Nexus Proposal for SRP

I

Fernando BarrazaFernando Barraza

Michale JenkinsMichale Jenkins

Richard JohnsonRichard Johnson

Utkarsh KumarUtkarsh Kumar

Richard RydzikRichard Rydzik

Prashant SampatPrashant Sampat

John TrujilloJohn Trujillo

GROUpGROUp

NEXUsNEXUs

Executive Summary ................................................................................................2

Marketing Plan ........................................................................................................4

Site Analysis ...........................................................................................................11

Market Analysis ......................................................................................................15

Zoning/Entitlements ................................................................................................42

Project Description .................................................................................................52

Financial Analysis ...................................................................................................67

MOU .......................................................................................................................71

Appendix..................................................................................................................77

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executive summaryexecutive summary

TermsTerms

Nexus offers $1.09/SF per year to Papago Park Center, Inc. (PPC) in exchange for the rights to be master developer on Site. The rate applies to the parcels which are developed or that are under development. The remaining parcels not developed will be held as an option to be taken down per the phasing strategy and will not accrue rent. In addition to the lease payment on the developing parcels, Nexus will provide all necessary horizontal development on Site including the proposed relocation of the canal. In exchange for the horizontal improvement costs, PPC agrees to accept the cash infusion into the grand as a rent equivalent during the improvement period. The term of the lease sought is 75 years.

Nexus will operate a third party auditing company which will audit the residual value of the land on an annual basis and will adjust rents based on the Consumer Price Index (CPI) or 3% per year, whichever is lower. Nexus will absorb all of the foregoing auditing and management expenses associated with this task.

Conditions: • In exchange for the above agreement, Nexus will need rights to form a sub association as well as implement CC&Rs specifi c to the Site. Nexus will work hand and hand with PPC to establish the sub association and CC&Rs. All expenses to be borne by PPC. • In an effort to create a corporate community, Nexus plans on luring a charter school to the site. As part of the agreement, Nexus requests the rent for the location of the school to be permanently abated. Purposed total acreage of the school shall be approximately 2.5-3.0 acres. • Deal is contingent upon full rezoning approval as specifi ed in report. • Granting of a revocable public easement for multi-use paths. • Granting of greenbelt expansion to tie into existing park circulation. • Lease would be assignable to a third party, contingent upon agreement by both PPC and Nexus.

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Proposed start for building construction is mid-2015 with an estimated full build out within 10 years. It is to be understood that Nexus’ role is that of a horizontal developer, not a vertical developer.

Area Growth Factors, Unsupplied Demand:Population growth has increased by 33% since 1990 and by 2020 is projected to grow an additional 25-30%. This results in unsupplied demand for offi ce during this time to range from 3.2 to 4.9 million SF. Risks Associated with Recommendation: 1. Zoning and entitlement approval 2. Market risk – Unpredictable changes in economic factors, past is not prologue. 3. Financial risk – Inability to accurately predict the future.Steps to Achieving Recommendation: 1. Establish and implement marketing plan to lure corporations 2. Zoning change 3. Horizontal land improvements 4. Development agreement with City: City Benefi ts • Assists Tempe’s in becoming the premier business location in Arizona • Increased job growth • Sales tax revenue to the City • Extension of existing multi-use path system The Grand Benefi ts • Construction permit fee waivers lowers project cost and makes it easier to attract clients • 68,000 SF of additional multi-use paths 5. Lease property to vertical developer

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marketing planmarketing plan

Nexus Group’s mission is to develop corporate communities that encompass our core values of:

Social/Psychological Wellness - Enhance community interaction

Physical Wellness - Promote healthy lifestyles

Environmental Wellness - Maximize the use of performative landscapes

Corporate Wellness - Create effective workspaces Educational Wellness - Produce learning and teaching spaces

communitycommunity

Social/Psychological

Physical

Corporate

Environmental

Education

company descriptioncompany description

5

Nexus Group seeks to develop corporate communities that serve the wants and needs of the corporate professional. “The Grand” will offer amenities within the corporate community that will support the lifestyles of the corporate professional such as areas for their children, places to live, places to relax, places to exercise, places to eat and places to socialize. A corporate professional that knows their children are close by and safe and can relieve stress by working out, socializing or enjoying nature will be a more productive, effi cient and cheerful worker.

Nexus Group will pursue the following specifi c goals:

o Option A - Lease all offi ce space to Fortune 1000 enterpriseso Option B – Leasing offi ce space to regional and local corporate establishmentso Incorporate core values throughout the development in strategic and creative wayso Commemorate the SRP legacy by utilizing the canal as a focal point throughout the development

goalsgoals

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swot analysisswot analysis

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Option A

The ideal tenant mix for “The Grand” is have nationally prominent Fortune 1000 enterprises that are in need of excess of 500,000+ square feet. These larger enterprises will seek to expand into new, more advantageous markets. In addition, such companies will also consider their employee’s needs wants such as: betterment of their employees overall lives with fi tness amenities, social amenities, places to live, places for clients and family to stay and area where their children to be safe.

The ideal customer market for “The Grand” will be partial to the following:• Fortune 1000 Company• Seeking close access to major transportation hub• Interested in expanding or moving to Arizona• Interested in keeping employees happy, healthy, safe and productive

Option B

The ideal tenants for “The Grand” consist of major regional and local corporations. The Phoenix market shows enough unsupplied or “unmet” demand in the coming years to stabilize large Class-A spaces even with smaller more regional tenant mixes. These establishments will be looking to expand their employment base as well as to gain notoriety in locating to a central location. Additionally, such companies will also consider their employee’s needs wants such as: betterment of their employees overall lives with fi tness amenities, social amenities, places to live, places for clients and family to stay and area where their children to be safe.

The ideal customer market for The Grand has the following characteristics:• Interested in expanding or moving to Arizona• Seeks to gain notoriety in relocating to high profi le, highly visibility sites• Interested in keeping employees happy, healthy, safe and productive

goalsgoals

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The Grand differentiates itself through its emphasis on Nexus Group’s fi ve functions of wellness: social, physical, corporate environmental and educational. Nexus Group is determined to redefi ne the corporate business park paradigm into full corporate communities that takes value innovative means of creating and sustaining employee’s happiness, health, safety and productivity.

According the Greater Phoenix Economic Council (GPEC) Arizona is marketable on a national and regional scale due to the following factors:• Non-union state• Operating costs in Greater Phoenix are approximately 40% lower than in California• Weather- Over 300 days of sunshine per year• Talent pool- Arizona State University is one of the largest public universities in the United States with 75,000 students on four campuses across Greater Phoenix• Greater Phoenix was recently ranked by Forbes as a Top 10 next big boomtown in the U.S. • CNBC ranked AZ #1 for workforce • Low cost of living

locational attributeslocational attributes

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The Grand is surrounded by a variety of existing amenities. These include: Papago Park Botanical Gardens Phoenix Zoo Phoenix Municipal Stadium Light Rail Stop Phoenix Sky Harbor Tempe Town Lake/Tempe Beach Park Tempe Center for the Arts Sun Devil Stadium Arizona State University “A” Mountain Green belt

An opportunity that has been recognized by Nexus Group is connecting these existing amenities by creating a circulation system through extending the green belt. This will provide very pleasant, relaxing, shaded paths throughout the overall SRP site. The amenity infrastructure is a gift Nexus Group can give back to the community.

o Charter School – Children of employees will be close by and safeo Inviting lit canal – Relaxing, pleasant walk for employees and pedestrianso Shared parking - Allows The Grand not to be dominated by parking spaceso Valet Parking – Cuts down commute time o Circulation system - extending from Papago Park down to Tempe Town Lakeo Health and Wellness – Promoting healthy liveso Light retail – Providing the area with day to day needso Walking/hiking/jogging/biking trails – Promoting healthy lifestyleso Hospitality – Providing space for family members and corporate professionals to stay when they are in from another town.o Zip cars – Save money on renting cars during family and/or corporate travelo Community garden- supporting the health and economy of the community

proposed amenitiesproposed amenities

amenitiesamenities

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Nexus Group will pursue the following outlets in order to market The Grand to potential tenants:

Broker network Magazines Site Selection Urban Land Institute (ULI) Discovery Triangle Website Coming soon signage

marketing outletsmarketing outlets

marketing schedulemarketing schedule

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site analysissite analysis

Our site, commonly known as “The Grand,” is located at the SWC of Priest and Washington Streets in the City of Tempe. The Grand is 58.56 acres in size and zoned General Industrial District (GID) with a Planned Area Development (PAD) overlay. The Grand is part of Papago Park Center, a mixed-use employment center owned and developed by Salt River Project (SRP). In Papago Park Center there are 66 companies (excluding retail uses) and approximately 11,000 employees. There are approximately 1,500 more employees expected in the near future for a total of about 12,500 employees. The Grand is located right up against a major freeway and has two light rail stops. It also has train tracks and the canal going through it. There is heavy traffi c volume going by our site. On Priest Dr., there is an average daily traffi c volume of about 28,000. On Washington St. there is an average daily volume of over 12,000. On the Loop 202, the volume increases to about 150,000. Directly adjacent to our site, there is the Phoenix Zoo, Desert Botanical Gardens, Phoenix Municipal Stadium, and two golf courses. Our site is also close to many of the area’s main attractions. Phoenix Sky Harbor International Airport is about a 10-minute drive away. Mill Avenue, one of the major streets of Tempe, is about a 5-minute drive. The US Airways Center, home of the Phoenix Suns of the NBA in Downtown Phoenix, is less than 20 minutes away. All of these sites are also directly accessible on the light rail.

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site analysis mapsite analysis map

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market analysismarket analysis

A comprehensive market analysis was complete by Nexus Group to determine the opportunity to develop a corporate community near the vicinity to Salt River Project’s Tempe Headquarters and just east of Sky Harbor International Airport. The subject project known as “The Grand” (Site), lies on approximately 58 acres and is located as depicted in the following map in purple:

The proposed project consists of nearly 2.5 million square feet within the site that is bounded by Priest Drive, Washington Street, Union Pacifi c Railroad and Parkside Drive. The Project is expected to fi rst accommodate tenants in 2015. The purpose of this market analysis is to determine the current and anticipated demand for the targeted project. Our focus is to determine how much and what type of demand can be support in this market and how the subject project addresses these market opportunities.

The following bullet points summarize our methodology:• Compiled macro-economic trends on national, state and local levels.• Provided in-depth analysis on corporate offi ce, hotel, multifamily and retail asset classes.• Researched and analyzed total demand.• Researched and analyzed total supply.• Reconciled total supply from total demand to fi nd total unsupplied/unmet demand.• Estimated overall market capture rates for subject property on submarket basis.• Estimated overall market capture rates for subject property for entire metropolitan area.• Conducted a socio-economic impact analysis.

Research for this project was completed in April, 2012. Conclusions and recommendations are strictly those of Nexus Group. Users of this information should recognize that assumptions and projections contained in this report will vary from the actual experience in the marketplace. Therefore, Nexus Group is not responsible for the actions taken or any limitations, fi nancial or otherwise of property owners, investors, developers, lenders, public agencies, operators or tenants.

introductionintroduction

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A comprehensive market analysis addressing the Site and the development potential of the subject property was completed by Nexus Group. Our report details our conclusion that by 2020, there will be a shortage of 1.7-3.5 million square feet within the immediate Salt River Project Corporate Headquarters vicinity.

We have determined that there is a compelling opportunity and suffi cient market demand to support the development of The Grand. Market capture rates are based on 10% and 20% for the submarket ensuring not only less risk but a genuine higher probability of success.

recommendations and conclusionsrecommendations and conclusions

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Nexus Group fi rmly believes that the nation is fi nally on the rise and recovering from the greatest fi nancial crisis since the Great Depression. Thus, we need to be especially careful in our analyses. Our economy appears to be getting better but any “shock to the system” could be critical. In our macroeconomic analysis we used research from analysts at UBS, PKF Research, Colliers, Grubb & Ellis, and Arizona State University.

As you can see in the chart below, UBS forecasts GDP growth for the United States and the World to increase going into 2014. For 2012, real GDP growth is expected to increase from 2.3% to 2.8% in the fourth quarter. Infl ation is also expected to stay positive. In the longer term, once economic conditions improve, UBS predicts that the recent moves by central banks all over the world will generate infl ation beyond the normal 2% - 3% range that was experienced in the recent decades. UBS has also shifted its expectations for rate hikes by the Federal Reserve of the United States from mid-2014 to late 2013. This is expected due to the forecasts of an ongoing drop in the unemployment rate and only modestly tighter fi scal policy in the United States in 2013.

initial market analysis - macro perspectiveinitial market analysis - macro perspective

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UBS believes that the biggest near-term threat to the global economic recovery is the increase in energy prices due to the rising tensions in the Persian Gulf, in particularly between Israel and Iran right now. The economists estimate that for each sustained 10% increase in oil prices, as much as 0.4% can be clipped off of economic growth over a 12-month period. They further predict that if a military attack occurs, our economy would face serious risks of recession.1In Arizona and the Western United States, the economy also appears to be improving and is expected to improve further in the near future. As shown in the following charts, personal income and employment is expected to increase going into 2014 for Arizona, as well as the Western United States. We view this as encouraging signs of an economic improvement, and believe that it will have a positive impact on all sectors of our project, especially retail, hotel, and offi ce.

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Hotel Offi ce

Source: Grubbs and EllisWe believe that the hotel sector is at the beginning of its recovery phase. As shown above, the sector peaked in 2008 and suffered a steep drop going through 2010. It fi nally improved last year and should continue to improve going into 2017.

We believe that the offi ce sector is also in the beginning of its recovery phase. After booming in the middle of the last decade, the offi ce sector suffered a steep drop-off. The sector appears to be stabilizing and we believe will continue to improve in the near future. Grubb & Ellis forecasts that net absorption will increase from about 750,000 in 2011 to 1.2 million in 2012. Their analysts also expect the vacancy rate to drop by about one percent in 2012.

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Multifamily Retail

Source: Colliers

We believe the multifamily sector is nearing the top of its recovery phase. With so many Americans losing their homes during the recent fi nancial crisis and suffering through credit issues, many have been forced into renting an apartment. In our view, this has caused the multifamily sector to “overheat”. As noted earlier, as employment and personal income improve, we believe many more people will be able to buy a home as opposed to renting an apartment.

We believe that the retail sector is in the beginning of its recovery phase. After booming, the retail sector has suffered through a sharp decline. The sector appears to be stabilizing, however, and we believe will continue to improve in the near future. Colliers forecasts net absorption to reach at least 1.5 million square feet by the end of 2012, which will drive the vacancy rate below 12 percent.

In conclusion, Nexus Group believes that our economy is fi nally starting to recover from the worst fi nancial crisis since the Great Depression and will continue to grow stronger in the near future. However, Nexus Group does realize that this recovery is fragile and thus we need to be especially prudent in our analyses. In particularly, due to the aforementioned factors, Nexus Group forecasts that hotel, offi ce, and retail will be the strongest sectors in the near future and should be further researched in the following market analysis section.

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In continuation of our study, Nexus Group next looked at the site its immediate vicinity by the dividing the asset classes into two distinctions: Multifamily & Corporate/Hotel/Retail. Looking from a micro-economic perspective, Nexus Group concluded that the market areas for each asset class would be classifi ed into the following distinctions: • Multifamily - Having its own study.• Corporate/Hotel/Retail: o Primary Demand Market Area: Based off 20 minute drive time for all asset classes. o Secondary Demand Market Area: Based off 30 minute drive time for all asset classes. o Primary Supply Market Area: Individual areas for each asset classes.The distinctions Nexus Group believes are crucial because the site isn’t conducive to just “one size fi ts all” from a market analysis perspective. Each asset class has different trade areas associated within the metropolitan area and as such, needed to be addressed in the allocation the market areas for each asset class.

