Message-ID: <22176811.1075855709847.JavaMail.evans@thyme> Date: Thu, 8 Mar 2001 05:33:00 -0800 (PST) From: phillip.allen@enron.com To: gthorse@keyad.com Subject: Sagewood Phase II Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Phillip K Allen X-To: gthorse@keyad.com X-cc: X-bcc: X-Folder: \Phillip_Allen_June2001\Notes Folders\Discussion threads X-Origin: Allen-P X-FileName: pallen.nsf ---------------------- Forwarded by Phillip K Allen/HOU/ECT on 03/08/2001 01:32 PM --------------------------- Andrew_M_Ozuna@bankone.com on 03/07/2001 11:41:43 AM To: Phillip.K.Allen@enron.com cc: Subject: Sagewood Phase II ---------------------- Forwarded by Andrew M Ozuna/TX/BANCONE on 03/07/2001 01:41 PM --------------------------- Andrew M Ozuna 03/06/2001 03:14 PM To: "George Richards" cc: Subject: Sagewood Phase II George, Thank you for the opportunity to review your financing request for the Sagewood Phase II project. Upon receipt of all the requested information regarding the project, we completed somewhat of a due diligence on the market. There are a number of concerns which need to be addressed prior to the Bank moving forward on the transaction. First, the pro-forma rental rates, when compared on a Bedroom to Bedroom basis, are high relative to the market. We adjusted pro-forma downward to match the market rates and the rates per bedroom we are acheiving on the existing Sagewood project. Additionally, there are about 500+ units coming on-line within the next 12 months in the City of San Marcos, this, we believe will causes some downward rent pressures which can have a serious effect on an over leveraged project. We have therefore adjusted the requested loan amount to $8,868,000. I have summarized our issues as follows: 1. Pro-forma rental rates were adjusted downward to market as follows: Pro-Forma Bank's Adjustment Unit Unit Rent Rent/BR Unit Rent Rent/BR 2 BR/2.5 BA $1,150 $575 $950 $475 3 BR/Unit $1,530 $510 $1,250 $417 2. Pro-forma expenses were increased to include a $350/unit reserve for unit turn over. 3. A market vacancy factor of 5% was applied to Potential Gross Income (PGI). 4. Based on the Bank's revised N.O.I. of $1,075,000, the project can support debt in the amount of $8,868,000, and maintain our loan parameters of 1.25x debt coverage ratio, on a 25 year amo., and 8.60% phantom interest rate. 5. The debt service will be approx. $874,000/year. 6. Given the debt of $8,868,000, the Borrower will be required to provide equity of $2,956,000, consisting of the following: Land - $1,121,670 Deferred profit& Overhead $ 415,000 Cash Equity $1,419,268 Total $2,955,938 7. Equity credit for deferred profit and overhead was limited to a percentage of actual hard construction costs. (See attached file: MAPTTRA.xls) - MAPTTRA.xls