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Analysis We have reviewed the hard and soft costs proposed for the development. We have also recreated the developers spreadsheets to confirm the calculations and assumptions. Below are our prelimwary findings. We have not discussed these findings with the developer. Such discussions may change our recommendations in the future. The concoction vests of $10,000 Per unit are reasonable, given the level of finish ami exterior improvements proposed by the developer. The developer fee and other soft costs are actually slightly lower than what we see in similar developments. The land cost of $500,000 is slightly lower than we see for other developments, which ern the $8,000 to $10,000 per uoitra�e. Arroreapproprimelandcostwouldbe approximately $1,000,00010 $1,250,000. The arms are primarily one bedroom units with rents averaging $1,188 per month and two bedrooms averaging $1,690 per month. Pekin& water and sewer, and trash are included in the mom Heat, electricity, phone and cable are the tenant's responsibility. The rents before any utilities average $1.50 per s.fdmonth of rentable space. This level ofremishigherth=n Mvesceninaparnn inandaromd New Brighton. Momof the after developers we have raised to about the New Brighton market have suggested rems in the $1.25 to $1.40 per s.f range. The $1.50 per sf is not the top ofthe remal market. We have worked on recent projects in than more urban Twin Cities markets where new buildings are renfing at $1]0 per s.f. Overall, we sea the proposed mom as aggressive for the northern suburb market. The vacancy rate of S% is standard for rental burning. The rents and expenses are expected to increase 3% normally, which is also typical. The loan assumptions of 30 years in a 6.75% interest one are consistent with other similar developments. The operating expense and Property rax estimates of $6,000 Per unit per year are slightly conservative, given that the tenants pay the majority of the utilities cost. The annual ante of union on the $4M+ of equity at 8% in the first stabilized year is actually slightly lower than industry standards but not surprising given that the Smart tradition is to build and own. The developer is calculating an internal rete ofmnun(IRR) at 16% assuming a We in year 10 and assuming a 7%capitalization rate. A 16% raw of return is typical for this type of development, and is purely speculative at this time. We place more weight on the ammal one of return analysis than an IRR calculation. Major Findings Overall, the development does require some level of assistance because the $1.50 per st. of rent is $.15 to $-20 lower than what is necessary in today's market to fineace and cash flow a higher end rental housing development Generally, we see only two major issues that warrant further discussions with the developer on the pare firtarrcial issues. One is