The Property, located in Brooklyn, New York, is a 326,608 gross square foot, six story, structure located north of the Williamsburg Bridge

BROOKLYN, NY

BACKGROUND

The Property, located in Brooklyn, New York, is a 326,608 gross square foot, six story, structure located north of the Williamsburg Bridge. The Property is bounded by the East River to the west, K avenue to the east, North 3rd street to the south and North 4th street to the North. Occupying an entire city block, the Property sits on 3.03 acres and has an 82,429 square foot floor plate. The building is currently unoccupied and certain demolition has commenced. The U.S. Department of the Interior National Park Service and the New York State Historic Preservation Office have approved the rehabilitation plan. Residential unit sizes and layouts have been optimized based on the façade and window locations resulting in approximately 270,000 square feet of rentable area and 338 units. Many units will have city and water views and all units will feature loft style finishes and high ceilings. Ground floor retail space will total approximately 17,000 square feet and the Property will have parking spaces on the cellar, first and second floors. Other amenities include an extensive fitness and gym facility with water views, library, TV and activity lounge, children’s playroom, a landscaped private garden on the second floor, a large third floor courtyard, roof top terrace, on-site leasing office, and 24 hour doorman and security. Because the project qualifies for New York City’s J-51 Tax Benefit, there will be no real estate taxes until 11/1/2019. After that date, taxes will be phased in at 20% per annum over the following five years.





ASSIGNMENT

Suppose that you are a tax credit investor considering making an equity investment in this project. In addition to the tax credits that you will receive, you will also be paid a preferred return of 2% annually from available cash flow. Tax credits can be used dollar-for-dollar to offset federal income tax liability.



Please construct a 10-year pro-forma income statement for the project using the information provided in the attached Excel workbook.
Using the information from the project’s operations, please provide a 1 page narrative describing whether or not you would invest in this project and why. Please provide any supporting analysis used to reach your conclusion and state any assumptions that you have made.


Click here for the SOLUTION