PPM EVALUATION CHECKLIST

PRIOR STEPS: THE BASICS | Partnership Type | Checklists

Evaluating private placements becomes easier if you use a consistent methodology. You'll also develop your own critical screening factors more quickly by standardizing the measures you use to compare deals.

The "Private Placement Evaluation Checklist" that follows is the uniform method we ourselves use to undertake PPM review for clients. While It's safe to say it may be a bit more involved than you feel you need, start with the portions you feel meets your current needs. and over time you will eventually have created your own uniform method measure that is easily modified for each deal you take a look at. An added bonus: By having a completed checklist for many deals, you will develop a handy reference file for quickly comparing investments.

PPM Evaluation Checklist TOC

NAME OF OFFERING

_____________________________________

OFFERING SIZE

TOTAL ALL-IN $ ____________________

PER UNIT SIZE $ ____________________

SPONSOR NAME

_____________________________________

ADDRESS:

_____________________________________

CONTACT __________________________

PHONE ____________________________

1. ASSET

1.1 QUALITY

Property Name and Address

_____________________________________

_____________________________________

Property Type

_____________________________________

Location

Grade (excellent, good, fair or poor)

_____________________________________

Physical Condition

Age ________

Year Constructed ___________________

Year Last Updated __________________

Maintenance Condition (good, etc.)

_____________________________________

_____________________________________

Construction (wood, brick, steel)

_____________________________________

_____________________________________

Style _______________________________

Marketability (unit size, # of bedrooms, etc. vs. market)

_____________________________________

_____________________________________

Inspection Report and Engineering Study Performed? ____________ (Y,N)

Required Property Improvements:

_____________________________________

_____________________________________

Economic Factors

Lease Terms (pick one)

Duration ___________ (12 mo. or less)

Other (specify) ______________________

_____________________________________

Current Rental Rates (per unit)

• Type (# BR) _______ Count ______

$ _____________ Sq ft _____________

• Type (# BR) ________ Count ______

$ _____________ Sq ft _____________

• Type (# BR) _______ Count ______

$ _____________ Sq ft _____________

• Type (# BR) ________ Count ______

$ _____________ Sq ft _____________

• Type (# BR) ________ Count ______

$ _____________ Sq ft _____________

Current Occupancy ______________%

Break-Even Occupancy __________%

Market Rental Rate $ _____________

Credit Quality of Tenants ___________

_____________________________________

_____________________________________

_____________________________________

Financing Terms

Loan Maturities ______________ (yrs.)

Interest Rate(s) _______________%

Lender Participations (describe):

_____________________________________

_____________________________________

_____________________________________

Market Trends:

Comparable Available in the market

________________ Sq ft

New Space Under Construction

________________ Sq ft

Occupancy Rates for Similar Space

________________%

Absorption Rate Per Annum

________________ Sq ft

1.2 VALUE

Prices of Comparable Property

Per ____ Sq Ft ____ Unit (pick one)

$ ________________

Gross Rent Multiplier

(Purchase Price / Gross Rents)

________________

Capitalization Rate

(NOI / Purchase Price) _________%

Price of Partnership Property

Price Paid by Investors (PPP)

Per ____ Sq Ft ____ Unit (pick one)

$ ________________

Gross Rent Multiplier

(Purchase Price / Gross Rents)

________________

EQUALIZER™ Capitalization Rate

(NOI / PPP paid by Investors)

________________%

Appraised Value $__________________

Projected Property IRR ___________%

Seller Financing Terms:

_____________________________________

_____________________________________

General Partner Guarantees:

_____________________________________

_____________________________________

2. SPONSOR

2.1 STAFF

Senior Personnel

Executive Personnel _________ (no.)

Avg yrs of real estate exp _________

Avg yrs service w/Sponsor ________

Acquisition Staff

No. of professional personnel

________________

Avg yrs acquisition experience

________________

Acquisition Procedures & Criteria

Describe ____________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

No. acquisitions per yr _____________

Pro Forma financials prepared?

________________ (Y,N)

Comp Property Analysis Performed?

________________ (Y,N)

Management & Legal Involved?

________________ (Y,N)

Property acquisitions through:

Developers? ________________ (Y,N)

Brokers? ________________ (Y,N)

Senior personnel involved?

________________ (Y,N)

Property management involved?

________________ (Y,N)

Property Management Staff

Avg yrs of PM experience ___________

Third-party PM used? _________ (Y,N)

Sponsor tracks PM performance

Budgets ____________ (Y,N)

Variances ____________ (Y,N)

Other? (describe) ___________________

_____________________________________

_____________________________________

Legal & Finance Staff

Number ____________

Average yrs of experience __________

Investor accounting & reporting

_____________________________________

_____________________________________

_____________________________________

IRS & State tax compliance

_____________________________________

_____________________________________

_____________________________________

SEC reporting (if required)

_____________________________________

_____________________________________

_____________________________________

Experience of Senior CFO

_____________________________________

_____________________________________

_____________________________________

2.2 PRIOR PERFORMANCE

Total Dollars Raised in Syndications

$ ________________

Number of Partnerships Formed

__________________

Number of Partnerships Exited

__________________

Investor IRR on Exited Partnerships:

___________________________ / ______%

___________________________ / ______%

___________________________ / ______%

___________________________ / ______%

___________________________ / ______%

___________________________ / ______%

2.3 FINANCIAL CONDITION

Sponsor's Net Worth

$ __________________

Current Ratio

___________________

Net Worth - Sponsor's Parent entity

$ __________________ (N/A if none)

Bank References:

_____________________________________

_____________________________________

_____________________________________

3. PROJECT SUMMARY

3.1 TERMS

Front-end Fees / Investor Capital

_________________%

Contingency Reserves / Capital

1: At Partnership Inception

_________________%

2: In Year Following Pay-in Period

(if Pay-in has a deferral option)

_________________%

Reserve for Capital Improvements

(as a % of Investor Capital)

_________________%

IRR on Property __________________%

IRR to Investor ___________________%

PV Investor Benefits / Investment

_________________%

Property Cost (All-in)

$ _________________

All Investor Cash + Debt Assumed

$ _________________

Property "Markup", if any __________%

Appreciation Necessary to B/E

_________________%

3.2 FEASIBILITY

Reasonableness of Assumptions

Period to stabilization _________ (yrs.)

Cash Flow to Investor in Yr 1 ______%

Annual Rate of Rental Increase

__________________%

Annual Rate of Expense Increase

__________________%

Capitalization Rate on Exit

__________________%

Forecast Opinion from CPA firms?

_______________(Y,N)

Describe ____________________________

_____________________________________

_____________________________________

Accountants Opinion on Tax Issues:

_______________(Y,N)

Describe ____________________________

_____________________________________

_____________________________________

3.3 ECONOMIC VALUE

ARR (or IRR) ___________________%

Payback Period ____________(yrs.)

_____________________________________

_____________________________________

_____________________________________

3.4 RISK

Relative Risk Factor

(i.e. the odds of success)

_____________%

3.5 RISK ADJ EXPECTED RETURN

Economic Value (ROR) x Risk Factor

_______________%

NEXT STEP: Sponsor Evaluation Checklist