Sample Lease Buy SCENARIO Analysis - Welcome to …

[Pages:18]SCENARIO

Sample Lease Buy Analysis

Lease vs. Buy is designed for a user/occupier to compare the costs of ownership with the costs of leasing. In either event, at the end of the analysis term, if leasing you would assume you will move, so if buying, you need to also assume you will move and sell the property.

In this example two different properties are being compared, one that is available for lease and one that can be purchased. The Mgmt Summary and Key Assumptions reports show the comparison and the differences. Financing for the Purchased property includes a Balloon Loan with the payment amortized over 30 years and the balloon payment due after 5 years.

Typically in a lease vs. buy analysis, the key decision metric is when it becomes cheaper to Buy than Lease based on Cash Flow, either before or after taxes. (See graphs G - 1 and G 2). When the cumulative cost of Leasing exceeds the cumulative cost of Buying (called the crossover), then buying becomes the preferred route. Historically, the crossover (when buying becomes cheaper than leasing) occurs in years 6 through 8. Note: the crossover is dependent upon the rent, the purchase price and financing.

From an Income Statement perspective, i.e. the annual tax impact that is reported to the IRS, purchasing is almost always cheaper than leasing because in leasing the rental cost is higher than the depreciation cost associated with purchasing (depreciation on the building is usually spread over 39 years). (See graphs G - 3 and G - 4).

To learn more about how our services will be of benefit to you please contact us at:

All Brokers Commercial Real Estate Services 3926 E Pima Tucson, Arizona 85712 520-770-9221 consult@commercial-real-estate-

Sample Lease Vs. Buy Analysis

All Brokers Commercial Real Estate Services

Management Summary of Key Costs

MANAGEMENT SUMMARY - LEASE vs. BUY ANALYSIS

Client:

ABC Co.

Leased Property:

253 Green Steet

Purchased Property:

48 Aubrey Way

Compare different properties.

Optional - include pictures

Comparison of Key Variables

Leased Property 253 Green Steet

Analysis Period (in Months) Square Footage

120 50,000

120 48,500

Purchase Price (including Construction Costs) Loans @85.0% (Less Fees) Net Down Payment (Purchase Cost - Loans less fees) Average Base Rent (or loan pmt.)/Month Average Base Rent (or loan pmt.)/Sq.Ft./Year

$77,651 $1.55/sf $18.64

$8,287,438 $6,734,734 $1,552,703

$41,356 $10.23

Sale Analysis

Sale Price (before selling costs) * Unamortized Principal Equity Before Sale

$9,873,245 $4,806,510 $5,066,736

Equity Before Sale Less Selling Expenses Less Down Payment Cash Gain (Loss) before Taxes

Compares the Cost

$5,066,736 ($503,536) ($1,552,703) $3,010,497

* Land and Building assumed to increase in value annually by 2.0% and 2.0% respectively.

PreTax - Tax Deductible Cost Comparison

Year 1 Total Cost NPV @8% Average Annual Cost

Cash Flow - Annual Cost Comparison

Leased Property

PreTax

AfterTax

Cash Flow Cash Flow

$1,213,750

$1,099,364

$14,383,516

$8,007,248

$9,885,516

$6,221,086

$1,438,352

$800,725 Compares Cash Flow - Before &

After Tax, and the Difference!

Purchased Property

PreTax

AfterTax

PreTax

Cash Flow Cash Flow

Cash Flow

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$1,663,750 $1,196,625 $1,303,372 $1,340,333 $1,378,349 $1,417,450 $1,457,668 $1,499,035 $1,541,584 $1,585,350

$1,238,938 $760,306 $829,692 $853,716 $878,427 $903,842 $929,984 $956,873 $984,530

$1,012,977

$2,551,565 $1,010,197 $1,021,830 $1,033,769 $2,190,040

$926,114 $939,018 $952,261 $965,852 ($3,583,399)

$2,166,788 $623,360 $632,972 $642,938

$1,797,293 $573,814 $584,255 $595,055 $606,228

($3,398,755)

($887,815) $186,428 $281,542 $306,564 ($811,691) $491,336 $518,650 $546,774 $575,732 $5,168,748

NPV @8% Avg./Year

$19.77 $28.77

$12.96 $18.70

$14.67 $16.51

$9.83 $9.95

$5.10 $12.26

$170.88/sf $138.86/sf

$32.01/sf $0.85/sf

( 100.0% ) ( 81.3% ) ( 18.7% )

$203.57/sf $99.10/sf

$104.47/sf

$104.47/sf ($10.38)/sf ($32.01)/sf

$62.07/sf

Cash after sale and paying off loans.

Difference (Lease - Purchase)

Cumulative

AfterTax

Cash Flow

($887,815) ($701,388) ($419,846) ($113,282) ($924,973) ($433,637)

$85,013 $631,787 $1,207,520 $6,376,268

($927,850) $136,946 $196,720 $210,779 ($918,867) $330,029 $345,729 $361,818 $378,302 $4,411,732

$3.13 $8.75

0 1,500

$36,295 $8.40

$114,386 $6,376,268 $3,664,431

$637,627

Cumulative ($927,850) ($790,904) ($594,184) ($383,405)

($1,302,272) ($972,243) ($626,514) ($264,696) $113,606 $4,525,338

Year 1 Total Cost NPV @8% Avg./Year

$1,663,750 $14,383,516

$9,885,516 $1,438,352

$1,238,938 $9,349,285 $6,479,586

$934,929

$2,551,565 $8,007,248 $7,116,089

$800,725

$2,166,788 $4,823,948 $4,766,022

$482,395

($887,815) $6,376,268 $2,769,428

$637,627

($927,850) $4,525,338 $1,713,564

$452,534

First Year of Purchase Crossover

Yr. 7

(When the cumulative Purchase cost is less than the cumulative Lease cost.)

