*Terms are listed alphabetically*

**% NCF from Residual:** % of total transaction Net Cash Flow (as of the end of the transaction) that comes from the sale of the asset (vs. the operation of the asset).

**Acquisition Fee:** Fee amount paid to Sponsor at point of acquisition.

**Cap Rate:** The valuation % applied to NOI to determine property Gross Valuation for sale.

**Capital Reserve Escrow:** Capital amounts, if any, escrowed at point of acquisition for capital projects past Year 1.

**Cash Flow Before Debt Service:** Net Operating Income - Total Leasing & Capital Costs

**Closing Costs: **Anything that does not fit into the other input fields related to closing. In the case of an Assumed Loan, Assumption Cost and Additional (assumption) Costs input on the Sources of Funds screen will be added to any existing value in this field.

**Cumulative Capital Costs:** all capital expenditure costs to date as of the date of measurement.

**Due Diligence:** Acquisition costs related to study of the property prior to closing (legal, environmental, other consultants, etc.)

**Equity Multiple:** The number of times the transaction returns the original equity investment, assuming an all-cash purchase of the property (i.e., no use of debt financing). A 1.0x Equity Multiple is breakeven (no profit). Anything less than 1.0x means equity investment was lost. Anything above 1.0x means that all capital invested was returned, and profit was achieved as well.

You can enter a desired unlevered Equity Multiple and Valuate will back-solve for the Purchase Price of the property that results in that multiple. The Equity Multiple input is not limited but the recommended range is between 1.0 and 25.0.

**Fiscal Year 1 Begins:** The day after Time 0, when operation of the asset begins. Time 0 is the point of acquisition.

**Gross Valuation: **Current year's Net Operating Income / Current year's Cap Rate

**Loan to Value Percentage: **Loan Size at funding / Total Unleveraged Uses of Funds

**Net Operating Income:** Effective Gross Revenue - Total Operating Expense

**NPV:** Net Present Value of unlevered transaction cash flows, calculated using monthly cash flows, at the ANNUAL discount rate input made.

The annual discount rate is the rate at which future cash flows are discounted to their Present Value before being added to the negative Time 0 investment amount, (the result of which is the Net Present Value). The higher the discount rate used, the more aggressively that future cash flows will be discounted. A positive NPV (i.e., any value greater than $0) represents an investment that creates value as measured in today's dollars. The higher the positive NPV value, the more value that is perceived as being created. A negative NPV (i.e., any value less than $0) represents an investment that destroys value as measured in today's dollars. You do not want to proceed with any investment that shows a negative NPV.

**Occupancy:** Current property occupancy. This variable does not drive anything in the application, it is just informational and for presentation purposes.

**Preferred return (Pro-Rata):** Monthly compounding, cumulative preferred return paid to both Sponsor and Third Party Investor, parri passu (simultaneously, and pro-rata), after which invested capital will be returned.

**Price PSF:** You can enter a desired Purchase Price PSF and Valuate will back-solve for the Purchase Price of the property equal to that price PSF. Note that Purchase Price PSF input is not limited but the recommended range is between $10 and $10,000.

**Purchase Price:** The Purchase Price is not a limited input but the recommended range is between $1,000 and $500,000,000

**Recording Fees/Misc**: Fees paid at closing to jurisdiction for updating of land records.

**Renovation Budget:** Amount identified, if anything, which will be spent towards property renovation after closing.

**Residual Cash Flow Splitting:** After any preferred return is paid, and after capital is returned, the method by which remaining profit cash flows are partitioned: either a Single Residual Split (such as 50/50), or a Multi-Tier Waterfall (such as 80/20 up to a 15% Third Party Investor IRR, then 70/30 up to a 20% Third Party Investor IRR, then 60/40 thereafter).

**Sale Cap Rate:** The valuation % applied to NOI to determine property GrossValuation for sale. There is no upper or lower input boundary for the Sale Cap Rate but the recommended range is between 3% and 29%

**Sale Capitalization NOI:** The NOI off of which the sale year Gross Valuation is calculated. Choices are Sale Year, or Forward Year (the year after the year in which the sale occurs).

**Sale Capitalization Rate: **The rate by which the Sale Year or Forward Year NOI is divided to calculate the Gross Valuation (sale price) of the property. There is no upper or lower input boundary for the Sale Cap Rate but the recommended range is between 3% and 29%.

**Sale Valuation Deducts Next Buyer's Year 1 Capital Costs:** If set to yes, will be reflected in Sale Valuation on home screen and in Disposition Net Proceeds line on Annual Cash Flow report.

**Sale Valuation:** If selected on the Purchase/Sale screen, net of next buyer's Year 1 Capital Costs. Sale Valuation is not limited but the recommended range is between $1,000 and $500,000,000.

**Sponsor equity:** Sponsor share of cash flows related to their cash equity investment in the transaction at all tiers (remains constant). The sum of Sponsor Equity, Sponsor Promote, and Third Party Investor Equity (or Equity Partner Equity) must equal 100%.

**Sponsor Promote:** Sponsor share of cash flows related to their promoted interest (aka carried interest) that is above and beyond the share of cash flows related to the Sponsor equity (likely grows from tier to tier, and is 0% by definition for the first tier if that tier is the Preferred return). The sum of Sponsor Equity, Sponsor Promote, and Third Party Investor Equity (or Equity Partner Equity) must equal 100%.

**Third Party Investor equity:** Third Party Investor share of cash flows at each tier (will decrease from their share of investment by the Sponsor promote amount in each tier). The sum of Sponsor Equity, Sponsor Promote, and Third Party Investor Equity must equal 100%

**Total equity requirement:** Total equity needed for the transaction including for any deficit amounts.

**Total tiers including the preferred return tier (if any preferred return): **A tier is a range of investment performance, as measured by the Third Party Investor's IRR.

**Transfer Tax:** Tax paid at closing to jurisdiction for transfer of title.

**Unlevered Cash Return:** Current year's Operating Net Cash Flow / Cumulative Capital Costs

**Unlevered Income Return: **Current year's Net Operating Income / Cumulative Capital Costs

**Unlevered IRR:** Internal Rate of Return, on an all-cash purchase basis, assuming sale at the end of the current year, where the IRR is measured using monthly cash flow

**Year 1 Cap Rate:** You can enter a desired Year 1 Cap Rate to back-solve for the Purchase Price of the property that results in that cap rate. The Cap Rate input does not have a lower or upper bound but the recommended range is between 3% and 29%.

**Year 1 Capital:** Capital amount, if anything, escrowed at point of acquisition for capital projects to occur during Year 1 of holding period.

**Year 1 Debt Yield:** Year 1 NOI / Loan Principal Amount at funding

**Year on Year Growth:** Annual growth of Asset Management Fee if the AM Fee is calculated as a % of Purchase Price.

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