Of the four asset classes, multifamily was the asset class with the most concern. On a macro level multifamily is currently the only class that is receiving fi nancing compared to other residential programming. However, this comes at the cost of over-supply in the metropolitan area.

Demand

To demonstrate the over-supply problem, Nexus Group fi rst looked at the overall demand.

intermediate market analysis - micro perspectiveintermediate market analysis - micro perspective

multifamilymultifamily

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Maintaining the historic norm of 2.61 average household size, we were able to calculated the number of additional households needed in the coming years. By 2020, we expect the number of additional households to be approximately 64,831. After knowing the amount of additional households that will be needed in the future, next we had to determining the number of those households that will be classifi ed as renting as opposed to owning.

The following graphic conveys the number of renters based off of census data. Historic data shows that 46.6% of all households are renters and as such, we maintained the same rate through 2020:

By 2020, the total additional demand for rental households will be approximately 30,211 for the entire 20 minute drive time, primary demand market area.

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When looking at the primary supply area however, the numbers tell a different story. The total number of proposed, planned, prospective and projects under construction by 2015, on a submarket level, are almost on par to the total demand for the metropolitan area as shown in the following two charts:

demanddemand

Development Developer # Units Status Location

Gracie's Village Gorman & Co 50 Planned Tempe

Retreat at 1000 Apache Glenwood Intermountain 124 Prospective Tempe

Student Housing Investor Mortgage 190 Planned Tempe

Archstone Tempe Archstone 234 Planned Tempe

LG Tempe LG Development Group 279 Planned Tempe

The District Residential Housing Dev 279 Permitted Tempe

Manzanita Hall American Campus Communites 300 Planned Tempe

Fairfield at Tempe Fairfield Residential 304 Planned Tempe

Lakeside & Rio Salado Evergreen Development 330 Planned Tempe

Michael's Plaza Millenium Properties 224 Prospective Tempe

San Marquis Mark Taylor 224 Permitted Tempe

Palmeraie Five Star Development 50 Prospective Scottsdale

Stetson & Civic Center Triyar Companies 92 Planned Scottsdale

Stetson &Wells Fargo Triyar Companies 132 Planned Scottsdale

6520 E McDowell Chason Properties 220 Planned Scottsdale

Bristol Stadium Lofts Continental Group 224 Planned Scottsdale

Blue Sky Phase II Gray Development 253 Prospective Scottsdale

Broadstone at Scottsdale Alliance Residential 259 Planned Scottsdale

Scottsdae & Lincoln Alliance Residential 264 Planned Scottsdale

Bahaus Flats & Studios Clayton Companies 274 Planned Scottsdale

Optima Sonoran Village Phase II Optima 283 Planned Scottsdale

SkySong Arizona State University 325 Planned Scottsdale

Projects: Planned, Permitted, Proposed, Under Construction

Submarket, Primary Supply AreaPortales Place JLB 369 Planned Scottsdale

Scottsdale Goldwater Zaremba Group 420 Planned Scottsdale

Blue Sky Gray Development 496 Planned Scottsdale

McDowell & 74th Street Mark Taylor 536 Planned Scottsdale

Centrovida PDG America 595 Prospective Scottsdale

Jackson St Entertainment Future Cities 50 Prospective Phoenix

Encanto Pointe Native American Connections 54 Permitted Phoenix

Madison Pointe NRP Group 60 Permitted Phoenix

Lofts at McKinley Gorman & Co 60 Permitted Phoenix

Frank Luke City of Phoenix 60 Permitted Phoenix

Roosevelt 217 BJ Gunner 62 Prospective Phoenix

Glen Harbor Cotan Jacob & Jacqueline 92 Prospective Phoenix

Victory Place IV Cantwell Anderson 96 Prospective Phoenix

DNA Phoenix Mentor Properties 129 Prospective Phoenix

Fillmore 555 McCormack Baron Salazar 137 Prospective Phoenix

Sycamore Station I & II Knowlton Group 167 Prospective Phoenix

Frank Luke Family City of Phoenix 190 Planned Phoenix

Blue on 12th St Lafferty Development 200 Planned Phoenix

Blue on Washington St Lafferty Development 200 Prospective Phoenix

Blue on Jefferson St Lafferty Development 200 Prospective Phoenix

Optima Sonoran Village Phase II Optima 210 Permitted Phoenix

Omega W Developments 214 Prospective Phoenix

Trillium 44 Trillium Residential 294 Planned Phoenix

Roosevelt & 3rd St Concord Eastridge 329 Permitted Phoenix

TotalSource: Census, Pierce Eislen, ESRI, Nexus Group, LLC

10,134

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When looking at the overall supply in the entire Phoenix-MSA, the probability of over-supply becomes more apparent:

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As aforementioned in the initial market analysis, the stage of the cycle for multifamily is nearing its peak. By 2015 we anticipate that this asset class will have reached the plateau stage of the real estate cycle and in the years following, starting it’s decent. Because of this reality Nexus Group wants to take advantage of the recovery for multifamily in the meantime, but at the same time exert caution in light of the apparent over-supply problem.

It is our recommendation that given the additional demand needed, over-supply fears and stage of cycle that if multifamily is to be pursued at all; it should be contained only to two pads with a maximum cap at 500 units for the grand site. At 400 units, one to two parcels could potentially be suited for multifamily while. Additionally the Site does hold attributed that we believe with small unit counts, could be relatively inelastic to the potential over-supply problem.

stage cyclestage cycle

recommendationrecommendation

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Demand Analysis

To address the uncertainty in making long-range market projections, Nexus Group created a set of scenarios, each having a high and a low range associated to them. In all, four scenarios are processed through the rest of this report as depicted by the following:• Scenario 1 (S:1), Low & High Ranges: Based on 85% of average population growth rate from 1990-Present.• Scenario 2 (S:2), Low & High Ranges: Based on 100% of average population growth rate from 1990-Present.A graphic representative provides the following market areas:• Primary Demand Market Area: Based of 20 minute drive time (Teal)• Secondary Demand Market Area: Based of 30 minute drive time (Navy Blue)

corporate - hotel - retailcorporate - hotel - retail

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First step in analyzing the total demand was to calculate the projected job creation. In order to do so, the change in population over 5 year intervals had to be addressed. This was divided in two portions, one for the primary demand market area which accounts for approximately 80% of trade area as well as one for the secondary demand market area which approximately accounts for the remaining 20%. Additionally, Nexus Group projected the populations up to 2020 using the historic norm from 1990-present as shown in the following graphs:

step 1 - calculating projected job growthstep 1 - calculating projected job growth

Next, the adult workforce was singled-out and projected through 2020:

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Next piece of the demand process was the comprising of the workforce composition. Assuming the division of labor maintained its historic employment base; Nexus was able to assign percentages of the total workforce for each asset as shown below for the two market areas:

From 1990-today the average resident to employee ratio has been 0.58 (roughly one employee for every 2 residents in vicinity) for the primary demand market area, and 0.45 for the secondary demand market area. This ratio is important because it paints an accurate picture of the number of jobs that will be needed at a given point in time.

The projected job creation is the fi rst of two major demand analysis conclusions. The equation takes into account the previous three sections in Step 1 of the demand analysis and is depicted below, with the primary demand market area in black and the secondary in blue:

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As provided in the previous tables, the total job creation holds a range based on the two scenarios. It is important to note that in the coming years, signifi cant growth is projected in both the primary and secondary demand market areas:

• Total new jobs needed in primary demand market area• 5 Year period: 11,600-13,357• 10 Year period: 31,271-36,790

• Total new jobs needed in secondary demand market area• 5 Year period: 14,690-19,586• 10 Year period: 84,179-99,036

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step 2 - calculating space demandstep 2 - calculating space demand

In this section, we address how much space additional space is demanded. As demonstrated in Step 1: Calculating Projected Job Growth, having 11,000-36,000+ new jobs means that there will need to be space to accommodate such an infl ux. The equation starts with the previous section in total number of additional jobs demanded as shown below:• Total new jobs needed in primary demand market area• 5 Year period: 11,600 - 13,357• 10 Year period: 31,271 - 36,790

• Total new jobs needed in secondary demand market area• 5 Year period: 14,690 - 19,586• 10 Year period: 84,179 - 99,036

The next step is establishing a range for average square footage per employee. Each asset class is unique in that they all require differing amounts of space that a single employee is on average to need. It is in this portion of the calculation where High and Low ranges are introduced into the analysis as shown in the following below:Average SF per employee• Corporate: Low- 150 SF High- 200 SF• Hotel: Low- 1500 SF High- 2,000 SF• Retail : Low- 125 SF High- 175 SF

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The total calculated space demand is the second of the two major demand analysis conclusions. The equation takes into account the previous two sections in Step 2 and is depicted in the following page for each demand market area, with the primary demand market area in black and the secondary in blue. It is important to note that in this section four scenarios were used:• S:1 Low• S:1 High• S:2 Low• S:2 HighWhen calculating the four scenarios, Nexus Group concluded that in this report only the lowest range (S:1 High) and highest range (S:2 Low) scenarios will be used since S:1 Low and S:2 High both fall in between this range.

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As provided in the previous tables in Part 1, the total demand holds a range based on the various scenarios ran. For calculated space demand the following are approximate ranges for the upcoming years:• Total new jobs needed in primary demand market area o 5 Year period: 11,600 - 13,357 o 10 Year period: 31,271 - 36,790

• Total new jobs needed in secondary demand market area o 5 Year period: 14,690 - 19,586 o 10 Year period: 84,179 - 99,036

For Part 2, total calculated space demand, the following ranges adequately address the upcoming need within the near and intermediate future:• Total additional space needed in primary demand market area o 5 Year period: 2,304,173 – 3,992,312 SF o 10 Year period: 2,947,622 – 9,884,862 SF

• Total additional space needed in secondary demand market area o 5 Year period: 2,947,622 – 5,323,084 SF o 10 Year period: 16,895,555 – 26,915,738 SF

demand conclusiondemand conclusion

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In determining the total supply for the Site, Nexus Group compiled a series of supply market areas to each asset class. The following illustrates the four main primary supply areas, one for each asset class:

supply analysissupply analysis

Corporate Multifamily

Hotel Retail

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For the supply analysis, the fi rst step in determining total supply is to obtain the currently overall inventory of the market.• Corporate: 6,567,893 SF• Hotel: 1,989,375 SF• Retail: 3,997,022 SF

Second step in the supply analysis process is to determine the square footages for all planned, proposed and projects currently under construction:• Corporate: 200,000 SF• Hotel: 64,875 SF• Retail: 99,982 SF

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When talking about total future supply, obsolescence has to be considered. Obsolescence is defi ned as the process of attrition on the life of a building. Taking a 10 year period into consideration we assigned a percentage for each use. For example 40% obsolescence factor is equal to a building life of 25 years, while a 30% factor is equal to a life of 30% is equivalent to 30 years. Overall the obsolescence factor will mean that additional supply will be needed to overcome such attrition.

2010-2015• Corporate: 7.5%• Hotel: 7.5%• Retail: 7.5%2015-2020• Corporate: 25%• Hotel: 25%• Retail: 25%

Lastly, the total future supply is the remaining amount of supply after taking into consideration the previous three sections and ultimately is what will be used to go against the demand in the reconciliation portion of this report.The total future supply is shown in the following equation below. The equation takes into account the previous three sections of the supply:

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Lastly, the total future supply is the remaining amount of supply after taking into consideration the previous three sections and ultimately is what will be used to go against the demand in the reconciliation portion of this report.The total future supply is shown in the following equation below. The equation takes into account the previous three sections of the supply:

37

The last portion of the intermediate market analysis is the reconciliation of total demand and total supply. The equation works as shown below in subtracting the total supply from the total demand. What is left over is the true demand otherwise known as the “unsupplied” or “unmet” demand.

Additionally, the reconciliation also leads to the overall market capture for each asset class. The market capture rate is the true hurdle rate from marketing prospective. The rate tells the percentage of the excess demand needed to ascertain to have the upcoming project stabilized. Due to the ranges for total unsupplied demand for each scenario, the capture rates were done at 10% and 20% of the submarket for each extremity of the total unsupplied demand range. A capture rate of 10% to 20% ensures a higher probability of success due to the project only needing to draw from 20% of the submarket. Nexus Group believes that the overall submarket capture rate shows the overall probability of success from a market analysis perspective. Due to the square footages that can be potentially captured, Nexus Group believes that “The Grand” is an endeavor that should be pursued. Excess demand shows a genuine need for additional corporate offi ce, hotel service, multifamily and retail, while growth projections attest to the longevity of such a problem into the long-term. While Nexus Group recognizes that nothing is guaranteed, the low capture rates associated with this project conveys a high probability of success.

reconciliation, Overall market capturereconciliation, Overall market capture

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Corporate offi ce was the top performing asset class by far. Unsupplied demand by 2020 ranged from 1.2 to 2.2 million SF overall in the submarket. The following chart depicts the fi ndings of the submarket and overall reconciliation of supply and demand:

corporatecorporate

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Hotel was surprisingly the second most demanded asset class. Not only does the Site not have a hotel, but with the intermediate market analysis completed, the numbers point towards a large amount of space needed by 2015 as well as by 2020 as shown below:

hotelhotel

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The retail asset class also performed well within the intermediate market analysis. On a submarket level, large amounts of additional square footage will be needed in the intermediate and long term future with approximately 55,000-110,000 SF by 2015 alone. Though the site will only use a minimum amount of retail the large quantities of unsupplied, attest to the asset class’ high probability of success on the Site:

retailretail

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Overall, all three asset classes showed potential in a determining a genuine market need. All three classes had unsupplied demand that was a large quantity showing genuine need. The main issue is the probability of capturing a given percentage of the market needed for stabilization otherwise known as the capture rate. In this category erred on the side of caution in this market analysis with capture rates ranging from 10% to 20% for the submarket. Even with such a cap on the maximum market capture, all three asset classes provided large quantities of square footage for to proceed with the project:

intermediate market analysis conclusionintermediate market analysis conclusion

Additionally, Nexus Group also concluded the following talking points: • All three classes demonstrate feasibility from a market analysis perspective.• All three uses should be used as they are complimentary to each other.• Further research needs to be conducted for fi nancial feasibility.• Other effects: Due to the high amount of employees in the area, a small daycare/school could compliment the programming of the Site as well as benefi ting the Site on a community level.

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zoning and entitlementszoning and entitlements

• LocationA PORTION OF THE SOUTH HALF OF SECTION 9, AND A REPLAT OF TRACT ‘D’ OF PAPAGO PARK CENTER, PHASE I AS RECORDED IN BOOK 334, PAGE 16, M.C.R. BOTH LOCATED IN SECTION 9, TOWNSHIP 1 NORTH, RANGE 4 EAST OF THE GILA AND SALT RIVER MERIDIAN, MARICOPA COUNTY, ARIZONA

The property is commonly known as “The Grand” and is located at the SWC of Priest Drive and Washington Street in the City of Tempe. The parcel is part of the Papago Park Center which is a mixed-use employment center owned and developed by Salt River Project Agricultural Improvement and Power District. The property is 58.56 acres in size of which about 10 acres to the South is separated by The Grand Canal.

