How the sensitivity analysis works
Three adjustable assumptions and one consistent five-year projection, with no cash-out refinancing assumed.
The five-year return projection
Each property is projected independently using the operating schedules in the supplied underwriting presentation. Cash flows are then combined and the LP / GP distribution structure is applied once at portfolio level.
The main projection assumes the outstanding loans are replaced at the end of Year 3, including financed refinancing costs, with a 6.25% interest-only coupon. It does not take cash out and does not reduce principal at refinancing. The Wimbledons' scheduled amortization before maturity remains included.
Refinancing costs are 1% of the new loan principal and are financed into each replacement loan. New principal equals outstanding debt divided by 0.99: approximately $30,075,435, covering $29,774,681 of outstanding debt and $300,754 of costs. No refinancing proceeds are distributed to investors. The larger loans incur approximately $18,797 in additional annual interest in Years 4 and 5 and are repaid at sale.
Financing availability is an assumption. The main return calculation does not test lender approval, appraised value, or refinancing availability. Those must be evaluated separately. The displayed ranges are selected sensitivities, not a boundary on possible losses or a statement that more adverse outcomes cannot happen.
Three controls
| Assumption | Range / base | Effect |
|---|---|---|
| Market rent growth | 1.00%–4.00% Base: 3.00% | Applied from Year 2 onward, in addition to each property's fixed rent-capture schedule. Year 1 market growth is zero. |
| Expense growth | 2.50%–4.50% Base: 3.00% | Adjusts the original property-specific expense path from Year 2. The original expense in year index y is multiplied by ((1 + selected growth) / 1.03)y. Year 1 is unchanged. |
| Exit cap rate | 6.50%–8.00% Base: 7.00% | Year 5 NOI divided by the selected cap rate gives gross sale value. |
Every control moves in 0.25 percentage-point steps. The three presets change only these controls; vacancy, rent capture and financing assumptions do not change with a preset.
| Scenario | Rent | Expenses | Exit cap | LP IRR | LP multiple |
|---|---|---|---|---|---|
| Base | 3.00% | 3.00% | 7.00% | 19.4% | 2.21× |
| Softer performance | 2.00% | 3.50% | 7.50% | 13.8% | 1.77× |
| Stronger performance | 3.50% | 2.75% | 6.75% | 22.1% | 2.46× |
What stays fixed
- Purchase price: $37,050,000; initial common equity: $10,376,340.02.
- Capital plan: $1,532,300; acquisition closing costs, fees and reserves: $1,608,075.
- Five-year hold, with sale at the end of Year 5 and 1% sale costs; no disposition fee.
- 234 physical units, with 232 revenue units used in the original operating schedules.
- Original property vacancy, other income, utility reimbursements and rent-capture schedules.
- Original replacement reserves: $24,250 at Village Square, $15,750 at Heritage, and $18,000 at The Wimbledons each year.
- Original debt-service amounts through Year 3. The Wimbledons' Year 3 debt service is $484,788.96 and its maturity balance is $8,466,205.55, including the scheduled amortization in the supplied model.
This implementation uses the supplied annual debt-service amounts and maturity balances; it does not independently reconstruct the original monthly debt amortization schedule.
LP distributions and return measures
The investor capital pool is the full common equity, including capital invested alongside LPs by principals and families on the same terms. The separate GP participation receives the promote economics; it is not an additional capital contribution in the model.
Available operating cash, after debt service, is initially split 60% LP / 40% GP. When the LP share is below 7% of original invested capital, up to the available GP share is redirected to LPs and tracked as deferred GP distributions. Later LP operating cash above the 7% level repays that balance. Any remaining deferred amount is repaid from the LP share of residual sale profit to the extent available. This changes payment timing; any LP shortfall below the 7% annualized level does not accumulate as an amount owed in future periods.
At sale, net equity is floored at zero separately for each property in accordance with the supplied non-recourse modeling convention. Portfolio sale proceeds return remaining LP capital first, then split residual profit 60% LP / 40% GP before any deferred-GP true-up. Actual recoveries and obligations depend on the definitive loan documents and applicable carve-outs.
- LP net IRR: annual IRR using initial equity at time zero and year-end LP distributions.
- LP equity multiple: total LP cash received, including returned capital, divided by initial equity.
- Average annual cash yield: average LP operating distributions after debt service, divided by original equity. Sale proceeds are excluded.
- $100,000 illustration: each LP cash flow is scaled proportionally to $100,000 of original equity; amounts are rounded independently.
- Minimum property DSCR: the lowest annual NOI / debt service across the three properties and five years. It is not a loan approval test.
Scope and limitations
The controls do not test additional vacancy, slower rent capture, capital overruns, changes in tax treatment, alternative hold periods, or different refinancing rates. They do not independently validate source underwriting, market data, historical results, or financing availability. Results are preliminary illustrations and may change; actual outcomes may differ materially and invested capital may be lost.
Any offering is made only through definitive offering documents, which control. These calculations are not forecasts, guarantees, investment advice, or a financing commitment.