Structured Capital, Ground Sale & Leasehold Financing

1177 Sixth Avenue, 5th Floor, New York, NY 10036 | T 212.776.4058 | F 212.881.9650 | dedrei@anikaequities.com | www.anikaequities.com

Structured Capital, Ground Sale & Leasehold Financing

Anika Equities is seeking opportunities to create and purchase ground leases on cash-flowing com-mercial real estate in primary and strong secondary markets. Anika will purchase the land under most asset types, with a minimum investment of $10 million and no maximum.

1. In a refinance/recapitalization scenario, the seller/leaseholder repays existing debt and repatri-ates equity while continuing to benefit from the future upside of the operating asset

2. In an acquisition scenario, the seller/leaseholder achieves higher “all-in” leverage utilizing a ground lease/leasehold financing combo at a lower blended cost than a senior/mezzanine loan option

3. Unlike a traditional senior/mezzanine stack where all debt usually expires conterminously, a ground lease provides low cost permanent capital with no immediate balloon risk

4. Tax advantaged execution allows the seller/leaseholder to depreciate 100% of the leasehold improvements and deduct 100% of the ground lease rent

1. Anika Equities buys the ground – taking an unsubordinated fee position. The property is then bifurcated into: • Leased Fee ownership of the ground (owned by Anika Equities) • Leasehold ownership of the improvements (owned by the Seller)

2. Purchase price of leased fee position –is approximately 30% - 40% of the property value

3. The ground rent – is fixed at a significant discount to the cap rate of the overall asset with fixed annual increases of approximately 2% - 3%

4. Buy-back options – deals can be structured with imbedded options at very favorable terms

6. Leasehold financing – Avison Young can assist the Seller in securing senior secured leasehold financing (up to 75% LTV)

7. Structured capital may be available – Avison Young may arrange or the Institution may fund additional capital over the senior secured leasehold financing allowing Seller to achieve as much as 95% leverage on the asset

GENERAL BENEFITS:

STRUCTURE AND TERMS:

1177 Sixth Avenue, 5th Floor, New York, NY 10036 | T 212.776.4058 | F 212.881.9650 | dedrei@anikaequities.com | www.anikaequities.com

Structured Capital, Ground Sale & Leasehold Financing

CASE STUDY: GROUND LEASE VS. TRADITIONAL FINANCE IN A REFINANCE SCENARIO

DEAL SPECIFIC BENEFITS:

• The Property – A $100 million asset, valued at a 6% cap rate, with a $6 million NOI. • Fee Simple Financing – 70% LTV, 10 year term, 30 year amortization at 4.25% interest. • The Ground Lease – A $40 million ground sale and the creation of a 99-year lease. Ground rent is fixed at 4.75%, with 3% annual escalations.• Leasehold Financing – 70% LTV, 10 year term, 30 year amortization at 4.3% interest.• Leasehold & Mezzanine Financing – 90%LTV, 10 year I/O Mezzanine at 12% interest.

The results over a 6-year hold:

1. As a result of the positive arbitrage of the ground sale, on the day of closing the value of the leasehold at $65.6M is $3.4M more than the allocated cost ($62.2M).

2. The going in cap rate has improved by 72 bps and the exit year cap rate has improved 84 bps.

3. 1st year cash-on-cash is increased by 294 bps and the average cas8h-on-cash over a six-year period has improved by 426 bps.

4. At disposition in year 6, the IRR has gone from 13.2% to 20.8% and the equity multiple has gone from 1.95x to 2.71x. This is further increased with the addition of mezzanine debt, if de-sired.

Asset Value 100,000,000$ @ 6.00% Cap 65,600,000$ @ 6.25% Cap 65,600,000$ @ 6.25% CapCost Basis 102,215,509$ 62,215,509$ 62,215,509$ Senior Debt Financing 71,550,856$ @ 4.25% 47,406,848$ @ 4.30% 47,406,848$ @ 4.30% Ground Lease 40,000,000$ 40,000,000$ Mezzanine Financing 8,542,159$ @ 12.00% Equity 30,664,653$ 14,717,221$ 6,231,080$

NOI Amount Cap Rate Amount Cap Rate Amount Cap RateYear 1 6,000,000$ 5.87% 4,100,000$ 6.59% 4,100,000$ 6.59%Year 6 6,955,644$ 6.80% 4,753,024$ 7.64% 4,753,024$ 7.64%

If Held Until Year 10 7,828,639$ 7.66% 5,349,570$ 8.60% 5,349,570$ 8.60%NCF (LEVERAGED) Amount C-on-C Yield Amount C-on-C Yield Amount C-on-C Yield

Year 1 1,776,154$ 5.79% 1,284,765$ 8.73% 245,469$ 3.94%Year 6 2,731,798$ 8.91% 1,937,788$ 13.17% 895,645$ 14.37%

Year 6 Average 2,244,563$ 7.32% 1,604,845$ 10.90% 564,599$ 9.06%If Held Until Year 10 Average 2,654,481$ 8.66% 1,884,955$ 12.81% 844,805$ 13.56%

Total Leverage 71,550,856$ 70.00% 87,406,848$ 85.59% 95,949,007$ 93.90%Total Cash Flow (Holding Period) 13,467,381$ 9,629,068$ 3,387,597$Residual Equity 46,450,330$ @ 6.50% Cap 30,233,762$ @ 6.75% Cap 21,560,893$ @ 6.75% CapIRR 13.2% 20.8% 27.9%Equity Multiple 1.95x 2.71x 4.00x

FEE SIMPLE LEASEHOLD LEASEHOLD & MEZZ

Daniel Edrei Managing Director/Partner Anika Equities, LLC TEL 212 776-4058 x101 | MOBILE 917 224-8931 FAX 212 881-9650 | dedrei@anikaequities.com www.anikaequities.com | 1177 Sixth Avenue, 5th Floor, New York, NY 10036

ANIKA EQUITIES GROUND SALE/LEASEHOLD FINANCING PROGRAM

Leverage Ownership Cash-on-Cash Returns

85% 100% 200%

Anika will assist the seller in obtaining competitive leasehold financing for total leverage of as much as 85-95%

Retain Full Ownership. Boosting cash-on-cash return of as much as 2x or greater than that attain-able through conventional financing.