Tax Parcel numbers for “The Grand” are: 124-20-013 and 124-20-014

• General PlanThe site currently does not conform to City of Tempe’s General Plan 2030. The projected land use is indicated to be “Mixed-Use”. The General Plan defi nes this uses as “A specialized land use that combines at least two approved land uses that upgrade or replace existing single-use sites with quality development that is sensitively adapted to surrounding land uses. This form of development integrates vertically and/or horizontally and shares parking.” Additionally, the site has also been identifi ed as one of the six potential “growth areas” in the General Plan.

• Current Zoning/Entitlements“The Grand” site is currently zoned General Industrial District (GID), with a Planned Area Development (PAD) overlay as per the most recently Amended Preliminary PAD plan. It is important to note that Use Permits were also granted for hotel, retail, and restaurants (without entertainment). The caveat to Use Permits is that they are revocable.

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• EasementsCurrently, there are existing utility and landscaping easements that border the entire property. The easements vary in depth around the site and will need to be noted when siting the buildings during detail design phase.• Surrounding usesNorth: The property is bordered on the North by Washington Street. North of street are offi ce buildings within the GID zoning of the Papago Park Center.South: Loop 202 runs East-West immediately adding visibility value to the property. However, it important to note that there is also an existing Union Pacifi c Railroad tracks. The tracks were realigned to its current location by Papago Park Center in preparation for the site to me marketed for development.East: There is an existing Multi-family complex that was completed in 2004.West: Priest Drive runs on the Western border of the parcel. Immediately West of Priest Drive, are more offi ce buildings.• Covenants, Conditions and Restrictions (C.C.&R’s)The Grand has a set of Covenants, Conditions and Restrictions (C.C.& R’s) that was prepared by Papago Park Center in 1990. These C.C.& R’s our very outdated and will need to be amended in order to serve Papago Park Center’s goals and that of “The Grand” in order to ensure smooth operation of the Corporate Community.

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proposed zoningproposed zoning

• Proposed zoning changesNexus Group will be requesting a rezoning of “The Grand” site from General Industrial District (GID) to Mixed-Use-4 (MU-4) with a Planned Area Development Overlay (PAD overlay). This is a required element as per the City of Tempe Zoning and Development Code. The main purpose of a PAD overly it to “…accommodate, encourage and promote innovatively designed developments involving residential and/or non-residential land uses…” It is important to note that the current GID land use designation does not allow for any residential and has low height restrictions.We are also requesting a variance for parking from the required 6826 parking spaces to 6346. This shortage is only expected upon full build out of the development. The defi ciency in parking at full build out is anticipated to be dispersed throughout the remainder of Papago Park Center to utilize the available parking. If it is found by City of Tempe that there is a shortage of parking still, the air rights to the cross cut facility will be secured if the need arises for a structured parking space. See table for parking calculation:

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MONDAY - FRIDAY

GROUP (S)

S.F.PARKINGREQ 7:00 AM 8:00 AM 9:00 AM 10:00 AM 11:00 AM 12:00 PM 1:00 PM 2:00 PM 3:00 PM 4:00 PM 5:00 PM 6:00 PM 7:00 PM 8:00 PM 9:00 PM 10:00 PM 11:00 PM 12:00 AM

OFFICEMEDICAL (1/150)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

OFFICEGENERAL (1/300)Tenant - Pad 6 375,000.00 1,250.00 25.00 787.50 1,162.50 1,250.00 1,250.00 1,125.00 1,125.00 1,212.50 1,162.50 962.50 587.50 287.50 87.50 87.50 37.50 37.50 0.00 0.00Tenant - Pad 7 375,000.00 1,250.00 25.00 787.50 1,162.50 1,250.00 1,250.00 1,125.00 1,125.00 1,212.50 1,162.50 962.50 587.50 287.50 87.50 87.50 37.50 37.50 0.00 0.00Tenant - Pad 8 375,000.00 1,250.00 25.00 787.50 1,162.50 1,250.00 1,250.00 1,125.00 1,125.00 1,212.50 1,162.50 962.50 587.50 287.50 87.50 87.50 37.50 37.50 0.00 0.00Tenant - Pad 9 375,000.00 1,250.00 25.00 787.50 1,162.50 1,250.00 1,250.00 1,125.00 1,125.00 1,212.50 1,162.50 962.50 587.50 287.50 87.50 87.50 37.50 37.50 0.00 0.00

WAREHOUSE/STORAGE (1/500)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FITNESS CENTER (Personal Training)Tenant - Pad 2 38,000.00 126.67 57.00 44.33 57.00 63.33 57.00 57.00 57.00 50.67 50.67 88.67 126.67 126.67 107.67 95.00 25.33 19.00 6.33 0.00

CHURCH (1/100)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

SCHOOL (1/300)Tenant - Pad 3 42,000.00 140.00 3.50 112.00 140.00 140.00 140.00 112.00 105.00 133.00 133.00 119.00 98.00 35.00 21.00 14.00 7.00 7.00 2.80 2.80

RETAIL/SERVICE (1/300)Tenant - Pad 2 35,000.00 116.67 9.33 21.00 49.00 79.33 101.50 113.17 116.67 113.17 110.83 101.50 92.17 95.67 103.83 101.50 71.17 37.33 15.17 0.00Tenant - Pad 3 50,000.00 166.67 13.33 30.00 70.00 113.33 145.00 161.67 166.67 161.67 158.33 145.00 131.67 136.67 148.33 145.00 101.67 53.33 21.67 0.00Tenant - Pad 6 2,500.00 8.33 0.67 1.50 3.50 5.67 7.25 8.08 8.33 8.08 7.92 7.25 6.58 6.83 7.42 7.25 5.08 2.67 1.08 0.00Tenant - Pad 7 2,500.00 8.33 0.67 1.50 3.50 5.67 7.25 8.08 8.33 8.08 7.92 7.25 6.58 6.83 7.42 7.25 5.08 2.67 1.08 0.00Tenant - Pad 8 2,500.00 8.33 0.67 1.50 3.50 5.67 7.25 8.08 8.33 8.08 7.92 7.25 6.58 6.83 7.42 7.25 5.08 2.67 1.08 0.00Tenant - Pad 9 2,500.00 8.33 0.67 1.50 3.50 5.67 7.25 8.08 8.33 8.08 7.92 7.25 6.58 6.83 7.42 7.25 5.08 2.67 1.08 0.00

NIGHTCLUB/BARINDOOR (1/50)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

OUTDOOR BAR (1/150)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/75)-GENERALtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/75)-DRIVE THRUtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/300)-TAKE OUT NO SEATINGtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1,675,000.00 185.83 3,363.33 4,980.00 5,418.67 5,472.50 4,976.17 4,978.67 5,340.83 5,134.50 4,333.17 2,824.83 1,571.33 760.50 734.50 375.50 277.33 50.30 2.80

PARKING PROVIDED 6,346.00PARKING REQUIRED 5,583.33PARK BY DEMAND REQUIRED 5,472.50

OTHER PARKING REQUIRED 1,353.00

TOTAL PARKING REQUIRED 6,826.00

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SATURDAY-SUNDAY

GROUP (S)

S.F.PARKINGREQ 7:00 AM 8:00 AM 9:00 AM 10:00 AM 11:00 AM 12:00 PM 1:00 PM 2:00 PM 3:00 PM 4:00 PM 5:00 PM 6:00 PM 7:00 PM 8:00 PM 9:00 PM 10:00 PM 11:00 PM 12:00 AM

OFFICEMEDICAL (1/150)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

GENERAL (1/300)Tenant - Pad 6 375,000.00 1,250.00 87.50 250.00 312.50 312.50 437.50 437.50 375.00 250.00 187.50 187.50 625.00 25.00 25.00 0.00 0.00 0.00 0.00 0.00Tenant - Pad 7 375,000.00 1,250.00 87.50 250.00 312.50 312.50 437.50 437.50 375.00 250.00 187.50 187.50 625.00 25.00 25.00 0.00 0.00 0.00 0.00 0.00Tenant - Pad 8 375,000.00 1,250.00 87.50 250.00 312.50 312.50 437.50 437.50 375.00 250.00 187.50 187.50 625.00 25.00 25.00 0.00 0.00 0.00 0.00 0.00Tenant - Pad 9 375,000.00 1,250.00 87.50 250.00 312.50 312.50 437.50 437.50 375.00 250.00 187.50 187.50 625.00 25.00 25.00 0.00 0.00 0.00 0.00 0.00

WAREHOUSE/STORAGE (1/500)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FITNESS CENTER (Personal Training)Tenant - Pad 2 38,000.00 304.00 15.20 60.80 136.80 182.40 167.20 121.60 121.60 106.40 106.40 152.00 136.80 106.40 76.00 60.80 45.60 152.00 0.00 0.00

CHURCH (1/100)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

SCHOOLTenant - Pad 3 42,000.00 140.00 2.80 7.00 14.00 21.00 14.00 14.00 21.00 14.00 14.00 7.00 2.80 2.80 0.00 0.00 0.00 0.00 0.00 0.00

RETAIL (1/300)Tenant - Pad 2 35,000.00 116.67 3.50 11.67 35.00 52.50 85.17 99.17 110.83 116.67 116.67 105.00 87.50 75.83 70.00 64.17 46.67 44.33 15.17 0.00Tenant - Pad 3 50,000.00 166.67 5.00 16.67 50.00 75.00 121.67 141.67 158.33 166.67 166.67 150.00 125.00 108.33 100.00 91.67 66.67 63.33 21.67 0.00Tenant - Pad 6 2,500.00 8.33 0.25 0.83 2.50 3.75 6.08 7.08 7.92 8.33 8.33 7.50 6.25 5.42 5.00 4.58 3.33 3.17 1.08 0.00Tenant - Pad 7 2,500.00 8.33 0.25 0.83 2.50 3.75 6.08 7.08 7.92 8.33 8.33 7.50 6.25 5.42 5.00 4.58 3.33 3.17 1.08 0.00Tenant - Pad 8 2,500.00 8.33 0.25 0.83 2.50 3.75 6.08 7.08 7.92 8.33 8.33 7.50 6.25 5.42 5.00 4.58 3.33 3.17 1.08 0.00Tenant - Pad 9 2,500.00 8.33 0.25 0.83 2.50 3.75 6.08 7.08 7.92 8.33 8.33 7.50 6.25 5.42 5.00 4.58 3.33 3.17 1.08 0.00

NIGHTCLUB/BARINDOOR (1/50)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

OUTDOOR BAR (1/150)tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/75)-GENERALtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00tenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/75)-DRIVE THRUtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

RESTAURANT(1/300)-TAKE OUT NO SEATINGtenant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1,675,000.00 377.50 1,099.47 1,495.80 1,595.90 2,162.37 2,154.77 1,943.43 1,437.07 1,187.07 1,194.00 2,877.10 415.03 366.00 234.97 172.27 272.33 41.17 0.00

PARKING PROVIDED 6,346.00PARKING REQUIRED 5,760.67PARK BY DEMAND REQUIRED 2,877.10

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We are requesting the rezoning based on the following reasons:1. Conformance to City of Tempe’s General Plan 2030 which calls for Mixed-Use development.2. To allow for all the uses that Nexus Group has determined for “The Grand” to truly be a successful mixed-use corporate community.3. Due to the long time-frame of the proposed development, this use provides fl exibility in planning future phases according to then market needs and conditions.4. For future consideration of Transportation Overlay District (TOD) standards.The proposed zoning change is expected to take approximately 6-9 months from the time of application to the City of Tempe. The process involves the following steps in general:o Preliminary Pre-application meeting with the City of Tempe: A meeting with planning division staff will provide guidelines, constraints, requirements of the proposed zoning changeo Formal application for Entitlements: The application will be reviewed by Planning staff and Development Engineering staffo Staff meetings and Final submittalo Neighborhood meetings: Provide a report on citizen outreach efforts, including minutes of neighborhood meeting, list of people contacted and responses to inquiries.o City Council approvalNexus Group intends to submit the 19th Amended Preliminary PAD to request the rezoning and then submit a 20th Amended Final PAD for Phase I when the site is ready for development. Subsequent amendments will follow as the phasing of the development progresses.• General PlanThe site is designated as Mixed-Use (live/work) according to the General Plan 2030 and thus the rezoning to MU-4 will conform to the designation. See general plan map;

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SITE

general plangeneral plan

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• Transportation Overlay District (TOD)The main purpose of the City of Tempe’s Transportation Overlay District (TOD) is to encourage appropriate development that is consistent with the City’s transit, bicycle and pedestrian infrastructure development. Per City of Tempe’s Zoning and Development Code, the main objectives of this overlay district are:o Develop livable and sustainable communitieso Increase and promote use of alternative modes of transportation such as walking, bicycling, carpooling, bus and/or light rail.o Encourage mix of uses and balance of densities and intensities amongst the uses.o Provide a quality of urban design promoting pedestrian activityo Reinforce public-private partnershipso Provide development that creates a safe, accessible, comfortable and pleasant environment.Keeping this in mind, “The Grand” site is not located within the TOD designation as per the Zoning and Development Code. It is so, because the TOD designation does not apply to properties to PAD’s recorded prior to the date of adoption of the TOD code. However, Nexus Group does understand that TOD is important to the City of Tempe as per the objectives stated above. Hence, Nexus Group is willing to open a dialogue with the City of Tempe to generally conform to the intent of TOD standards as and when appropriate under Option B of the Zoning and Development Code for Overlay Zoning Districts.• Canal RealignmentPrior to any rezoning application, the existing Grand Canal will be realigned towards the center of the site to make it a central theme of the development and celebrate the historical aspect of the canal that has existed for hundreds of years. This process is complicated and not managed by the City of Tempe as the Grand Canal is owned by Bureau of Reclamation. This process is expected to take about 1 year to complete from the start of our awarding the development.• EasementsAs noted earlier, there are existing utility and landscaping easements along the property borders, but there are no easements dissecting the site. According to Papago Park Center, the site has adequate utilities available for this type of development with stub points available on the North and West border of the property. This is advantageous, as it provides greater freedom and fl exibility to the design and building placements. Although, it is expected that as phases of the project develop, easements will need to be created to provide the necessary services to each phase.• Federal Aviation Administration(FAA)Due to the proximity to Sky Harbor Airport, Papago Park Center has already received confi rmation and approval of the FAA of the maximum allowable heights and the proposed development conforms to the set guidelines.• Covenants, Conditions and Restrictions (C.C.&R’s)As noted earlier, the original C.C.&R’s for Papago Park Center was created in 1990 and our outdated for the current development. Hence, Nexus Group will be requesting Papago Park Center for an adoption of a new set of C.C.&R’s specifi cally applicable to “The Grand” site by completely severing the parcel from the original set.

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• Federal Aviation Administration(FAA)Due to the proximity to Sky Harbor Airport, Papago Park Center has already received confi rmation and approval of the FAA of the maximum allowable heights and the proposed development conforms to the set guidelines.• Covenants, Conditions and Restrictions (C.C.&R’s)As noted earlier, the original C.C.&R’s for Papago Park Center was created in 1990 and our outdated for the current development. Hence, Nexus Group will be requesting Papago Park Center for an adoption of a new set of C.C.&R’s specifi cally applicable to “The Grand” site by completely severing the parcel from the original set.

