Value Creation Strategy - Illustrative Example

Cre-Pro Creates Substantial Value At The Acquisition of Each Asset

ASSET PURCHASE

Market Value
$13.75 Million
@ 8%
Cap Rate
$3,75MM
Embedded
Value
Purchase Price
$10 Million
@ 11%
Cap Rate
27%
Discount to Market Value

EQUITY VALUE

$3.75 Million
Equity “Cushion”
25% Equity
$2.5MM
75% Loan to Cost
Senior Debt
$7.5MM
55%
Loan to
Value

PRE-REFINANCE

Equity Value
25% Equity (Assuming NO
Value Appreciation)
Debt
$7.5MM

Target Strategy

✓ Acquire assets at special sales events/auctions from financial institutions, special servicers
and private owners as well as on a direct basis
✓ Direct relationships with special servicers and brokers drive transaction opportunity
✓ “Below the radar” of larger, institutional investors creating pricing inefficiencies amongst
the smaller, less sophisticated buyer universe

Market Focus

✓ National focus, with primary concentration on Eastern and Midwestern U.S. markets
✓ Markets with solid demographic trends, employment growth, and demand drivers

Asset Profile

✓ Good quality real estate – the sellers/capital structures are distressed, not the assets
✓ Income-producing properties – CRE-Pro underwrites off in-place income
✓ Occupancy range from 70% to 100%; CRE-Pro assumes NO growth or lease-up in its underwriting in
order to achieve targeted returns
✓ Potential for revenue upside through additional leasing and market-to-market rents

Target Equity Returns

✓ Asset Cap rates of 10%+
✓ Spread to market cap rates of 200 – 300+ Basis Points
✓ IRRs of 50%+ if held less than 2 years; 20%-25%+ over a 5-year hold period
✓ Multiples of 2.0x+ over an 18 – 24 month hold period; 2.5x to 3.0x if held 5 years or longer