2. MODULE 10

3. Basic Premises w Risk/Return analysis is critical to establish project feasibility w Financial and ownership structures affect participants’ risks and returns

4. Analysis of Alternative Structures w Importance of “Structuring” w The Relative Attraction of Investment in Real Estate

5. The Basic Flow of Every Real Estate Transaction w Capital Structure: The Provision of funds Equity and Debt w Cash Flow Return Of and On Capital from Operations w Appreciation Upon Sale or Reversion Return on Risk Capital

6. Opportunities in Real Estate: The Ultimate Inefficient Market w Risk/Return tradeoffs w Successful projects rely on monopoly – and it’s legal

7. Legal Forms of Organization w Individual w Co-ownership (3 types of tenancy) w Group Ownership: Syndication Partnerships and Joint Ventures Corporations “C” Corporation “S” Corporation LLC w REITs

8. Financial and Ownership Structures w Real Estate Debt Equity Hybrid w Corporation Bonds Stocks Preferred Stock

9. Alternative Financial Structures w All-Equity w Leveraged Equity With First Mortgage With Subordinated Mortgage(s) w Hybrids With Participating Mortgage(s) Convertible Debt

10. Alternative Ownership Structures w Fee Simple Sole Ownership Joint Venture (including partnerships) w Leasehold Ground Leasing Improvements Leasing Master Leasing w Hybrids

11. Participating Debt w Equity Kicker Percentage of Appreciation (upon sale/refinancing) w Cash Flow Kicker Percentage of Operating Cash Flow (OCF) Percentage of Effective Gross Income (EGI) And/or Net Operating Income (NOI) w Lump Sum(s) at predetermined time(s)

12. Convertible Debt w Conversion of all or part of loan balance to equity at predetermined time or event

13. Real Estate Investment Trusts (REITs) w Equity REITs w Mortgage REITs w Hybrid REITs

14. Equity (Part I) w Sole Ownership w Joint Ventures All-Cash by Investor; carried interest by developer Debt and Equity JV Interim JV (less the 5 years) Credit Enhancement w Key Issues in Joint Ventures

15. Equity (Part II) w Partnerships General partnership Limited partnership

16. Other Shared Risk/Reward Arrangements w Presale Arrangements w Participating Management Agreements

17. Ownership w Fee Simple w Leasehold

18. Valuing Fee and Leasehold Interests w Leased fee interest = PV of lease payments + PV of residual (the reversion) w Leasehold Interest = PV of NOI (-) lease payments w Leased fee interest + leasehold interest = value of the fee simple

19. Lease & Leasehold Financing (Part I) w Ground Leases Developer (Lessee) Advantages Disadvantages Land Owner (Lessor) Advantages Disadvantages Subordination

20. Lease & Leasehold Financing (Part II) w Participating Ground Leases: Base Ground Rent Participation in Effective Gross Rents Participation in Cash Flow Participation in Refinance or Sale Proceeds

21. Lease & Leasehold Financing (Part III) w Equity Leases (Landlords/Tenants) Landlord Advantages Disadvantages Tenants Advantages Disadvantages Critical provisions

22. Lease & Leasehold Financing (Part IV) w Sales/Leasebacks The “Synthetic Lease” w Master Leases

23. Recap: Financing the Project through its Life Stages w Land Acquisition w Land Development w Off-sites w On-sites w Vertical Construction w Sales/Lease-up w Holding (Income properties) w Final Sale