The development standards and complete site data for each pad is provided in the table below:

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Surface Parking sq/ft Surface Parking Spaces Structured Parking sq/ft Structured Parking Spaces Parking Floors Total Parking sq/ft Building sq/ft Building Floors Lot Total Floors Building Height Land Acres Land Sq Ft Green Space Acres FAR FAR w/ parking Lot Coverage Lot Coverage w/ ParkingPAD 1Hotel 78,392 262 68,000 303 2 119,000 7 9 90

Total 78,392 262 68,000 303 2 146,392 119,000 7 9Land 95,196 6.1 265,716.0 1.1 0.45 1.00 35.83% 65.33%

PAD 2Health/Wellness 45,000 150 38,000 1 1 20Retail 30,000 100 35,000 1 1 20

Total 75,000 250 75,000 73,000Land 73,000 7.4 322,344.0 1.8 0.23 0.46 22.65% 45.91%

PAD 3Community Center 20,400 68 42,000 2 2 24Charter School 20,400 68 42,000 2 2 24Retail 29,400 98 50,000 2 2 24

Total 70,200 234 70,200 134,000Land 67,000 8.1 352,836.0 3.3 0.38 0.58 18.99% 38.88%

PAD 4Multifamily 62,000 276 2 280,000 5 7 60

Total 62,000 276 2 62,000 280,000 5 7 60Land 87,000 4.9 213,444.0 1.31 1.60 40.76% 40.76%

Pad 5Multifamily 48,000 214 2 250,000 5 7 60

Total 48,000 214 2 48,000 250,000 5 7 60Land 74,000 3.5 152,460.0 1.64 1.95 48.54% 48.54%

PAD 6Office 243,000 1,080 4 375,000 17 22 132Retail 1,125 5 2,500 1 22 132

Total 244,125 1,085 4 244,125 377,500 18 22 132Land 86,000 4.4 191,664.0 1.3 1.97 3.24 44.87% 44.87%


Total 244,125 1,085 4 244,125 377,500 14 18 84Land 86,000 4.7 204,732.0 1.2 1.84 3.04 42.01% 42.01%


Total 244,125 1,085 4 244,125 377,500 14 18 84Land 86,000 5.0 217,800.0 1.4 1.73 2.85 39.49% 39.49%


Total 244,125 1,085 4 244,125 377,500 18 22 132Land 86,000 6.1 265,716.0 3.1 1.42 2.34 32.37% 32.37%

PAD 10Hotel 80,000 267 45,000 200 2 154,000 7 7 80

Total 80,000 267 45,000 200 2 125,000 154,000 7 7 80Land 30,000 5.4 235,224.0 1.6 0.65 1.19 12.75% 46.76%

Total 303,592 1,013 5,333 1,503,092 2,401,000 770,196 2,421,936 0.99 1.61 31.80% 44.34%

Total Parking Spaces 6,346

site datasite data

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project descriptionproject description

The proposed design and amenities carry out Nexus Group’s core values of social wellness, physical wellness, environmental wellness, educational wellness, and corporate wellness.

A charter school with after school activities is proposed in the Grand. This will provide a safe place that parents can leave their children at while they work in the corporate offi ces. The charter school will also be able to utilize the open space on the site for the children to have outside activities.

educational wellnesseducational wellness

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A health and wellness facility will emphasize the physical wellness core value. It will provide am area where corporate professionals can go to before or after work and be phycically fi t. Also, safe well lit paths along the canal will be able to be used as jogging and bike trails.

An extension of the existing green belt will run throughout the The Grand and the overall SRP property. This will create a pleasant connection to all the amenities in the area. Other charateristics will support this core value such as denser greenery, community garden and solar panels.

physical wellnessphysical wellness

environmental wellnessenvironmental wellness

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On the south side of The Grand will be corporate offi ce buildings. The offi ces will sit on top of structured parking and utilize the shared parking component of the master plan. The offi ces will be near relaxing areas like a meditative tributary space and a relaxing canal. The buildings and the structured parking will create signage along the 202 Freeway.

corporate wellnesscorporate wellness

The entire Grand site is designed around encouraging people to run into each other. This creates a sense of social awareness within the corporate community. Wi-Fi will be provided in shaded relaxin outside areas where we are encouraging people to congrigate and socialize. This areas will be marked by unique landscaping features. Light retail will also be sprinkled throughout the site and provide different opportunities for people to be together.

social wellnesssocial wellness

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corporate wellness

The Grand offers the people that are associated with the site a unique experience in providing a corporate community that provides a healthy, friendly, safe, and environmentally friendly atmosphere. The Grand by Nexus Group is a corporate community that will create an iconoc space for PPC inc. It is the vision of Nexus Group to combine the above principals at the Site to create the preeminent corporate location which will be the standard of the Phoenix business community and the model for which all other corporate communities will be sculpted from in the future.

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master plan option 1master plan option 1

Option 1 is a master plan with no zoning change and showing all the parking being located on the site.

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Option 2 is the most feasable master plan and the main focus of Nexus Group. It includes offi ce, multifamily,hospitality, light retail, health and wellness center, and charter school. As well as a green belt circulation system.

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Option 3 is a total build out on the site.

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Nexus Group conducted an analysis on the placement of different asset classes that will be proposed on The Grand. The analysis determined the strategic positioning of each asset class. Based on the market analysis the asset classes considered will be multifamily, retail, hospitality and offi ce.

The fi rst step in the process was to determine the areas in the site on such characteristics as safety, access and the areas that can contribute to promoting the SRP image.

0

-20

-2

11

1-1

safetysafety

-1

-20

-2

11

10

accessaccess

step 1step 1

area analysisarea analysis

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The scale was developed on a scale from 1 to -2. 1 being the best and -2 being the worst.

0

01

0

11

-1-2

srp imagesrp image

61

C

GF

H

AB

DE

hospitalityhospitality

H

GE

F

CD

AB

multifamilymultifamily

The next step was to determine the best positioning for each asset class in The Grand. positioning was based on safety, access, SRP image, pedestrian access, freeway visibility and other factors.

step 2step 2

62

H

DA

E

BC

FG

office

D

FE

H

AB

CG

retailretail

63

O

OO

O

RH

MFMFO

option 1

H

OO

O

HR

MFMFMFMF

option 2option 2

Prefered option

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phasingphasing

n

n n

INFRASTRUCTURE

Nexus Group plans to accomplish the development in Phases due to the long time-frame of the complete buildout of “The Grand”. There are 4 main phases proposed at this time:Phase 1Pad 9-Offi cePad 2-Fitness CenterPad 4-Multi-family

Phase 2Pad 1-HotelPad 10-HotelPad 8-Offi cePad 2-RetailPad 3-Charter School: Phase 1

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n n

n

FINAL

Phase 3

Pad 7-Offi ce

Phase 4

Pad 5-Multi-familyPad 3-Charter School: Phase 2Pad 3-RetailPad 6-Offi ce

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project scheduleproject schedule

ID Task Name Duration Start Finish

1 Marketing Plan 1827 days Tue 5/1/12 Wed 5/1/192 Development Activities 262 days Tue 5/1/12 Wed 5/1/133 Site Zoning Change 133 days Tue 5/1/12 Thu 11/1/124 Demo and Fill Canal 133 days Tue 5/1/12 Thu 11/1/125 Relocate Canal 133 days Tue 5/1/12 Thu 11/1/126 Infrastructure Pad Prep 130 days Thu 11/1/12 Wed 5/1/137 Phase 1 523 days Wed 5/1/13 Fri 5/1/158 Pad 9 Office 523 days Wed 5/1/13 Fri 5/1/159 Pad 2 Fitness Center 523 days Wed 5/1/13 Fri 5/1/1510 Pad 4 Multi Family 523 days Wed 5/1/13 Fri 5/1/1511 Phase 2 522 days Fri 5/1/15 Mon 5/1/1712 Pad 1 Hotel 522 days Fri 5/1/15 Mon 5/1/1713 Pad 10 Hotel 522 days Fri 5/1/15 Mon 5/1/1714 Pad 8 Office 522 days Fri 5/1/15 Mon 5/1/1715 Pad 2 Retail 522 days Fri 5/1/15 Mon 5/1/1716 Pad 3 Charter School Phase 1 522 days Fri 5/1/15 Mon 5/1/1717 Phase 3 523 days Mon 5/1/17 Wed 5/1/1918 Pad 7 Office 523 days Mon 5/1/17 Wed 5/1/1919 Pad 3 Local Grocer 523 days Mon 5/1/17 Wed 5/1/1920 Phase 4 524 days Wed 5/1/19 Sat 5/1/2121 Pad 5 Multi Family 524 days Wed 5/1/19 Sat 5/1/2122 Pad 3 Charter School Phase 2 524 days Wed 5/1/19 Sat 5/1/2123 Pad 6 Office 524 days Wed 5/1/19 Sat 5/1/2124 Shared Parking Strategy Begins 262 days Fri 5/1/20 Sat 5/1/21

H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H22012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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financial analysisfinancial analysis

For fi nances to be developed as accurately as possible one must take the real estate cycle into consideration and the effect macro-economic trends play. The Macro Perspective of the Market Analysis in this report goes into depth on this very subject. The fi ndings from this section were used in modeling future costs and revenues in the pro formas for the hypothetical vertical developments of the project. The fi ndings from this section point toward an above average growth in the near term, trending to stabilization of 3% growth thereafter.

Current construction costs and methods were used to put an expected cost on the buildings, on-site and off-site improvements. Standard building materials were assumed to be used as a set of blueprints with specifi cations has not been produced.

On-site and Off-site costs were calculated based on the proposed uses. The off-site infrastructure is already existing and suffi cient for the needs of the proposed uses. There are no assessment district fees or impact fees associated with the site. The on-site improvements were based on the master plan scenario. The estimated costs of the improvements are roughly $5M. See appendix infrastructure estimate for an estimate.

As with all projects the effect of construction permit fees can be a burden to the total cost of a project. A possible solution for the handling of these fees is to enter a development agreement with the City of Tempe. This is recommended as the fees would then be negotiated and some form of concession may be attainable. The negotiation of this fee provides an environment in which the lower cost of the project can help incentivize development and make it easier to lure in major corporate users. Under current guidelines the fee will total between $2.4M and $3.6M. See Construction Permit Fees Appendix.

As the process to estimating the exact costs associated with the project are impossible without accurate construction documents a contingency factor of 5%-10% was used across all asset classes. The exact contingency factor used depended upon the use under evaluation.

Real Estate Cycles and Macro Economic Trends Real Estate Cycles and Macro Economic Trends

constructionconstruction

On-site - Off-site costs On-site - Off-site costs

construction permit feesconstruction permit fees

contingencycontingency

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The discount rate calculation for the proposed asset classes were determined by taking factors of time and risk into consideration.

To ultimately determine what Nexus would be able to pay for the land in the form of lease payments it became necessary to run residual land value calculations and compare them to current market prices. To do this, the end user was taken into consideration fi rst. The proposed phasing schedule was determined and at what point in time a particular pad would be developed. This provided a present value at a point in the future for each of the proposed vertical developments (Please see the Phasing section of the report for full details on when the pads are to be developed and the Financial Appendix section to review the 10 year pro forma for each proposed structure). Once modeling for each building had been completed it became necessary to set them all equal in time by present valuing them to the project start date. With this accomplished it was possible to sum all pad values, with them equally compared in today’s dollars to determine a per acre value and a value per SF. Nexus plans on functioning as the horizontal land developer and master developer for “The Grand” and as such, the appropriate land holding costs, site improvements, marketing plan and other administrative costs were taken into consideration when present valuing each of the pads. With this done the modeled price per SF was compared to current market rate for similar tracks of land. This allowed Nexus to validate/reevaluate the effi ciency of its modeling with current market data. The pricing was found to be within range. It then became necessary to calculate the required 10% lease payment on the unimproved land plus the 15% required developer margin for the horizontal improvement of the land. The total price of the now improved land was checked against market comps for similarly improved land.

The results from the fi nancial modeling concluded the current value of the land to be +/- $11.00 PSF or $480,000 per acre. This produces a land rent payment at 10% of the land value at $1.09 PSF per year. Once the land has been horizontally improved it is estimated Nexus will be able to charge $2.40 PSF per year, creating a spread of $1.21 for Nexus. These pricing assumptions along with all other associated management, marketing and land improvement costs were modeled. The Unlevered IRR at full build out (year 10) is 35%, Cash on Cash for the equity partner is in excess of 600%, and an NPV with a 15% discount rate of $8.7M. The total equity contribution is just over $6 M. For complete fi nancial details see Appendix “The Grand” Horizontal Development Pro Forma.

The “The Grand” project is one that should be actively pursued by Nexus Group, LLC. The project meets and exceeds the fi nancial hurdles assigned to it. The downside is the long term hold, as the returns signifi cantly increase in year 10. The project should seek equity partners that are capable of and understand the time frame associated with the investment.

discount rate calculationdiscount rate calculation

methodologymethodology

resultsresults

conclusionconclusion

69

determining economic impactdetermining economic impact

Our methodology in determining the economic impact of the Site consisted of predicting the number of direct jobs created for each use. From the total job fi gures, we then determined the amount of disposable income that would come from each worker and predicted a tax revenue amount for the City. In addition, we estimated tax revenues from our retail component by calculating average sales per square foot and applying a tax rate to these sales. We added the tax revenue from jobs created to the tax revenue from retail sales to arrive at the estimated annual sales tax revenue for the City. For a breakdown of our assumptions and calculations please see the “Economic Impact Appendix” at the end of our report.

• The primary reason is to address the total impact of the City. When economic impact is known, an adequate job creation forecast can ensue, building clout politically as well as fi nancially for a given project.• To leverage economic impact when negotiating with City: The biggest reason is the leverage such positive economic impact to the City as a means to gain an upper hand through negotiations. The City cares most about the additional tax revenue in addition to appeasing constituents’ concerns, which over the duration of the recent recession has been about job creation. Examples of leveraging this for betterment of the project may include, but not limited to: Construction permit fee waivers, impact fees waivers added infrastructure.

why it is neededwhy it is needed

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As shown below, the following outlines the basic framework of the development agreement that should be pursued:City of Tempe Development AgreementWe are recommending Papago Park Center, Inc. agree to work with Nexus Group to collectively negotiate a development agreement with the City of Tempe (City) that outline the following stipulations:Items “The Grand” Parties are requesting from City 1. Waiver of all construction permits fees. 2. Extension of 62,000 square feet of multi-use paths. The costs of items 1 and 2 have been estimated at a range of $2,700,000 – $4,000,000.Items “The Grand” Parties will provide for the City 1. Proposed development will bring an estimated 9,000-12,000 new jobs (direct). 2. The total annual sales tax revenue created from the project and in benefi t of the City will be in the range of $716,000 - $1,024,000. 3. The City will recoup their costs in 9 - 12 years. 4. To further embedded SRP’s community involvement and expand Tempe’s multi-use path network, SRP/PPC grants public easement along the multi-use paths within Papago Park Center. This easement can be revoked at any time with 90 days written notice. SRP and/or the developer has the right to purchase back the easement with fair replacement value of improvement costs at any given time. Can revoke the easement at any given time without compensation for the multi-use paths that were funded by the developer.The high impact and construction permit fees prohibit development at the “The Grand” site currently. The development agreement will provide assurance and security that these items will be paid for and/or waived.

sample agreementsample agreement

The economic impact analysis provides a win-win to all of the parties involved. The City gets the affi rmation of tending to their constituents’ primary need, job creation. The City also over the span of the agreement gets a large return and benefi ts fi nancially. For the developers, the development agreement will provide assurance and security that the impact and construction impact fee items will be paid for and/or waived.

conclusionconclusion

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1 Memorandum of Understanding, “The Grand”

Memorandum of Understanding

Dated April 26, 2012

Between Nexus Group AND

Papago Park Center, Inc.


April 26, 2012

Mitch Rosen

Papago Park Center, Inc.

