Class project for REAL 470 at Drexel University. The goal was to practice finding a property and evaluate its benefits and negatives.

1. Site Market Due Diligence Finance Pro-Forma> > > >
Commercial & Rental Property
John Cao, LLC
537 North 35th Street
Philadelphia, PA 19104

2. Site Market Due Diligence Finance Pro-Forma> > > >
Content Page
• Site Analysis
• Market Analysis
• Project Team
• Financial Options
• Pro-Forma

3. Site Market Due Diligence Finance Pro-Forma> > > >
The building
Site >

4. Site Market Due Diligence Finance Pro-Forma> > > >
The building
Site >

5. Site Market Due Diligence Finance Pro-Forma> > > >
The Area
Site >

6. Site Market Due Diligence Finance Pro-Forma> > > >
Neighborhood Analysis
Site >
Source: City-data.com

7. Site Market Due Diligence Finance Pro-Forma> > > >
Competition in the Area
Proposed Area Competitors
Site >

8. Site Market Due Diligence Finance Pro-Forma> > > >
Market Analysis
Market >
Source: Neighborhoodscout.com
Real estate activity blooming
Mantua Growth

9. Site Market Due Diligence Finance Pro-Forma> > > >
Drexel Master Plan (40 years)
Market >
New building
Old Building
35th Street

10. Site Market Due Diligence Finance Pro-Forma> > > >
Zoning
• CMX-2
– Neighborhood Commercial Mixed-Use 2
• Primarily intended to accommodate neighborhood-
serving retail and service uses. The range of allowed
uses is broader than the CMX-1 district.
• CMX-1,
– Neighborhood Commercial Mixed-Use
• Primarily intended to accommodate low-impact, small-
scale, neighborhood-serving retail and service uses in
storefront buildings, as well as the types of residential
uses allowed in surrounding zoning districts.
Due Diligence >

11. Site Market Due Diligence Finance Pro-Forma> > > >
Permits & Licenses
Due Diligence >
Permit
Permit
Number
Permit
Type
Status
Date
issued
Work
Descrip7on
200946
ELE-­‐EZ
ELECTRICAL
ACTIVE
2/12/09
REPLACE
ROMEX
WIRING
TO
FIXTURES
IN
BASEMENT,
REMOVE
HANGING
WIRES,
CLOSE
OPEN
JUNCTION
BOXES,
REPLACE
4
LIGHT
FIXTURES,
2
EXIT
SIGNS,
ADD
2
EMERGENCY
LIGHTS,
4
REMOTE
HEADS
IN
BACK
BATHROOM
AND
POINT
OF
EGRESS
AS
PER
2005
NEC
(WEST
DISTRICT)
Business
Licenses
License
Number
License
Type
Status
Date
issued
Expira7on
Date
206214
FOOD
PREP(<50
SEATS)
ACTIVE
12/7/04
4/30/14
R
7026
RESTAURANT
LIQUOR
-­‐R
ACTIVE
11/2/01
N/A

12. Site Market Due Diligence Finance Pro-Forma> > > >
Violations
Due Diligence >
Building
Viola4ons
VIOLATION
CODE
VIOLATION
TYPE
VIOLATION
DATE
STATUS
LOCATION
A-­‐301.1/2
PERMB-­‐
CONST
ADDITION
10/4/12
Complied
One
Story
A_ached
Shed
A-­‐504.1/3
SWO-­‐
CONSTR
W/O
BLDG
PERMIT
10/4/12
Complied
One
Story
A_ached
Shed
A-­‐901.13/1
PENALTY-­‐
NO
BLDG
PERM
INFO
N/A
Complied
N/A
Liquor
License
Viola4ons
Case
Number
Avertment
Ini7a7on
Date
Closing
Date
Penalty
2005-­‐0593
44001-­‐NOT
A
BONA
FIDE
RESTAURANT,
INSUFFICIENT
FOOD,
UTENSILS,
SEATING.
3/17/05
7/8/05
$200

