Exit Strategy Fundamentals
Loan Term
5 Years
Interest-only period
Year 5 NOI
$1,519,170
2.2% annual growth
Principal Due
$15,000,000
Full payoff required
Year 6 Cash Flow
$777,568
Post-refinancing projection
Capital Structure: Each development operates under a 5-year interest-only loan structure requiring full principal repayment or refinancing at maturity. Operating performance determines available exit options.
SHIELD Waterfall Structure (Years 1-5)
| Year |
NOI |
SHIELD Interest |
PHA Share (1.35 DSCR) |
Fund Fixed Return |
Total Fund Return |
| 1 |
$1,392,524 |
$675,000 |
$356,499 |
$361,025 |
$1,036,025 |
| 2 |
$1,423,160 |
$675,000 |
$387,135 |
$361,025 |
$1,036,025 |
| 3 |
$1,454,469 |
$675,000 |
$418,444 |
$361,025 |
$1,036,025 |
| 4 |
$1,486,467 |
$675,000 |
$450,442 |
$361,025 |
$1,036,025 |
| 5 |
$1,519,170 |
$675,000 |
$483,145 |
$361,025 |
$1,036,025 |
Distribution Priority: Net Operating Income flows first to SHIELD interest payments, then to Public Housing Authority share maintaining 1.35 debt service coverage ratio, with remainder allocated to fund fixed returns.
Refinancing Options
Private Activity Bonds
4-5%
Tax-exempt, 30+ years
HUD 221(d)(4)
Market Rate
Up to 90% LTV, 35-40 years
Conventional
Market Rate
75-80% LTV, 20-30 years
Refinancing Characteristics
| Option |
Interest Rate |
Loan-to-Value |
Term |
Requirements |
| Private Activity Bonds |
4-5% (Tax-Exempt) |
Various |
30+ Years |
Affordability compliance |
| HUD 221(d)(4) Apartment Loan |
HUD Market Rate |
Up to 90% |
35-40 Years |
HUD approval process |
| Conventional Refinancing |
Market Rates |
75-80% |
20-30 Years |
Standard underwriting |
Sale Exit Scenarios - Cap Rate Analysis
| Cap Rate |
Property Value |
Loan Payoff |
Net Proceeds |
Total 5-Year Return |
| 4.0% |
$37,979,250 |
$15,000,000 |
$22,979,250 |
$28,159,375 |
| 4.5% |
$33,759,333 |
$15,000,000 |
$18,759,333 |
$23,939,458 |
| 5.0% |
$30,383,400 |
$15,000,000 |
$15,383,400 |
$20,563,525 |
| 5.5% |
$27,621,273 |
$15,000,000 |
$12,621,273 |
$17,801,398 |
| 6.0% |
$25,319,500 |
$15,000,000 |
$10,319,500 |
$15,499,625 |
| 6.5% |
$23,371,846 |
$15,000,000 |
$8,371,846 |
$13,551,971 |
| 7.0% |
$21,702,429 |
$15,000,000 |
$6,702,429 |
$11,882,554 |
Market Context: Current multifamily cap rates range from 4-6% in major markets. Total return calculations include 5-year cumulative cash flow plus net sale proceeds. Property valuations are based on Year 5 NOI projections.
Interest Rate Protection Mechanism
Multiple Pathways
3 Options
Refinancing alternatives
Market Timing
Flexible
Sale vs. refinance decision
Cash Flow Stability
$777,568
Post-refinancing projection
Principal Recovery
$15M
Required at maturity
Risk Mitigation Framework
- Diversified Exit Options: Multiple refinancing pathways reduce execution risk
- Market Timing Flexibility: Sale versus refinance decision based on market conditions
- Debt Service Coverage: 1.35 DSCR maintains financing capacity throughout hold period
- Operating Performance: Consistent NOI growth supports valuation stability
Capital Requirements Summary
Principal Repayment
$15,000,000
Due at Year 5 maturity
Annual Cash Flow
$1,036,025
Fixed fund returns
5-Year Cash Total
$5,180,125
Cumulative distributions
Exit Flexibility
High
Multiple execution paths
Capital Structure Overview: Each development within the 10-property fund structure operates under standardized 5-year exit parameters. Principal repayment requirements create defined exit timeline while multiple refinancing options provide execution flexibility based on market conditions at maturity.
Exit Strategy Summary
SHIELD development exit strategy provides multiple execution pathways at 5-year maturity. Refinancing options include tax-exempt bonds, HUD programs, and conventional financing. Sale scenarios demonstrate value sensitivity to market cap rates ranging from 4.0% to 7.0%.
Important Considerations:
All projections are based on current market assumptions and may vary based on actual operating performance. Interest rates, cap rates, and refinancing terms are subject to market conditions at time of execution. This analysis represents one development within a diversified 10-property fund structure.
Risk Factors: Interest rate environment, property performance, market conditions, refinancing availability, and regulatory changes may affect exit execution and returns.