RE: Proposed Memorandum of Understanding (the “Lease”) by and between Papago Park Center Inc., (Lessor) and Nexus Group (Lessee) for space in The Grand, (“Site”) within the Papago Park Center, located in Tempe, Arizona.

Dear Mitch Rosen:

The purpose of this letter is to express the intent of Lessee to earnestly investigate and work in good faith toward an agreement whereby the Lessor would lease to Lessee the property described herein upon the terms detailed below. Although this letter is non-binding on the parties as to terms herein detailed, should the transaction contemplated occur, this shall not be construed as either a lease agreement or an option to lease.

PROPOSED DEAL

Premises: An unimproved piece of land at the Site consisting of approximately 58 Acres(in the location shown on the attached plan).

Location of the Premises: Shown on the site plan attached as Exhibit A.

1. Terms. Lessee offers $1.09/SF per year Lessor in exchange for the rights to be master developer on Site. In addition to the lease payment, Lessee will provide all necessary horizontal development on Site including the proposed relocation of the canal. In exchange for the horizontal improvement costs, Lessor agrees to accept the cash infusion into the grand as a rent equivalent during the improvement period. The term of the lease sought is 75 years.

Lessee will operate a third party auditing company which will audit the residual value of the land on an annual basis and will adjust rents based on the Consumer Price Index (CPI) or 3% per year, whichever is lower. Lessee will absorb all of the foregoing auditing and management expenses associated with this task.

memorandum of understandingmemorandum of understanding

72


2. Conditions. This Agreement is contingent upon the following conditions: a. The City of Tempe’s full rezoning approval of the site to MU-4 b. Lease would be assignable to a third party, contingent upon agreement by both Lessor and

Lessee. c. Ability to relocate the Canal as shown in “The Grand” Masterplan site plan.

3. Initial Capitalization: The Parties shall be required to make the following initial Capital Contributions:

a. Specifically in this venture Nexus Group will providei. Infrastructure Improvements

1. 5% of all infrastructure costs2. 45% of all infrastructure costs to be funded by an equity partner3. 50% of all infrastructure to be funded by debt

b. Papago Park Center Inc., will providei. Rent abatement in the amount of the total infrastructure improvements, including all

appropriate cost of capital expenses. ii. Option for take-down of the future parcels specified according to the phasing strategy

and timeline. iii. Rent will not be paid on parcels while they are waiting to be developed. iv. If a portion of a parcel needs to be taken-down for an interim use PPC has the right to

charge the applicable lease rate to the square footage of land being used.

MEMORANDUM OF UNDERSTANDING

1. Date. The date of this Master Lease Agreement (“Lease”) is April 26, 2012 (“Lease Commencement Date”).

2. Parties. The parties to this Lease are: a. Papago Park Center, Inc.

An Arizona Corporation ATTN: Mitch Rosen 1521 N Project Drive Tempe, AZ 85284 (“Lessor”)

b. Nexus Group An Arizona limited Liability Company ATTN: Team 4 MRED 300 E. Lemon Drive Tempe, AZ 85284 (“Lessee”)

3. Recitals. a. Lessor and its Affiliates (as defined in this Lease) own that certain real property in the City of

Tempe, Arizona (“City”) described in Exhibit A (“Property ”) attached hereto. Included in the


Lessor’s Property is a 58.56 acre parcel of real property identified as H1 (“Site”) that is more particularly described in the attached Exhibit B and depicted on the attached Exhibit C (“Site Plan”), which Site is owned by Lessor.

4. Intent.a. Lessee desires to lease the Site from Lessor with first right of first refusal for Alternative

Properties, and Lessor desire to lease the Site to Lessee, all as set forth in this Lease.

b. Lessee desires to enable development of the Site and Alternative Properties as a phased master planned development and such phasing plan has been described in the Master Plan (as defined hereafter) and accepted by the Lessor.

c. Lessee is in the business of master planning, positioning and developing property for the leasing by target users for the development of high quality build to suit product that is in alignment with the goals and character of the proposed development (“Development”).

d. The quality of the Project is intended to be Class A Business Park with retail component extending from pedestrian plaza spaces with the most density and intensity on the West side of the Site and gradually phased to allow for better transition into the multi-family development to the East.

5. Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lessor and Lessee agree as is more specifically set forth in this Lease

6. Lease.a. Lessor leases the entire Site to Lessee:

1. Term: The initial term of this Lease (“Initial Term”) is 75 years. Lease will commence six (6) months from date of lease execution or after PAD amendment is approved through the City whichever occurs earlier. The term of this Lease (“Term”) shall be automatically renewed for an additional term of twenty (20) years, unless Lessee gives Lessor notice of Lessee’s intention not to renew at least ninety (90) days prior to the expiration of the Initial Term of any Renewal Term.

2. Rent: Until the date that is thirty (30) days after the approval of PAD Amendment and Parcel A final plat the rent (”Rent”) shall be a monthly payment of $1.09 PSF of developed or developing land.

a. Rent shall be reviewed on an annual basis via an auditing process. The rent will be benchmarked to the CPI index or 3%, whichever is lower. The cost and management of the audit will be paid for by the lessee.

b. Lessee at the expense of Lessee, rezone, entitle, improve, operate and maintain the right of ways within the Site and for Lessee to develop and sublease PADs (“PADs”) on the Site for the improvements and

73


construction of build to suit product that is aligned with the character of the area (as defined in this Lease).

b. Lessor shall cooperate with Lessor in PAD amendment(s) that will allow increase in density and intensity of the use of the Site to correlate with the Master Plan. Lessor shall permit Lessee and its Assignees to develop the Site in its entirety in such a way that it is consistent with this Lease and the Master Plan, subject to: (1) final plat for each phase of development, (2) each plat, and (3) each site plan, and (ii) compliance with the Laws and Regulations. Subject to the foregoing, the right to develop the Site as provided in the Master Plan is hereby vested and shall not be changed, provided, material progress has been made by the Lessor in the construction of the elements of the infrastructure required by the Master Plan (such as and primarily the elements relating to water, sewer and streets) within five (5) years or the Owner or its Assignees have not built or caused to be built the end product uses: (i) on at least 25% of the Site within fifteen (15) years, (ii) on at least fifty percent (50%) of the Site within twenty (20) years, and (iii) one hundred percent (100%) of the Site within thirty (30) years.

c. The Site may be planned and developed in phases (individually “Phase” and collectively “Phases”). Lessee shall have the right to plan and develop more than one Phase at a time, with the location, rate, timing and sequencing to be determined by Lessee.

7. As Is. Except as otherwise provided in this Lease (i) Lessee is leasing the Site “as is, where is with all faults and defects”, both latent and apparent, (ii) Lessee acknowledges and agrees that Lessor has not made, does not make and specifically disclaims any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future regarding the Site, and (iii) Lessor has not made, does not make and is unwilling to make any representations as to the condition, expenses, use, operation or any other matter or thing affecting or relating to the use of the Site and other rights of Lessee under this Lease.

8. Subleases.a. Lessee shall have the right to enter into subleases with the End-users (individually “sublease” and

collectively “Subleases”) for part or the entire Site. The terms and provisions of the Subleases shall not be in conflict with the terms and provisions of this Lease. Lessee shall remain liable under this Lease notwithstanding the existence of any Sublease of all or a portion of the Site. Lessee shall provide Lessor with complete copies of all executed Subleases. Each Sublease shall (i) require that Lessor be named as an additional insured under the insurance policy to be furnished by the End-user under the Sublease, (ii) provide that any indemnification from the Subleasee to Lessee under the Sublease shall also be for the benefit of Lessor, and (iii) make Lessor a third party beneficiary under the Sublease (but such provision shall not constitute a substitution of Lessor for Lessee as the sublessor under the Sublease).

b. Lessor shall accept any payment or performance by one (or more) End-user to cure any default under this Lease within the time periods provided in this Lease. If one (or more) sublease acquires this Lease in the exercise of an End-user’s remedies against Lessee, and there is not an uncured Event of Default, this Lease shall continue in full force and effect and Lessor shall recognize the End-user as the Lessee under this Lease.


c. Lessee intends to develop whenever practical and possible. Lessee shall make each Phase of the project available up to its fullest capacity to all end-users on terms and provisions comparable to those provided to other users on such Site and Lessee shall not enter into any “exclusive use” or other similar agreements as to any PAD within the Site. Lessor acknowledges that it may be necessary for Lessee to give the first End-user that subleases a financial incentive, and Lessor agrees that Lessee will not be required to offer the same incentive to subsequent sublessees as long as the terms and provisions are comparable among subsequent sublessees.

d. Lessor, or an Affiliate of Lessor, shall have the right, at its election, to enter into a Sublease with Lessee, so that Lessor may build to suit on the Site in the same manner as any End-user.

9. Site & Site Improvements.a. The construction and installation of the wet and dry utilities shall be constructed in a single phase.

Lessor shall grant any easements required by Lessee for the installation and improvements of the Site.

b. This provision shall not be construed as a requirement by Lessor that Lessee construct and install the improvements; and it shall not be deemed to create any agency relationship between Lessor and Lessee under Arizona lien laws. Any contract for such design, construction or installation of the Improvements shall provide that: (i) the work is for the Lessee and no other party, (ii)Lessor is not obligated to construct or pay for the Improvements on Site and, (iii) neither Lessee nor the contractor are express or implied agents of Lessor under the lien laws of Arizona. Lessee shall timely respond to all preliminary lien notices with the statement that: (i) the “Owner” for the purposes of construction is Lessee, (ii) the location of building structure or improvement is “Lessee Improvements without any claim being made against any fee ownership in the underlying property”, and (iii) the property legal description is “Leasee Improvements for Lessee, with no claim being made against any fee ownership in the underlying property.”

c. Lessee or its Assignees agrees to forever maintain all landscaping located within the main street right of way located on the Site and such obligation shall survive the termination nor expiration of this Agreement; provided, however, Lessee or its Assignees may assign this obligation to one or more Owner’s Associations (“OA”) provided such OA is legally bound to such landscaping maintenance obligation and has adequate financial ability, acceptable to the Lessee. The assignment of this obligation into an OA, Lessee shall be relieved of any further obligation to maintain the landscaping.

10. Alternative Property.a. During the Terms of this Lease, if Lessor is given an arm’s length bona fide offer (“Offer”) from

another development company (“Other Development Company”) to lease a site on any of the Alternative Properties, and the Offer is acceptable to Lessor, Lessee shall have the right (“Right of First Refusal”), but not the obligation, to lease the Alternative Property(ies) upon the same

74


terms, conditions and provisions as contained in the Offer, except that the lease of the Alternative Property(ies) would be cross-defaulted with this Lease.

b. Lessee shall have twenty-one (21) days from the date that Lessor gives notice of the Offer to Lessee (“21-Day Period”) to give to Lessor notice of its election to lease the Alternative Property(ies) upon the same terms, conditions and provisions as contained in the Offer. The notice of the Offer shall include the documentation between Lessor and the Other Development Company that represents the Offer. If Lessee elects to lease the Alternative Property(ies) as allowed in this Section, and it does not enter into a lease within thirty (30) days after presentation of the form of lease by Lessor (which may be given simultaneously with the notice),m regardless of the reason (except for a default by Lessor), Lessee shall no longer have the Right of First Refusal as to the Other Site. If Lessee fails to timely exercise its right to lease the Other Site in accordance with the foregoing, or Lessee does not enter into a lease as required in this subsection after electing to do so, then Lessor shall be free to lease the Alternative Property(ies) on substantially the same terms and provisions of the Other Offer with the Other Development Company or any other development company within one (1) year after the 21-Day Period. If Lessee fails to respond within the 21-Day Period, it shall be deemed to have rejected the Offer as of 5:00 PM on the last day of the 21-Day Period.

c. If there is any material change in the term or rent of the Offer or if a lease is not executed within the one (1) year period, then any new or revised or extended Offer shall first be given to Lessee as though it were a new offer in accordance with the procedure set forth above. If the Other Development Company does not enter into the lease of the Alternative Property(ies) pursuant to the Offer, Lessee shall continue to have the Right of First Refusal as to the Lessor’s Property.

11. Late Charge. If any installment of Rent or any other amount payable under this Lease is not paid within five days after the date it falls due, Lessee shall pay to Lessor a late charge equal to 5% of the unpaid amount. Lessor and Lessee agree that the late charge represents a reasonable estimate of the damages caused by late payment and that the late charge constitutes liquidated damages and not a penalty. Acceptance of such late charge shall in no event constitute a waiver of Lessee’s default or breach with respect to the overdue amount nor prevent Lessor from exercising any of its other remedies under this Lease.

12. Title and Quiet Possession. Lessor represents and warrants to, and agrees with, Lessee that: (a) it has the right to enter into this Lease; (b) the person signing this Lease has the authority to sign; and (c) Lessee is entitled to access to the Site at all times and to the quiet possession of the Site throughout the Term so long as Lessee Is not in default beyond the expiation of any cure period.

13. Covenants, Conditions and Restrictions. Lessee or its Assignees shall have the right to record one or more declaration of covenants, conditions and restrictions (“CC&Rs”) for the area of the Site or each phase to govern the private development and use of the Site. These CC&Rs shall be consistent with this Lease and are subject to the initial approval of the Papago Park Center Association.

14. Development Agreement. As shown below, the following outlines the basic framework of the development agreement that should be pursued:


City of Tempe Development Agreement

We are recommending Papago Park Center, Inc. agree to work with Nexus Group, LLC to collectively negotiate a development agreement with the City of Tempe (City) that outline the following stipulations:

Items “The Grand” Parties are requesting from City

1. Waiver of all construction permits fees. 2. Extension of 62,000 square feet of multi-use paths.

The costs of items 1 and 2 have been estimated at a range of $2,700,000 – $4,000,000.

Items “The Grand” Parties will provide for the City

1. Proposed development will bring an estimated 9,000-12,000 new jobs (direct). 2. The total annual sales tax revenue created from the project and in benefit of the City will be in

the range of $716,000 - $1,024,000.3. The City will recoup their costs in 9 - 12 years. 4. To further embed SRP’s community involvement and expand Tempe’s multi-use path network,

SRP/PPC grants public easement along the multi-use paths within Papago Park Center. This easement can be revoked at any time with 90 days written notice. SRP and/or the developer has the right to purchase back the easement with fair replacement value of improvement costs at any given time. Can revoke the easement at any given time without compensation for the multi-use paths that were funded by the developer.

15. Representations and Warranties. As of the date of the execution of this Agreement, the parties represent and warrant to each other as follows (“Representations and Warranties”):

a. Lessor Lessor is the holder of the Master Lease of Papago Park Center. b. Nexus Group LLC , an Arizona limited liability company is duly formed and in good standing in

the State of Arizona. c. Lessee has the authority, including the persons signing for Lessor, and the right to enter into this

Agreement as authorized by the members of Lessor at duly noticed meetings at which quorums were present.

d. Lessee is not prohibited from executing this Agreement by any law, rule, regulation, instrument, agreement, order or judgment.

e. Lessee has not relied on any representations or warranties of Lessor other than those expressly set forth in this Lease.

16. Cooperation.a. Lessor and Lessee shall each designate a representative to act as a liaison between Lessor and its

various departments and Lessee (“Representatives”). The Representatives shall be available at all reasonable times to assist with the performance of the parties under this Lease. The initial representative for Lessor (“Lessor Representative”) shall be Mitch Rosen, and the initial representative for Lessee (“Lessee representative”) shall be Team 4 MRED. Lessor and Lessee Representative may be changed by the applicable party by giving notice to the other party of the name, title, address and telephone number of the replacement.