13. Site Market Due Diligence Finance Pro-Forma> > > >
Financial Options
• Construction loan
– Nationwide
• Permanent loan
– New America
Finance
Finance >

14. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Real
470
Retail
Pro-­‐forma
Revised
6/4/13
Number
or
Retail
Units
3
Total
#
of
units
3
Rental
Revenue
Summary
Apartment
Unit
Types
#
of
Units
Rent/g.
area
/g.
Total
sq.
g.
Rent
/
Month/
Unit
Total
annual
revenue
Retail
Unit
1
(Bar)
1
3.75
800
800
3,000
$36,000
Retail
Unit
2
(2nd
Floor
Office)
1
0.88
800
800
700
$8,400
Retail
Unit
3
(3rd
Floor
Office)
1
0.89
784
784
700
$8,400
Total
Retail
Rental
revenue
3
2,384
4,400
$52,800
Other
Rental
revenue
$0
Other
Misc.
revenue
$0
Gross
Poten4al
Revenue
$52,800

15. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Proforma
Net
Opera7ng
Income
Gross
Poten7al
Revenue
$52,800
-­‐Vacancy
5.00%
($2,640)
-­‐
Bad
Debt
0.50%
($264)
Effec7ve
Gross
Income
$52,800
Property
Management
Income
3.00%
of
effec7ve
gross
revenue
1,584
-­‐
Controllable
Expenses
$300
per
unit
$900
-­‐
Real
Estate
Taxes
1.36%
of
es7mated
total
project
costs
$7,920
-­‐
Insurance
$400
per
unit
$1,200
-­‐
Common
Area
U7li7es
$100
per
unit
$300
-­‐
Replacement
Reserves
$150
per
unit
$450
=
Total
Expenses
$10,770
$10,770
Net
Opera7ng
Income
$43,614

16. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Maximum
Debt
Calcula7on
Proforma
NOI
$43,614
Capitaliza7on
Rate
9.69%
Value
of
Income
Property
$450,000
Loan
Terms
Interest
Rate
3.38%
Amor7za7on
Rate
(yrs.)
30
Debt
based
on
Loan
To
Value
ra7o
(LTV)
Maximum
LTV
ra7o
80.00%
Maximum
Loan
based
on
LTV
for
Income
Property
$360,000
Using
Debt
Coverage
Ra7o
(DCR)
Monthly
NOI
$3,635
Maximum
Debt
Coverage
Ra7o
(DCR)
4.05
$898
Maximum
Loan
Based
on
DCR
$203,010
Maximum
loan
(lesser
of
LTV
or
DCR
results)
$360,000
Annual
Debt
Service
$10,770

17. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Ini7al
Purchase
Cost
Number
of
Units
3
0.34
0.34
0.33
1
1.00
Hard
&
Sog
Costs
Measurement
Unit
1
Unit
2
Unit
3
Per
Unit
Total
Land
S.F.
151,006.71
151,006.71
147,986.58
450000
$450,000
Appraisal
&
7tle
S.F.
458.05
458.05
448.89
1365
$1,365
Marke7ng
Per
Unit
600.00
600.00
600.00
67238
$1,800
Total
Purchase
Costs
before
Interest
&
Opera7ng
Reserve
$453,165
Development
Costs
Number
of
units
3
0.34
0.34
0.33
1
1.00
Hard
&
Sog
Costs
Measurement
Unit
1
Unit
2
Unit
3
Per
Unit
Total
Approval
&
License
Fees
S.F.
1,237.92
1,237.92
1,213.16
3689
$3,689
Environmental
remedia7on
Per
Unit
5,800.00
4,960.00
4,860.80
15972.8
$15,621
Construc4on
hard
costs
Per
Unit
1,672.00
80.00
78.40
6839745
$1,830
Professional
services
(plumbing,
HVAC,
fire
protec4on,
electrical)
Per
Unit
4,184.00
616.00
607.68
345796
$5,408
Legal
&
other
fees
Per
Unit
8,389.26
8,389.26
8,221.48
25000
$25,000
Real
estate
tax
abatement
S.F.
($7,920)
($7,920)
($7,920)
45740
-­‐$23,760
Insurances
S.F.
2,000.00
2,000.00
2,000.00
870
$6,000
Con7ngency
S.F.
566.91
566.91
555.57
192864
$1,689
Total
Development
Costs
before
Interest
&
Opera7ng
Reserve
$35,477

18. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Hard
Costs
Unit
1
Unit
2
Unit
3
Total
Exterior
walls
80
80
78
238
Exterior
windows
200
-­‐
-­‐
200
Exterior
doors
1,000
-­‐
-­‐
1,000
Interior
doors
-­‐
-­‐
-­‐
-­‐
Wall
finishes
-­‐
-­‐
-­‐
-­‐
Floor
finishes
-­‐
-­‐
-­‐
-­‐
Ceiling
finishes
392
-­‐
-­‐
392
Total
1,672
80
78
1,830
Professional
services
cost
Unit
1
Unit
2
Unit
3
Total
Plumbing
200
200
200
600
Rain
water
drainage
408
-­‐
-­‐
408
Electrical
service
&
distribu7on
2,000
-­‐
-­‐
2,000
Cement
ramp
1,000
-­‐
-­‐
1,000
Alarm
&
security
376
376
368
1,120
Other
Electrical
systems
200
40
39
279
Total
4,184
616
608
5,408

19. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Insurances
Cost
Landlord
insurance
(All
State
Insurance)
600
General
liability
insurance
(Hiscox)
270
Total
insurance
cost
870
Approval
fees
Cost
License
Cost
Demoli4on
fee
Cost
Total
fees
Cost
Altera7ons
permit
1,050
Commercial
ac7vity
license
300
Exterior
wall
covering
50
total
approval
cost
3,419
building
permits
100
Dumpster
license
-­‐
private
120
replacement
of
windows
and
doors
50
total
license
cost
420
cer7ficate
of
occupancy
-­‐
total
license
cost
420
Relocate
HVAC
difuser
50
Grand
total
3,839
cooking
ex7nguishing
systems
permit
100
For
warm
air
hea7ng
apparatus
100
Fire
suppression
permit
-­‐
total
cost
250
Lawful
occupany
sign
100
mechancial
permit
-­‐
Electrical
permit
100
Air
permit
-­‐
Plumbing
permit
100
Cer7ficate
of
rental
suitability
-­‐
real
estate
or
seller
cer7ficate
100
Demoli7on
fee
250
Commercial
cooking
exhaust
systems
100
ramp
100
Preliminary
review
(3
fl
>
$300,
ea.
+
=
$50)
350
electrical
code
fee
($20k
of
electrical
work)
800
Opera7onal
permit
(3
opera7ons)
75
House
inspec7on
license
90
Uniform
Construc7on
Code
Surcharge
4
total
approval
cost
3,419

20. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Es7mate
Of
Lease
Up
Opera7ng
Short
Fall
Gross
Poten7al
Rent
(monthly)
$4,400
Lease
up
period
(months
un7l
stabiliza7on)
6
Average
occupancy
during
lease
up
-­‐
Es7mated
rent
during
lease
up
$0
-­‐
Es7mated
Opera7ng
Expense
during
lease
up
$5,385
=
NOI
during
Lease
Up
-­‐$5,385
-­‐
Construc7on
Interest
during
lease
up
$0
=
Opera7ng
Short
Fall
during
lease
up
($5,385)
$5,385
Total
Project
costs
$494,027

21. Site Market Due Diligence Finance Pro-Forma> > > >
Pro-forma
Pro-Forma
Financial
Summary
Total
Project
Costs
$494,027
-­‐
Permanent
Loan
$360,000
=
Equity
Required
$134,027
NOI
at
stabiliza7on
$43,614
-­‐
Annual
Debt
Service
$10,770
NOI
ager
Debt
Service,
but
before
taxes
$32,844
Leverage
Annual
Return
on
Invested
Equity
24.51%