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Exhibit B -- Specifics of the Loan
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California Residents Only Loan Number: N1955 |
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PROPERTY Project: GREENMEADOW APARTMENTS Property
address: 2852 Greenmeadow Dr., Georgetown Township, MI EQUITY ANALYSIS
OPERATING STATEMENT
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TERMS
BORROWERS
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GREENMEADOW APARTMENTS George says, "The interest rate on this loan is too high. It should have been offered at just 9.0% because this is an excellent hard money loan. The borrowers have great credit, the property is less than 30 years old, the loan is secured by an apartment building, and the loan amount is small." We are pleased to present this first mortgage loan secured by a 14,205SF 13 unit 2-story wood-frame townhouse style apartment building. The borrowers have "perfect" credit and the property is near Grand Rapids, Michigan. Grand Rapids is located in southwestern Kent County, which is located in southwest Lower Michigan. US131 (north-south freeway) and I-196/I-96 (east-west freeway) runs through the city and provides convenient access to the major markets of Chicago (150 miles southwest) and Detroit (150 miles southeast), as well as regional market such as Kalamazoo and Cadillac. Lansing, the state capitol, is approximately 60 miles east-southeast. According to the appraiser, the Grand Rapids Metropolitan Area has been a moderately-growing community, though this growth has slowed the past 2-3 years. The economic down-turn and national recession has had a negative impact on manufacturing industries in the area, but other business sectors are still growing, specifically in the medical and research sectors. The area has fared quite well overall considering the economic difficulties of the Mid West region. The surrounding area is suburban and rural, having a good mix of farm type dwellings and residential homes on various sized tracts of land. The property is located precisely in Georgetown Township just outside of Grand Rapids. Most of the properties in the immediate subject neighborhood consist of multi-family dwellings, typically six units or larger. A few blocks away from the subject, properties become primarily single-family residential. Adequate shopping, grocery stories restaurants, gas stations and service providers are located within three miles of the subject. Several elementary schools and one high school are located within three miles of the subject. There are over a dozen houses of worship within two miles of the subject. The subject consists of a 14,205SF 13 unit 2-story wood-frame townhouse style apartment building built in 1988. The building is set upon a concrete foundation, with a concrete slab floor (no basement). The exterior is a combination of vinyl siding and brick. The exterior surface of each unit is different (different color siding, different style of brick) to give each unit an individual look. The roof is gabled and covered by asphalt shingles. The windows are vinyl-clad, double-plane, double-hung windows. There are twelve 2-bedroom units and one 3-bedroom unit. Each of the 2-bedroom units has a living room, dining room and kitchen on the ground floor. One of the ground floor closets in each unit has a washer and dryer. On the upper floors are two bedrooms and a full bathroom. The bathroom has a vanity sink, a toilet and a tub/shower enclosure. The three-bedroom unit also has a living room, dining room and kitchen on the lower floor. On the upper floor, there is a single bathroom similar to the 2-bedroom units, except that it has a window. Also, there are three bedrooms on the upper level. Each unit is accessed via its own door on the ground level. The 2-bedroom units are generally 1,070 square feet in size, while the 3-bedroom unit is approximately 1,160 square feet in size. The interior finish consists of carpet, tile, and faux wood laminate. The walls and ceilings consist of finished drywall. Each unit has its own gas-fired furnace unit with central air conditioning and a 40-gallon gas hot water heater located in a utility closest. Each unit also has 100-ampere electrical service. The electricity and gas to each unit is separately metered. The subject has two garage structures, one located on the east side of the apartment building, the other on the west side. The one on the east side of the building contains 1,560 square feet and is divided up into seven garage stalls. The west garage building contains 1,320 square feet and has six garage stalls. Each stall has its own eight-foot overhead door. The garage stalls are unheated and unlit. One garage stall is allocated each apartment unit. The site improvements mainly consist of an asphalt-paved parking lot on both sides of the building, concrete sidewalks and patio stoops in front of the apartment units, a manicured grass lawn and various trees, shrubs and bushes on the site. Our borrower is a closely held LCC managed by a husband and wife that have credit mid-scores of 786 and 752. They list total assets of $3.0 million, with a reported net worth of $2.24 million, mainly consisting of a 10-unit apartment building, their residence and business value. Their personal tax returns showed an adjusted gross income of $69,860 and $-64,423 (after adding back non-cash depreciation) in 2008 and 2007, respectively. They claimed a $145,013 loss in 2007 due to a dissolved partnership. We ordered a drive-by BPO showing the property value as $430,000. We also ordered a new appraisal from our long time Michigan appraisal firm. They concluded with a $460,000 value. The appraiser estimated an effective gross income (after vacancies) of $88,791. The borrowers 2009 operating income was somewhat higher at $91,165. Their reported net income for 2009 was $56,572, which should allow them to comfortably make our $2,807.53 payment. At a 59.8% loan-to-value and a 10.0% yield, this appears to be a reasonable investment. Every first mortgage investment involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular before investing. A substantial and prolonged decline in real estate values is possible.
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