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17. Termination.a. By Lessor. Lessor shall have the right, at its election, to terminate this Lease if Construction

activity consisting of, but not limited to, onsite infrastructure improvements greater than or equal to five million dollars ($5,000,000) has not commenced on the Site within three (3) years after the Lease Commencement Date.

b. By Lessee. Lessee shall have the right, at its election, to terminate this Lease at any time without further liability by giving Lessor thirty (30) days prior notice (i) if Lessee does not obtain all permits or other approvals within 24 months, including for zoning (collectively, “Approvals”) required from any governmental authority or any easements required from any third party to master plan and construct the proposed Development or (ii) if any of the Approvals are cancelled, withdrawn, terminated, or expires; or (iii)if Lessor fails to have property ownership of the Site or authority to enter into this Lease; or (iv) if Lessee, for any other reason, in its sole discretion, determines that it shall be unable to use the Site. Upon termination, all prepaid Rent shall be retained by Lessor, unless such termination is due to Lessor’s failure of proper ownership or authority, or such termination is a result of Lessor’s default under this Lease beyond the applicable cure period, or Lessor terminates this Lease pursuant to subsection (a) of this section.

18. Effect on Subleases. Upon a termination of Lessee’s right to possession, whether or not this Lease is terminated, sub tenancies and other rights of persons claiming under or through Lessee shall be terminated, except as otherwise expressly provided in this Lease.

19. Financing. a. Lessee shall have the right to finance this Lease, Master Plan, or any of the Improvements, and to

grant any lender that is not affiliated with Lessee (“Lender”) a first lien against this Lease, Master Plan, or any Improvement, but not the Site. Lessor hereby subordinates its statutory landlord’s lien on any personal property located on the Site to the first lien of the Lender, and Lessor shall execute any document reasonably acceptable to Lessor, Lessee (or the Subleasees, as the case may be) and the Lender , to confirm such subordination.

b. Lessor shall not be required to give notice to the lender of any default under this Leasee. However, Lessor shall accept any payment or performance by the Lender to cure the default. If the Lender acquires this Lease in the exercise of the Lenders remedies against Lessee, and there is not an existing Event of Default, this Lease shall continue in full force and effect and Lessor shall recognize the Lender or any purchaser under a foreclosure of this Lease as the Lessee under this Lease. Following notice from the Lender to Lessor of the existence of the financing, Lessor shall not consent to a modification or termination of this Lease without the prior written consent of the Lender.

c. Lessee shall not permit any mechanic’s or materialmen’s lien to stand against the Site for any labor or materials provided to the Site by any contractor or other person hired or retained by Lessee or any Subleasee. Lessee shall cause any such lien to be discharged (by payment, bonding or otherwise) within thirty (30) days after such a lien is recorded, and, if it is not discharged within the thirty (30) days, Lessor may, but shall not be obligated to, pay or otherwise discharge


the lien and immediately recover all amounts so expended from Lessee as additional Rent plus Default Interest.

20. Sub-Association. Lessee shall have the right to form a sub-association subject to the approval of the Lessor. All associated costs with the creation of the sub-association are to be borne by the Lessor. Continued management and operation of the sub-association is to be funded by dues paid on a per building square foot basis.

Association dues shall be calculated such that they are sufficient to cover the required dues to be paid to the PPC Association, as well as maintenance of the common areas at the Grand site and the equivalent of $100/acre. Any applicable assessments the board sees fit to apply shall also be included in the dues.

The aforementioned $100/acre fee shall be a pass-through from the sub-association to the Charter School to pay for a portion of the building structure.

21. Charter School. The Lessor understands and agrees to permanent rent abatement on the site which is dedicated for a Charter School. The rough area of this parcel is 2.5-3 acres. If any other user occupies the site, the Lessor has the right to collect fair-market rent at the CPI rate adjustment then in effect as described earlier in the Terms section of this Agreement.

Users exempt from the aforementioned activation of rent include but are not limited to non-profit organizations, after-school sport and educational opportunities, or any other sub-association and PPC approved use.

22. Assignment. This Lease may be freely assigned at any time by Lessee to Lessee’s parent company, Affiliate, subsidiary, or to any successor entity with or into which Lessee is sold, merged or consolidated, to any entity resulting from a reorganization of Lessee or its parent company, but any such assignment shall not relieve Lessee of its obligations under this Lease.

23. No Agency or Partnership. Neither Lessor nor Lessee is acting as the agent of the other with respect to this Lease, and this Lease shall not be deemed to create a partnership, joint venture or other business relationship between Lessor and Lessee.

24. Time of Essence. Time is of the essence of this Lease.

25. Signature. The parties have executed this Lease effective as of the Lease Commencement Date.

LESSOR:Papago Park Center, Inc. An Arizona Corporation

By: Mitch Rosen Its Representative

By: _______________________

76


Its: _______________________

LESSEE: Nexus Group, LLC An Arizona Limited Liability Company

By: Michale Jenkins Its Member

By: _______________________

Its: _______________________

Exhibit A (Photo of Papago Park Center, Inc. master leased properties from SRP)

Exhibit B (Picture of H1 – as defined in the Master Plan – aka The Grand)

Exhibit C Site Plan

77

appendixappendix

JJob Creation Corporate Hotel RetailLow 7,920 137 760 High 10,560 182 1,064

Low 8,817 High 11,806

Adjustment Factor for Indirect Impact - Low - High -

Low 8,817 High 11,806

Low 35,000.00$ High 45,000.00$

Low 5%High 11%

Low 15,429,750.00$ High 58,439,700.00$

Low 154,297.50$ High 584,397.00$

Retail SF 204,802

Low 175.00$ High 250.00$

Low 35,840,350.00$ High 51,200,500.00$

Low 716,807.00$ High 1,024,010.00$

Low 871,104.50$ High 1,608,407.00$

Low 2,400,000.00$ High 3,600,000.00$

Worst - Years 11.48Best - Years 9.33

Worst 25Best 30

Worst 11,777,612.50$ 21,777,612.50$ Best 33,252,210.00$ 48,252,210.00$ Most Likely 22,514,911.25$ 35,014,911.25$

Economic Impact Anaysis

Total Jobs from Indirect Impact

Total Jobs Created

Projected Total Job Creation - Direct plus Indirect

Percentage of Disposable Income

Average Salary Range - Yearly

Total Proposed Sales Revenues - Yearly

Total Economic Advantage for the City of Phoenix Over the Life of the Project

City of Tempe Payback Period - Recapture Basis

Development Agreement Concession from the City of Tempe

Total Yearly Economic Impact Range

Total Annual Sales Tax Revenue from Retail

Yearly Revenues

2.00%City of Tempe Sales Tax Rate

Sales Tax Revenues From Retail Component

Yearly Sales PSF

50%Capture Rate

Total Propoased Sales Tax Revenues - City of Tempe

Expected Useful Life of Project

Job Creation Corporate Hotel RetailLow 7,920 137 760 High 10,560 182 1,064

Low 8,817 High 11,806

djustment Factor for Indirect Impact - Low - High -

Low 8,817 High 11,806

Low 35,000.00$ High 45,000.00$

Low 5%High 11%

Low 15,429,750.00$ High 58,439,700.00$

Low 154,297.50$ High 584,397.00$

Retail SF 204,802

Low 175.00$ High 250.00$

Low 35,840,350.00$ High 51,200,500.00$

Low 716,807.00$ High 1,024,010.00$

Low 871,104.50$ High 1,608,407.00$

Low 2,400,000.00$ High 3,600,000.00$

Worst - Years 11.48Best - Years 9.33

Worst 25Best 30

Worst 11,777,612.50$ 21,777,612.50$ Best 33,252,210.00$ 48,252,210.00$ Most Likely 22,514,911.25$ 35,014,911.25$

Economic Impact Anaysis

Total Jobs from Indirect Impact

Total Jobs Created

Projected Total Job Creation - Direct plus Indirect

Percentage of Disposable Income

verage Salary Range - Yearly

Total Proposed Sales Revenues - Yearly

Total Economic Advantage for the City of Phoenix Over the Life of the Project

City of Tempe Payback Period - Recapture Basis

Development Agreement Concession from the City of Tempe

Total Yearly Economic Impact Range

Total Annual Sales Tax Revenue from Retail

Yearly Revenues

2.00%City of Tempe Sales Tax Rate

Sales Tax Revenues From Retail Component

Yearly Sales PSF

50%Capture Rate

Total Propoased Sales Tax Revenues - City of Tempe

Expected Useful Life of Project

marketmarket

78

Multi Use Path 1 16,800 SFMulti Use Path 2 45,000 SFTotal 61,800 SF

Total Costs: High 368,100$Total Costs: Most Likely 337,200$Total Costs: Low 306,300$

Total Length: Multi Use Path 1,400 FTTotal Width: Multi Use Path 12 FTTotal Area: Multi Use Path 16,800 SF

High 4.50$Most Likely 4.00$Low 3.50$


Total Length: Multi Use Path 1,500 FTTotal Width: Multi Use Path 30 FTTotal Area: Multi Use Path 45,000 SF

High 6.50$Most Likely 6.00$Low 5.50$


Total SF

Multi Use Paths Cost Estimates

Total Costs: Multi Use Path 2

Multi Use Path 2: Connecting Within Site

Cost Assumptions

Total Costs: Multi Use Path 1

Total Costs: All

Cost Assumptions

Multi Use Path 1: Connecting To Site

79

financialfinancial

Nexus Group, LLC. M. JENKINS, F. BARRAZA, R. RYDZIK, P. SAMPATJ. TRUJILLO, U. KUMAR, R. JOHNSON

SUBMITTED: 26 APRIL 2012

Estimated Project Value Permit Fee

Pad 4 MF 46,000,000$ 230,384.90$ Pad 9 Office 89,400,000$ 445,214.90$ Pad 2 B Health Wellness 5,500,000$ 29,909.90$

Pad 2 A Retail 6,700,000$ 35,849.90$ Pad 8 Office 94,300,000$ 469,469.90$ Pad 10 Hotel/Retail 44,000,000$ 220,484.90$ Pad 1 Hotel 54,000,000$ 269,984.90$

Pad 6 Office 100,600,000$ 500,654.90$ Pad 3 B Charter School 2000000 12,584.90$

Pad 5 MF 47,000,000$ 235,334.90$ Pad 7 Office 105,500,000$ 524,909.90$ Pad 3 A Retail 5,400,000$ 29,414.90$

TTotal $3,004,199

PHASE 1

PHASE 2

PHASE 3

PHASE 4

CONSTRUCTION PERMIT FEES

Years from today NPV - Future Discount Rate PV to Today

Pad 4 MF 213,444 3 5,831,290$ 15% $3,728,580Pad 9 Office 265,716 3 7,773,524$ 15% $4,970,462Pad 2 B Health Wellness 161,172 3 4,006,364$ 15% $2,561,706

Pad 2 A Retail 161,172 5 1,139,132$ 16% $514,558Pad 8 Office 217,800 5 8,069,292$ 16% $3,644,984Pad 10 Hotel/Retail 235,224 5 6,094,605$ 16% $2,752,997Pad 1 Hotel 265,716 5 8,866,568$ 16% $4,005,123

Pad 6 Office 191,664 7 7,828,798$ 17% $2,401,658

Pad 5 MF 152,460 9 8,056,720$ 18% $1,613,711Pad 7 Office 204,732 9 8,013,275$ 18% $1,605,009Pad 3 A Retail 117,612 9 931,921$ 18% $186,658

TTotal $27,985,446$482,508Price Per Acre

PHASE 1

PHASE 2

PHASE 3

PHASE 4

RESIDUAL LAND VALUE

80

Pedestrian Bridge 300$ PSF - -$ Traffic Bridge 150$ PSF 11,206 1,680,900$ Water Line - Up to 12" 45$ PLF 3,723 167,535$ Fire Hydrants 2,500$ Each One every 300' 300 3,723 31,025$ Sanitary Sewer - Up to 12" 50$ PLF 3,723 186,150$ Trench and Backfill 28$ PLF 3,723 104,244$ Utility Facility (Gas / Cable / Telephone 2,500$ Once 1 2,500$ Electrical Lines (Pipes) 150$ PLF 3,723 558,450$ Street Lights 3,500$ Each 175' - 200' apart 200 3,723 65,153$ Grading 2.00$ PSF - -$ Subgrade Preparation 1.00$ PSF 11,206 11,206$ Pavement, Parking Lots 4.50$ PSF 6" base, 2 1/2" pavement - -$ Pavement, Streets 6.00$ PSF 9" base, 4" pavement 167,535 1,005,210$ Curb & Gutter 5.00$ PLF 7,446 37,230$ Sidewalk 2.25$ PSF 4" thick, 4" base 18,615 41,884$ Roadside landscaping 2.00$ PSF 74,460 148,920$ Mature Trees 2,500.00$ Each - -$ Palm Trees 100.00$ Per Foot of Height (Each) - -$ Stubbing Utilities 5,000.00$ Per Lot 10 50,000$ Check Dam 300,000.00$ Each 1 300,000$ Move Canal 29.96$ PLF 2947 88,298$ Demo Canal 6.21$ PLF 2,162 13,430$ Traffic Signal 250,000.00$ Each 4 way traffic signal 1 250,000$

4,742,134$ 1.88$

Offsite Construction Costs

TotalPrice Per SF of Land - No Financing Costs

81

82

83

NEXUS GROUP, LLC M. JENKINS, J. TRUJILLO, R, RYDZIK, F. BARRAZA, P. SAMPAT, U. KUMAR, R. JOHNSON SUBMITTED: 26 APRIL 2012

TOTALS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10

INCOMEGross Potential Income 89,185,739$ -$ 831,929$ 10,022,204$ 10,209,907$ 10,520,451$ 10,840,440$ 11,170,163$ 11,509,914$ 11,859,999$ 12,220,732$

Total Number of Units Leased 2,412 - 23 271 276 285 293 302 311 321 331 Income Growth Rate 7,440,913$ -$ -$ 2,088$ 189,790$ 500,334$ 68,360$ 1,150,046$ 1,489,797$ 1,839,882$ 2,200,615$ Stabilized Occupancy 100% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Vacancy & Collection Loss 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 86,510,167$ -$ 806,971$ 9,721,538$ 9,903,610$ 10,204,837$ 10,515,227$ 10,835,058$ 11,164,617$ 11,504,199$ 11,854,110$

-$ Total Gross Revenue 86,555,017$ -$ 809,961$ 9,763,398$ 9,903,610$ 10,204,837$ 10,515,227$ 10,835,058$ 11,164,617$ 11,504,199$ 11,854,110$

-$ Effective Gross Income 86,555,017$ -$ 809,961$ 9,763,398$ 9,903,610$ 10,204,837$ 10,515,227$ 10,835,058$ 11,164,617$ 11,504,199$ 11,854,110$

Operating Expenses Res 1,425,019$ -$ 13,293$ 160,136$ 163,135$ 168,097$ 173,210$ 178,478$ 183,907$ 189,500$ 195,264$ Expense Growth Rate Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

-$ Operating Expense Comm -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses 1,425,019$ -$ 13,293$ 160,136$ 163,135$ 168,097$ 173,210$ 178,478$ 183,907$ 189,500$ 195,264$

Net Operating Income -$ 796,668$ 9,603,262$ 9,740,475$ 10,036,741$ 10,342,018$ 10,656,580$ 10,980,710$ 11,314,699$ 11,658,846$ 147,745,258$

