development + acquisitions

development + acquisitions

What are development + acquisitions? What do those people do? How long does it really take? Who are lenders + equity investors? And why are there always problems?

current portfolio. Beacon Portfolio by Geography (by number of projects) 2% 1% 1% 1% 16% (CT) 14% (PA) 65% (MA) Massachusetts (58) Connecticut (14) Pennsylvania (12) Virginia (2) Maryland (1) Rhode Island (1) California (1)

current portfolio. Beacon Portfolio: Elderly/Disabled Designated Communities Communities 75% 25% 100% Elderly/Disabled (22) Not Elderly/Disabled (67)

current portfolio. Beacon Portfolio: Market, Hope VI/Section 8, Other Income-Restricted, and Ownership Note: Market - when 60% or more of the apartments are unrestricted. HOPE VI/Section 8 - when 60% or more of the apartments are public housing/project Based Section 8 units. 26% (23 developments) (7 developments) 8% 23% (Section 8/HOPE VI with LIHTC: 28% 25 developments) 43% (Section 8/HOPE VI without 15% LIHTC: 13 developments) Section 8/HOPE VI with LIHTC Section 8/HOPE VI without LIHTC Market Other Income-Restricted Ownership (some affordable)

steps in the development + acquisitions processes.

locate a site: site looking for a use or use looking for a site? Haverhill, MA The Cordovan at Haverhill Station and Haverhill Lofts Historic Rehabilitation

locate a site. Framingham, MA Edmands House Acquisition Rehabilitation

locate a site. New Haven, CT Monterey Place Demo and New Construction

locate a site. Easton, MA Ames Shovel Works Historic rehabilitation

concept.

concept. Treehouse at Easthampton Meadow & The Homes at Easthampton Meadow Easthampton, MA

concept. 1acquisition of 384-unit community built in 70s (Ph. 1) 2 three new construction buildings (Ph. II) 4 upgrades to existing units + exteriors new community center 3 Rosemont Square Apartments Randolph, MA

concept. Ames Shovel Works Easton, MA

team formation.

team formation. Beacon Appraiser Architect Landscape Architect Interior Designers Engineers (Civil, Geotechnical, Environmental, Structural, Acoustical, Code Consultant, MEP, etc.) Legal Counsel Contractors Historic Consultant Design, Permitting and Construction Consultant Local, State and Federal Goernments Lenders (Construction and Permanent) Lender s Consultants Equity Investors Joint Venture Partners

DEVELOPMENT ORGANIZATION STRONG DEVELOPMENT DIRECTOR MODEL Finance (Devt & Equity) Beacon Concepts Accounting (Devt) WaypointKLA IT start DEVELOPMENT DIRECTOR finish General Counsel Management Operations Compliance Asset Mgmt Accounting (Property)

due diligence.

design. Site Plan Development Ocean Shores Marshfield, MA

design. Floor Plans

design. before after Floor Plans Beacon Concepts

political.

financial analysis.

importance of operations. BRM Summary Profit & Loss Year End For The Period January 2013 - December 2013 2013 2013 Actual Budget $ Variance Revenue Gross Potential Rent 1,464,272 1,460,776 3,496 Vacancies -93,307-73,039 (20,268) Other Revenue 17,201 12,570 4,631 Total 1,388,165 1,400,307-12,142 Vacancy Rate -6.4% -5.0% Expenses Renting Expenses 21,363 24,207 2,844 Management Fees 62,467 63,014 546 Administrative Expenses 72,500 62,372 (10,128) Electricity 14,658 20,570 5,912 Oil & Gas 75,000 65,000 (10,000) Water & Sewer 76,000 67,664 (8,336) Maintenance 126,580 121,405 (5,175) Security Deposit Interest 33 37 5 Service Expense 864 1,500 636 Payroll & Related Expenses 235,000 229,017 (5,983) Replacement Reserve Deposit 110,000 110,000 0 Total Operating Expenses 794,465 764,786-29,679 Taxes & Insurance Real Estate Taxes 103,445 94,925 (8,520) Property Insurance 28,500 25,000 (3,500) Total Taxes & Insurance 131,945 119,925-12,020 Areas of Exposure: 1. Rental Income 2. Vacancies 3. Utilities/Taxes/Insurance 4. Debt Service Coverage 5. Equity/Permanent Conversion 6. Replacement Reserve Withdrawals 7. Cash Distributions Total Operating Expenses + Tax 926,409 884,711-41,699 Net Operating Income 461,756 515,597-53,841 Debt Service Coverage 1.00x 1.14x Total Interest 414,703 401,339-13,365 Income / Loss from Operations 47,053 114,258-67,206 Less: Mortgage Amortization 49,260 49,260 - Replacement Reserves Released -150,000-230,400 (80,400) Capital Expenditures 200,000 230,400 30,400 Total Deductions 99,260 49,260-50,000 Cash Flow -52,208 64,998-117,206

the capital stack. Each deal requires coordination with multiple financing sources. Affordable Conventional Net Operating Income $500,000 $1,500,000 Total Units 150 150 Average Monthly Rent $925 $1,600 Debt Service Coverage 1.10x 1.25x Borrowing Constant 6.00% 6.00% Total Hard Debt $7,575,758 $20,000,000 Sources 1st Mortgage Debt $7,575,758 $20,000,000 Owner s Equity $ - $4,225,000 Tax Credit Equity $6,574,242 Soft/Subordinate Debt $4,000,000 Total Sources $18,150,000 $24,225,000 Uses Acquisition Cost $7,500,000 $22,500,000 Construction/Renovation Cost $7,500,000 $1,000,000 Other Transaction (soft) Costs $1,500,000 $500,000 Fee/Overhead $1,650,000 $225,000 Total Uses $18,150,000 $24,225,000 Debt Service Payments $454,545 $1,200,000 Cash Flow $45,455 $300,000 Cash:Cash Return N/A 7.10% Internal Rate of Return (%) Target N/A 18.00%

the power of leverage. Base Case Alt. Scenario 1 Alt. Scenario 2 Net Operating Income $1,000,000 $950,000 $1,100,000 Capitalization Rate 6.00% 6.00% 6.00% Capitalized Value $16,666,667 $15,833,333 $18,333,333 Increase (decrease) from Base Case $(833,333) $1,666,667 Alt. Scenario 1: Rents remain flat, increase in Operating Expenses by $50,000 Alt. Scenario 2: Increase in rental income, decrease in Operating Expenses, total improvement of $100,000

entitlements/regulatory.

roles that beacon can play in the acquisitions/investment world. Beacon plays many roles in transactions, including the following: - Purchaser - dealing with brokers and sellers from negotiation through closing. - Due Diligence(er) - run a detailed due diligence process, don t be surprised post-closing - Investor - demonstrating our conviction with hard equity investments - Syndicator - arranging for equity financing on property acquisition and investments - Replacement General Partner - stepping in to provide the next generation of ownership experience - Incentivized Consultant - establishing values, working to make transactions happen Very few of the deals that we work on actually close.

initial closing.

construction. March 2011. May 2011. July 2011. September 2011. October 2011. Completion. Old Colony Phase One South Boston, MA

marketing. lease now! apartments 508. 535.! 3444! ames shovel works! easton.ma

lease up.

final closing.

end.