)
Before-Tax Cash Flow (2,840,123) 143,517 201,648 205,608 209,660 3,400,814
After-Tax Cash Flow (2,840,123) 119,963 162,111 164,465 166,910 3,188,967

Before-Tax Unlevered IRR 8.82%

After-Tax Unlevered IRR 6.57%

Incremental After-Tax Unlevered IRR

2,021 2,022 2,023 2,024 2,025 2,026
After-Tax CF (Rennovated) (2,840,123) 119,963 162,111 164,465 166,910 3,188,967
After-Tax CF (No Rennovation) (1,774,772) 103,714 106,260 108,948 112,092 1,767,285
Incremental After-Tax CF (1,065,351) 16,249 55,850 55,517 54,818 1,421,683

IRR on Incremental CF 9.05%

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