CAPITAL COSTSPermanent Financing Loan Amount 95,594,109$ -$ -$ 95,594,109$ -$ -$ -$ -$ -$ -$ -$ Permanent Financing Monthly Payment (574,256)$ -$ -$ (574,256)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ Debt Balance @ Year 10 (80,036,526)$

Subtotal - Capital Costs (48,237,531)$ -$ -$ (574,256)$ (6,316,820)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$ (6,891,076)$

Debt Service 37,131,682$ Construction Loan Debt 37,131,682$ Debt Beginning Balance (34,684,655)$ -$ (24,429,333)$ (10,255,321)$ -$ -$ -$ -$ -$ -$ -$ Interest (2,454,483)$ -$ (602,433)$ (1,852,050)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ -$ (126,133,524)$ (316,567,540)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 67,259,675$ -$ -$ 67,259,675$ -$ -$ -$ -$ -$ -$ -$ Development Fee (1,237,919)$ -$ -$ (1,237,919)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 94,109,519$ -$ -$ 67,042,726$ 3,423,655$ 3,145,665$ 3,450,942$ 3,765,504$ 4,089,634$ 4,423,623$ 4,767,770$

EQUITYInvestor Equity Payout 14,322,220$

Equity Payout Schedule (14,322,220)$ (7,576,278)$ (6,745,942)$ (0)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (1,217,389)$ (393,861)$ (429,667)$ (393,861)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (2,363,166)$ (7,519,166)$ (10,204,582)$ -$ -$ -$ -$ -$ -$ -$

Investor Equity Payback 83,481,179$ -$ -$ 59,121,065$ 3,081,290$ 2,831,098$ 3,105,848$ 3,388,954$ 3,680,671$ 3,981,261$ 4,290,993$ Investor Equity Balance 72,541,987$ Preferred Retune Per Period 3,383,029$ -$ -$ 30,970$ 388,248$ 414,686$ 442,884$ 473,648$ 507,071$ 543,247$ 582,274$ Reduction in Equity - Per Period 86,864,207$ -$ -$ 59,152,035$ 3,469,538$ 3,245,785$ 3,548,732$ 3,862,602$ 4,187,741$ 4,524,507$ 4,873,268$

Developer Equity Payout 1,591,358$ Equity Payout Schedule (2,062,652)$ (841,809)$ (1,011,551)$ (209,292)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (450,885)$ (145,874)$ (159,136)$ (145,874)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (875,247)$ (2,784,876)$ (3,779,475)$ -$ -$ -$ -$ -$ -$ -$

Developer Equity Payback 8,960,067$ -$ -$ 6,253,388$ 342,366$ 314,566$ 345,094$ 376,550$ 408,963$ 442,362$ 476,777$ Developer Equity Balance 7,725,417$ Preferred return Per Period 356,708$ -$ -$ 3,222$ 40,497$ 43,412$ 46,523$ 49,919$ 53,610$ 57,606$ 61,920$ Reduction in Equity - Per Period 9,316,775$ -$ -$ 6,256,610$ 382,862$ 357,979$ 391,617$ 426,469$ 462,573$ 499,969$ 538,697$

PROJECT PAYOUT SCHEDULE Hard Costs (37,672,609)$ (2,092,923)$ (25,115,073)$ (10,464,614)$ -$ -$ -$ -$ -$ -$ Soft Cost (12,650,328)$ (6,325,164)$ (6,325,164)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (746,589)$ -$ (746,589)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 119,492,636$ -$ -$ 119,492,636$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 147,745,258$ 147,745,258$ Total Project Costs

RETURNS TO EQUITY PARTNERSReturn of Investor Equity - Above ROE & P. R. 73,988,068$ Return of Developer Equity - Above ROE & P. R. 73,988,068$

Discount Rate 15%Project Unlevered IRR (Yearly) 26.12%Project Levered IRR (Yearly) 18.44%NPV Unlevered (Yearly) $28,094,989NPV Levered (Yearly) $8,866,568

PAD 1 - HOTEL

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NEXUS GROUP, LLC M. JENKINS, J. TRUJILLO, R. RYDZIK, F. BARRAZA, P. SAMPAT, U. KUMAR, R. JOHNSON SUBMITTED: 26 APRIL 2012



Total Number of Units Leased 9 - 0 1 1 1 1 1 1 1 1 Income Growth Rate 852,140$ -$ -$ 700$ 24,044$ 58,833$ 7,893$ 131,716$ 169,880$ 209,240$ 249,834$ Stabilized Occupancy 94% 100.00% 98.83% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00%Vacancy & Collection Loss 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 9,093,774$ -$ 167,820$ 1,007,566$ 1,029,211$ 1,061,468$ 1,094,736$ 1,129,047$ 1,164,432$ 1,200,927$ 1,238,566$



Operating Expenses Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Expense Growth Rate Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

-$ Operating Expense Comm -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$


CAPITAL COSTSPermanent Financing Loan Amount 12,392,833$ -$ -$ 12,392,833$ -$ -$ -$ -$ -$ -$ -$ Permanent Financing Monthly Payment (74,447)$ -$ -$ (148,893)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ Debt Balance @ Year 10 (10,347,310)$

Subtotal - Capital Costs (6,327,967)$ -$ -$ (148,893)$ (818,913)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$ (893,360)$

Debt Service 4,625,906$ Construction Loan Debt 4,625,906$ Debt Beginning Balance (4,392,438)$ (286,000)$ (4,106,438)$ -$ -$ -$ -$ -$ -$ -$ -$ Interest (414,391)$ (1,691)$ (172,129)$ (242,055)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ (287,691)$ (33,236,192)$ (40,324,776)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 8,553,862$ -$ -$ 8,552,377$ -$ -$ -$ -$ -$ -$ -$ Development Fee (142,169)$ -$ -$ (142,169)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 10,254,492$ -$ -$ 8,513,693$ 210,298$ 168,108$ 201,376$ 235,687$ 271,072$ 307,567$ 345,206$


Equity Payout Schedule (1,784,278)$ (1,784,278)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (147,203)$ (49,068)$ (53,528)$ (44,607)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (294,406)$ (936,746)$ (1,124,095)$ -$ -$ -$ -$ -$ -$ -$

Investor Equity Payback 9,081,840$ -$ -$ 7,515,121$ 189,268$ 151,297$ 181,238$ 212,118$ 243,965$ 276,811$ 310,686$ Investor Equity Balance 7,690,351$ Preferred Return Per Period 392,789$ -$ -$ 7,946$ 48,932$ 50,569$ 52,371$ 54,443$ 56,794$ 59,435$ 62,376$ Reduction in Equity - Per Period 9,474,629$ -$ -$ 7,523,067$ 238,201$ 201,866$ 233,610$ 266,561$ 300,759$ 336,245$ 373,062$

Developer Equity Payout 198,253$ Equity Payout Schedule (226,853)$ (198,253)$ (28,600)$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (54,520)$ (18,173)$ (19,825)$ (16,521)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (109,039)$ (346,943)$ (416,332)$ -$ -$ -$ -$ -$ -$ -$

Developer Equity Payback 970,930$ -$ -$ 796,850$ 21,030$ 16,811$ 20,138$ 23,569$ 27,107$ 30,757$ 34,521$ Developer Equity Balance 813,972$ Preferred Return Per Period 41,295$ -$ -$ 830$ 5,117$ 5,296$ 5,494$ 5,721$ 5,980$ 6,271$ 6,595$ Reduction in Equity - Per Period 1,012,225$ -$ -$ 797,680$ 26,147$ 22,107$ 25,632$ 29,290$ 33,087$ 37,027$ 41,115$

PROJECT PAYOUT SCHEDULE Hard Costs (4,337,076)$ (1,686,641)$ (2,650,435)$ -$ -$ -$ -$ -$ -$ -$ Soft Cost (1,081,237)$ (540,619)$ (540,619)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (943,984)$ -$ (943,984)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 15,491,041$ -$ -$ 15,491,041$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 19,325,534$ 19,325,534$ Total Project Costs



PAD 2 A - RETAIL

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Total Number of Units Leased 9 - 0 1 1 1 1 1 1 1 1 Income Growth Rate 872,071$ -$ -$ 716$ 24,606$ 60,209$ 8,077$ 134,797$ 173,854$ 214,134$ 255,677$ Stabilized Occupancy 94% 100.00% 98.83% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00%Vacancy & Collection Loss 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 9,306,476$ -$ 171,745$ 1,031,133$ 1,053,284$ 1,086,296$ 1,120,342$ 1,155,455$ 1,191,668$ 1,229,017$ 1,267,536$




-$ Operating Expense Comma -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$




Debt Service 3,754,555$ Construction Loan Debt 3,754,555$ Debt Beginning Balance (3,530,204)$ (303,487)$ (3,226,717)$ -$ -$ -$ -$ -$ -$ -$ -$ Interest (326,667)$ (341)$ (139,371)$ (186,954)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ (361,555)$ (26,759,247)$ (30,914,740)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 9,815,276$ -$ -$ 9,815,276$ -$ -$ -$ -$ -$ -$ -$ Development Fee (122,317)$ -$ -$ (122,317)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 11,578,861$ -$ -$ 9,798,864$ 215,217$ 172,040$ 206,086$ 241,199$ 277,413$ 314,761$ 353,280$


Equity Payout Schedule (1,448,186)$ (1,448,186)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (119,475)$ (39,825)$ (43,446)$ (36,205)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (238,951)$ (760,297)$ (912,357)$ -$ -$ -$ -$ -$ -$ -$



Developer Equity Payback 1,113,636$ -$ -$ 935,636$ 21,522$ 17,204$ 20,609$ 24,120$ 27,741$ 31,476$ 35,328$ Developer Equity Balance 1,004,962$ Preferred Return Per Period 52,235$ -$ -$ 1,074$ 6,594$ 6,788$ 7,002$ 7,246$ 7,523$ 7,832$ 8,175$ Reduction in Equity - Per Period 1,165,871$ -$ -$ 936,711$ 28,115$ 23,993$ 27,611$ 31,366$ 35,264$ 39,308$ 43,503$

PROJECT PAYOUT SCHEDULE Hard Costs (3,731,532)$ (1,451,151)$ (2,280,380)$ -$ -$ -$ -$ -$ -$ -$ Soft Cost (922,862)$ (461,431)$ (461,431)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (509,482)$ -$ (509,482)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 15,853,374$ -$ -$ 15,853,374$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 19,777,556$ 19,777,556$ Total Project Costs



PAD 2 B - HEALTH WELLNESS

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NEXUS GROUP, INC. M. JENKINS, J. TRUJILLO, R. RYDZIK, F. BARRAZA, P. SAMPAT, U. KUMAR, R. JOHNSON SUBMITTED: 26 APRIL 2012


INCOMEGross Potential Income 7,884,731$ -$ 145,508$ 873,608$ 892,375$ 920,343$ 949,188$ 978,937$ 1,009,618$ 1,041,261$ 1,073,895$

Total Number of Units Leased 9 - 0 1 1 1 1 1 1 1 1 Income Growth Rate 685,065$ -$ -$ 563$ 19,329$ 47,298$ 6,345$ 105,891$ 136,573$ 168,216$ 200,850$ Stabilized Occupancy 94% 100.00% 98.83% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00%Vacancy & Collection Loss 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 7,310,802$ -$ 134,916$ 810,018$ 827,419$ 853,351$ 880,096$ 907,680$ 936,128$ 965,467$ 995,726$

-$ Total Gross Revenue 7,355,652$ -$ 143,886$ 845,898$ 827,419$ 853,351$ 880,096$ 907,680$ 936,128$ 965,467$ 995,726$

-$ Effective Gross Income 7,355,652$ -$ 143,886$ 845,898$ 827,419$ 853,351$ 880,096$ 907,680$ 936,128$ 965,467$ 995,726$



Net Operating Income -$ 143,886$ 845,898$ 827,419$ 853,351$ 880,096$ 907,680$ 936,128$ 965,467$ 995,726$ 15,536,471$



Debt Service 3,717,553$ Construction Loan Debt 3,717,553$ Debt Beginning Balance (3,501,957)$ (232,762)$ (3,269,195)$ -$ -$ -$ -$ -$ -$ -$ -$ Interest (329,416)$ (1,376)$ (136,955)$ (192,293)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ (234,138)$ (26,443,458)$ (32,019,689)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 6,918,545$ -$ -$ 6,917,337$ -$ -$ -$ -$ -$ -$ -$ Development Fee (116,134)$ -$ -$ (116,134)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 8,283,901$ -$ -$ 6,884,398$ 169,066$ 135,148$ 161,893$ 189,477$ 217,925$ 247,264$ 277,523$


Equity Payout Schedule (1,433,913)$ (1,433,913)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (118,298)$ (39,433)$ (43,017)$ (35,848)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (236,596)$ (752,805)$ (903,365)$ -$ -$ -$ -$ -$ -$ -$



Developer Equity Payback 784,576$ -$ -$ 644,626$ 16,907$ 13,515$ 16,189$ 18,948$ 21,792$ 24,726$ 27,752$ Developer Equity Balance 658,702$ Preferred Return Per Period 33,449$ -$ -$ 673$ 4,148$ 4,292$ 4,451$ 4,635$ 4,843$ 5,077$ 5,338$ Reduction in Equity - Per Period 818,025$ -$ -$ 645,299$ 21,055$ 17,807$ 20,641$ 23,582$ 26,635$ 29,803$ 33,090$

PROJECT PAYOUT SCHEDULE Hard Costs (3,501,489)$ (1,361,690)$ (2,139,799)$ -$ -$ -$ -$ -$ -$ -$ Soft Cost (917,645)$ (458,822)$ (458,822)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (693,850)$ -$ (693,850)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 12,453,788$ -$ -$ 12,453,788$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 15,536,471$ 15,536,471$ Total Project Costs


Discount Rate 12%Project Unlevered IRR (Yearly) 22.24%Project Levered IRR (Yearly) 14.81%NPV Unlevered (Yearly) $3,350,126NPV Levered (Yearly) $931,921

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Total Number of Units Leased 1,736 - 16 195 199 205 211 217 224 231 238 Income Growth Rate 5,052,383$ -$ -$ 1,417$ 128,867$ 339,727$ 46,417$ 780,882$ 1,011,573$ 1,249,281$ 1,494,219$ Stabilized Occupancy 94% 100.00% 99.42% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00% 93.00%Vacancy & Collection Loss 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 56,151,138$ -$ 525,702$ 6,309,739$ 6,427,912$ 6,623,423$ 6,824,881$ 7,032,466$ 7,246,365$ 7,466,770$ 7,693,879$



Operating Expenses Res 8,493,305$ -$ 80,828$ 970,105$ 985,221$ 1,010,135$ 1,035,680$ 1,061,871$ 1,088,724$ 1,116,256$ 1,144,485$ Expense Growth Rate Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

-$ Operating Expense Comm -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses 8,493,305$ -$ 80,828$ 970,105$ 985,221$ 1,010,135$ 1,035,680$ 1,061,871$ 1,088,724$ 1,116,256$ 1,144,485$




Debt Service 31,650,924$ Construction Loan Debt 31,650,924$ Debt Beginning Balance (29,551,060)$ -$ (20,170,681)$ (9,380,379)$ -$ -$ -$ -$ -$ -$ -$ Interest (2,131,840)$ -$ (475,927)$ (1,655,912)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ -$ (100,699,392)$ (286,189,942)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 63,166,937$ -$ -$ 63,166,937$ -$ -$ -$ -$ -$ -$ -$ Development Fee (1,113,592)$ -$ -$ (1,113,592)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 59,447,585$ -$ -$ 62,404,120$ (498,615)$ (868,138)$ (692,225)$ (510,830)$ (323,784)$ (130,911)$ 67,969$


Equity Payout Schedule (12,208,214)$ (5,274,269)$ (6,933,945)$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (1,037,698)$ (335,726)$ (366,246)$ (335,726)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (2,014,355)$ (6,409,312)$ (8,698,352)$ -$ -$ -$ -$ -$ -$ -$

Investor Equity Payback 55,677,742$ -$ -$ 55,210,699$ 403,488$ -$ -$ -$ -$ -$ 63,556$ Investor Equity Balance 46,107,109$ Preferred Return Per Period 2,637,580$ -$ -$ 29,863$ 362,787$ 366,386$ 369,451$ 372,541$ 375,658$ 378,800$ 382,095$ Reduction in Equity - Per Period 58,315,322$ -$ -$ 55,240,561$ 766,275$ 366,386$ 369,451$ 372,541$ 375,658$ 378,800$ 445,651$

Developer Equity Payout 1,356,468$ Equity Payout Schedule (1,772,224)$ (586,030)$ (994,757)$ (191,436)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (384,333)$ (124,343)$ (135,647)$ (124,343)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (746,057)$ (2,373,819)$ (3,221,612)$ -$ -$ -$ -$ -$ -$ -$

Developer Equity Payback 5,917,383$ -$ -$ 5,865,489$ 44,832$ -$ -$ -$ -$ -$ 7,062$ Developer Equity Balance 4,837,627$ Preferred Return Per Period 276,712$ -$ -$ 3,131$ 38,058$ 38,439$ 38,760$ 39,084$ 39,411$ 39,741$ 40,088$ Reduction in Equity - Per Period 6,194,095$ -$ -$ 5,868,620$ 82,890$ 38,439$ 38,760$ 39,084$ 39,411$ 39,741$ 47,149$

PROJECT PAYOUT SCHEDULE Hard Costs (34,458,535)$ (1,914,363)$ (22,972,357)$ (9,571,815)$ -$ -$ -$ -$ -$ -$ Soft Cost (7,891,871)$ (3,945,936)$ (3,945,936)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (1,181,091)$ -$ (1,181,091)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 112,389,216$ -$ -$ 112,389,216$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 139,838,886$ 139,838,886$ Total Project Costs


Discount Rate 10%Total Cash flow per period - UnleveredTotal Cash flow per period - Levered

Project Unlevered IRR (Yearly) 20.37%Project Levered IRR (Yearly) 11.95%NPV Unlevered (Yearly) $29,944,297NPV Levered (Yearly) $5,831,290

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Operating Expenses Res 9,893,751$ -$ 94,156$ 1,130,064$ 1,147,672$ 1,176,695$ 1,206,452$ 1,236,961$ 1,268,242$ 1,300,314$ 1,333,196$ Expense Growth Rate Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

-$ Operating Expense Comm -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses 9,893,751$ -$ 94,156$ 1,130,064$ 1,147,672$ 1,176,695$ 1,206,452$ 1,236,961$ 1,268,242$ 1,300,314$ 1,333,196$




Debt Service 32,059,279$ Construction Loan Debt 32,059,279$ Debt Beginning Balance (29,926,245)$ -$ (20,292,687)$ (9,633,558)$ -$ -$ -$ -$ -$ -$ -$ Interest (2,139,509)$ -$ (471,997)$ (1,667,512)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ -$ (100,131,348)$ (288,181,407)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 67,342,458$ -$ -$ 67,342,458$ -$ -$ -$ -$ -$ -$ -$ Development Fee (1,145,675)$ -$ -$ (1,145,675)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 63,482,097$ -$ -$ 66,564,428$ (522,229)$ (908,918)$ (723,912)$ (533,127)$ (336,383)$ (133,494)$ 75,731$


Equity Payout Schedule (12,365,722)$ (5,440,552)$ (6,925,170)$ (0)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (1,051,086)$ (340,057)$ (370,972)$ (340,057)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (2,040,344)$ (6,492,004)$ (8,810,577)$ -$ -$ -$ -$ -$ -$ -$

Investor Equity Payback 59,438,587$ -$ -$ 58,945,656$ 422,899$ -$ -$ -$ -$ -$ 70,031$ Investor Equity Balance 49,929,046$ Preferred Return Per Period 2,856,182$ -$ -$ 32,347$ 392,869$ 396,747$ 400,066$ 403,412$ 406,787$ 410,190$ 413,764$ Reduction in Equity - Per Period 62,294,768$ -$ -$ 58,978,003$ 815,768$ 396,747$ 400,066$ 403,412$ 406,787$ 410,190$ 483,795$

Developer Equity Payout 1,373,969$ Equity Payout Schedule (1,801,167)$ (604,506)$ (1,000,058)$ (196,603)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (389,291)$ (125,947)$ (137,397)$ (125,947)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (755,683)$ (2,404,446)$ (3,263,177)$ -$ -$ -$ -$ -$ -$ -$

Developer Equity Payback 6,331,784$ -$ -$ 6,277,013$ 46,989$ -$ -$ -$ -$ -$ 7,781$ Developer Equity Balance 5,258,604$ Preferred Return Per Period 300,790$ -$ -$ 3,405$ 41,371$ 41,783$ 42,132$ 42,485$ 42,840$ 43,198$ 43,576$ Reduction in Equity - Per Period 6,632,573$ -$ -$ 6,280,418$ 88,360$ 41,783$ 42,132$ 42,485$ 42,840$ 43,198$ 51,357$



Discount Rate 10%Total Cash flow per period - UnleveredTotal Cash flow per period - Levered

Project Unlevered IRR (Yearly) 21.18%Project Levered IRR (Yearly) 12.61%NPV Unlevered (Yearly) $33,329,119NPV Levered (Yearly) $8,056,720

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INCOMEGross Potential Income 63,289,000$ -$ 1,167,957$ 7,012,256$ 7,162,895$ 7,387,390$ 7,618,921$ 7,857,709$ 8,103,980$ 8,357,970$ 8,619,921$

Total Number of Units Leased 54 - 1 6 6 6 7 7 7 7 7 Income Growth Rate 5,498,865$ -$ -$ 4,515$ 155,154$ 379,649$ 50,932$ 849,968$ 1,096,239$ 1,350,229$ 1,612,180$ Stabilized Occupancy 100% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Vacancy & Collection Loss 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 63,289,000$ -$ 1,167,957$ 7,012,256$ 7,162,895$ 7,387,390$ 7,618,921$ 7,857,709$ 8,103,980$ 8,357,970$ 8,619,921$

-$ Total Gross Revenue 63,333,850$ -$ 1,176,927$ 7,048,136$ 7,162,895$ 7,387,390$ 7,618,921$ 7,857,709$ 8,103,980$ 8,357,970$ 8,619,921$

-$ Effective Gross Income 63,333,850$ -$ 1,176,927$ 7,048,136$ 7,162,895$ 7,387,390$ 7,618,921$ 7,857,709$ 8,103,980$ 8,357,970$ 8,619,921$



Net Operating Income -$ 1,176,927$ 7,048,136$ 7,162,895$ 7,387,390$ 7,618,921$ 7,857,709$ 8,103,980$ 8,357,970$ 8,619,921$ 134,497,931$

CAPITAL COSTSPermanent Financing Loan Amount 86,249,123$ -$ -$ 86,249,123$ -$ -$ -$ -$ -$ -$ -$ Permanent Financing Monthly Payment (518,119)$ -$ -$ (1,036,238)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ Debt Balance @ Year 10 (72,013,111)$

Subtotal - Capital Costs (44,040,097)$ -$ -$ (1,036,238)$ (5,699,307)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$ (6,217,426)$

Debt Service 35,253,475$ Construction Loan Debt 35,253,475$ Debt Beginning Balance (33,123,499)$ (4,526,354)$ (28,597,146)$ -$ -$ -$ -$ -$ -$ -$ -$ Interest (3,220,166)$ (11,733)$ (1,345,782)$ (1,862,651)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ (6,522,643)$ (256,398,215)$ (311,044,840)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 56,374,071$ -$ -$ 56,374,071$ -$ -$ -$ -$ -$ -$ -$ Development Fee (1,261,418)$ -$ -$ (1,261,418)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 67,937,793$ -$ -$ 55,832,866$ 1,463,588$ 1,169,964$ 1,401,496$ 1,640,283$ 1,886,555$ 2,140,545$ 2,402,495$


Equity Payout Schedule (13,597,769)$ (13,597,769)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (1,121,816)$ (373,939)$ (407,933)$ (339,944)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (2,243,632)$ (7,138,829)$ (8,566,594)$ -$ -$ -$ -$ -$ -$ -$

Investor Equity Payback 60,022,198$ -$ -$ 49,127,763$ 1,317,229$ 1,052,968$ 1,261,346$ 1,476,255$ 1,697,899$ 1,926,490$ 2,162,246$ Investor Equity Balance 48,890,187$ Preferred Return Per Period 2,465,758$ -$ -$ 49,236$ 303,997$ 315,080$ 327,317$ 341,425$ 357,474$ 375,538$ 395,692$ Reduction in Equity - Per Period 62,487,956$ -$ -$ 49,177,000$ 1,621,226$ 1,368,048$ 1,588,663$ 1,817,680$ 2,055,373$ 2,302,028$ 2,557,938$

Developer Equity Payout 1,510,863$ Equity Payout Schedule (1,765,043)$ (1,510,863)$ (254,180)$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (415,487)$ (138,496)$ (151,086)$ (125,905)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (830,975)$ (2,644,011)$ (3,172,813)$ -$ -$ -$ -$ -$ -$ -$

Developer Equity Payback 6,378,292$ -$ -$ 5,167,799$ 146,359$ 116,996$ 140,150$ 164,028$ 188,655$ 214,054$ 240,250$ Developer Equity Balance 5,123,509$ Preferred Return Per Period 256,081$ -$ -$ 5,067$ 31,341$ 32,552$ 33,891$ 35,438$ 37,200$ 39,186$ 41,405$ Reduction in Equity - Per Period 6,634,373$ -$ -$ 5,172,866$ 177,700$ 149,549$ 174,041$ 199,466$ 225,856$ 253,241$ 281,654$

PROJECT PAYOUT SCHEDULE Hard Costs (39,119,713)$ (15,213,222)$ (23,906,492)$ -$ -$ -$ -$ -$ -$ -$ Soft Cost (8,843,528)$ (4,421,764)$ (4,421,764)$ -$ -$ -$ -$ -$ -$ -$ -$ Land Cost (523,070)$ -$ (523,070)$ -$ -$ -$ -$ -$ -$ -$ -$ Project Value @ Permanent Financing 107,811,404$ -$ -$ 107,811,404$ -$ -$ -$ -$ -$ -$ -$ Project Reversion Value @ 120 Months 134,497,931$ 134,497,931$ Total Project Costs



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NEXUS GROUP, LLC. M. JENKINS, J. TRUJILLO, R. RYDZIK, F. BARRAZA, P. SAMPAT, U. KUMAR, R. JOHNSON SUBMITTED: 26 APRIL 2012














Investor Equity Payback 56,616,290$ -$ -$ 46,284,201$ 1,247,892$ 997,541$ 1,194,951$ 1,398,547$ 1,608,525$ 1,825,083$ 2,048,429$ Investor Equity Balance 46,161,236$ Preferred Return Per Period 2,326,330$ -$ -$ 46,442$ 286,773$ 297,261$ 308,844$ 322,197$ 337,391$ 354,492$ 373,574$ Reduction in Equity - Per Period 58,942,620$ -$ -$ 46,330,643$ 1,534,665$ 1,294,803$ 1,503,794$ 1,720,745$ 1,945,915$ 2,179,575$ 2,422,003$






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Equity Payout Schedule (12,071,390)$ (12,071,390)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (995,890)$ (331,963)$ (362,142)$ (301,785)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (1,991,779)$ (6,337,480)$ (7,604,975)$ -$ -$ -$ -$ -$ -$ -$







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Total Number of Units Leased 54 - 1 6 6 6 7 7 7 7 7 Income Growth Rate 4,936,577$ -$ -$ 4,053$ 139,288$ 340,828$ 45,724$ 763,054$ 984,143$ 1,212,161$ 1,447,326$ Stabilized Occupancy 100% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Vacancy & Collection Loss 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 56,817,366$ -$ 1,048,527$ 6,295,216$ 6,430,451$ 6,631,990$ 6,839,846$ 7,054,217$ 7,275,306$ 7,503,324$ 7,738,489$

















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Total Number of Units Leased 54 - 1 6 6 6 7 7 7 7 7 Income Growth Rate 4,936,577$ -$ -$ 4,053$ 139,288$ 340,828$ 45,724$ 763,054$ 984,143$ 1,212,161$ 1,447,326$ Stabilized Occupancy 100% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Vacancy & Collection Loss 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Base Rent Abatements -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Scheduled Base Rent 56,817,366$ -$ 1,048,527$ 6,295,216$ 6,430,451$ 6,631,990$ 6,839,846$ 7,054,217$ 7,275,306$ 7,503,324$ 7,738,489$

















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NEXUS GROUP, LLC. M. JENKINS, J. TRUJILLO, R. RYDZIK, F. BARRAZA, P. SAMPAT, U. KUMAR, R. JOHNSON SUBMITTED: 26 APRIL 2012






Operating Expenses Res 3,116,792$ -$ 29,115$ 349,598$ 356,887$ 367,742$ 378,927$ 390,453$ 402,329$ 414,566$ 427,175$ Expense Growth Rate Res -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

-$ Operating Expense Comm -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Operating Expenses 3,116,792$ -$ 29,115$ 349,598$ 356,887$ 367,742$ 378,927$ 390,453$ 402,329$ 414,566$ 427,175$




Debt Service 30,173,819$ Construction Loan Debt 30,173,819$ Debt Beginning Balance (28,187,408)$ -$ (19,912,623)$ (8,274,786)$ -$ -$ -$ -$ -$ -$ -$ Interest (2,014,261)$ -$ (493,563)$ (1,520,698)$ -$ -$ -$ -$ -$ -$ -$ Ending Balance -$ -$ (103,276,641)$ (260,257,576)$ -$ -$ -$ -$ -$ -$ -$ Cash Available for Accrued Preferred Return Payback 49,970,049$ -$ -$ 49,970,049$ -$ -$ -$ -$ -$ -$ -$ Development Fee (1,002,547)$ -$ -$ (1,002,547)$ -$ -$ -$ -$ -$ -$ -$ Free Cash Flow 70,538,244$ -$ -$ 49,751,583$ 2,629,287$ 2,415,797$ 2,650,242$ 2,891,819$ 3,140,743$ 3,397,239$ 3,661,536$


Equity Payout Schedule (11,638,473)$ (6,180,140)$ (5,458,333)$ -$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (989,270)$ (320,058)$ (349,154)$ (320,058)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return -$ (1,920,348)$ (6,110,198)$ (8,292,412)$ -$ -$ -$ -$ -$ -$ -$


Developer Equity Payout 1,293,164$ Equity Payout Schedule (1,674,061)$ (686,682)$ (818,505)$ (168,873)$ -$ -$ -$ -$ -$ -$ -$ Preferred Return (366,396)$ (118,540)$ (129,316)$ (118,540)$ -$ -$ -$ -$ -$ -$ -$ Accrued Preferred Return @ 120 Months -$ (711,240)$ (2,263,036)$ (3,071,264)$ -$ -$ -$ -$ -$ -$ -$





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