Sale Price Point of Indifference

(the FUTURE sale price of the property where leasing and buying are equaCl braossesdoovneerqwuahleAnftePrTuarcxhNaPsVin'sg.)

Property Sale Price - Point of Indifference

$4,985,604

Assumptions: Loan 1 atb7e0c.0o%meosf PchurecahpaesretChaonstLeasing

Requires Building Annual % Increase at

-8.02% Land % @2.00%

Loan 2 at 15.0% of Purchase Cost

Conclusion: Buy property if you can sell it for more than amount above in 9/2015.

Opportunity Cost at 5.00%

Yr. 9

Notes:

User defined - unlimited

Sale Price

rows for notes/comments

Point of Indifference

The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

All Brokers

Sample Lease vs. Buy Analysis

520-770-9221

Page 4 of 19

Key Assumptions

KEY LEASE and PURCHASE ASSUMPTIONS

Client:

ABC Co.

Leased Property:

253 Green Steet

Purchased Property:

48 Aubrey Way

Page A2 12Feb05 Revision 1.0

KEY LEASE ASSUMPTIONS

Lease Assumptions

KEY PURCHASE ASSUMPTIONS Purchase Assumptions

FINANCIAL ASSUMPTIONS

TERM FOR ANALYSIS

Type of Business Entity

LLC

Start Date

10 / 2005

NPV Discount Rate (Beginning of Mo. Calc.)

8.0%

Date Property Sold

9 / 2015

Ordinary Income Tax Rate

35.0%

Holding Period

120 months

Capital Gains Tax Rate

15.0%

Recapture 1250 Depreciation Tax Rate

25.0%

PROPERTY COST

Land Description

1 lot

RENT ASSUMPTIONS

Building

48,500 rsf

Commencement Date

10 / 2005

$/rsf

Termination Date

9 / 2015

Land Purchase Cost

$38.75 $1,879,375

25.0%

Lease Term

120 months

Building Purchase Cost

$116.25 $5,638,125

75.0%

Rentable SF

50,000

Total Property Cost

$155.00 $7,517,500

100.0%

Base Rental Rate

$16.50 $/rsf/yr

Type of Lease

NNN

BUILDING COST with CONSTRUCTION

Months of Rent Abatement

2

Building Purchase Cost

$116.25 $5,638,125

90.6%

Landlord Construction Allowance

$10.00 $/rsf

Const. Improvements

$12.00

$582,000

9.4%

Total Building Cost

$128.25 $6,220,125

100.0%

ANNUAL % RENT INCREASES

Increase @3% starting 10/06 based on

$16.50

OTHER PURCHASING COSTS

Expense

Capital

FIXED AMOUNT RENT INCREASES

Closing costs @2.5% of Purchase Cost *

$187,938

Fixed Increase #1 Fixed Increase #2 Fixed Increase #3 Fixed Increase #4

Costs can be in any currency - $, ?, , ?, ect.

Legal Fees Other Contingency Total

0% $187,938

Fixed Increase #5 Fixed Increase #6 Fixed Increase #7 Fixed Increase #8

Measurement can be in square feet or square meters.

* Purchase Cost (Land and Building, not Const. Costs)

TOTAL PURCHASE COST Total Purchase Cost *

$170.88 $8,287,438

Fixed Increase #9

* Without Loan Fees, includes all Other Purchasing Costs & Construction

Fixed Increase #10

FINANCING

OPERATING EXPENSES & TAXES

First Loan from 10 / 2005 to 9 / 2035

@ 6.5%

Actual Op. Exp. & Taxes

$8.00 $/rsf/yr

Loan Amount

$5,669,650

Base Year Op. Exp. & Taxes

Loan % of Land, Bldg., Const. Cost

70.0%

Annual % Increase Pass through costs start

2.5%Inc(leuffd. e1/2B0a0l6lo) on 10/200l5oans & payments

Monthly Payment (360 month term) Loan Fees @2.00% Net Proceeds from Loan

$35,836 (30 yrs.) $113,393 $5,556,257

CONSTRUCTION COSTS

50,000 rsf

Unamortized Principal (due 9 / 2015)

$4,806,510

Interior Fit-up

$20.00 $/rsf

Contingency %

0%

Second Loan from 10 / 2005 to 9 / 2010

@ 10%

Landlord Construction Allowance

$10.00 $/rsf

Loan Amount

$1,214,925

Net Cost to the Tenant

$500,000

Loan % of Land, Bldg., Const. Cost

15.0%

Monthly Payment (300 month term)

$11,040 (25 yrs.)

KEY SALE ASSUMPTIONS

Loan Fees @3.00%

$36,448

SALE ASSUMPTIONS

Net Proceeds from Loan

$1,178,477

Land - compounded annually @2.00%

$47.24 $2,290,948

Balloon Payment (due 9 / 2010)

$1,144,019

Building* - compounded annually @2.00%

$156.34 $7,582,298

Total Sale Price

$203.57 $9,873,245 OPPORTUNITY COST

* Building with Construction Costs

Lost Interest Income based on

$1,052,703

Sale Assumptions SELLING EXPENSES

Invested @5% from 10/2005 - 9/2015; AfterTax Interest compounded monthly.

Commissions @5.1% of sale price

$503,536

OPERATING EXPENSES AND TAXES

Spruce-up

Operating Expenses & Taxes

$7.75 $/rsf/yr

Other Contingency Total Selling Expenses

0% $503,536

Annual % Increase Optional - Include

OpportuniPtyRCOoPsOt SinAL DATE your analyAsnisalysis prepared by All Brokers Inc.

2.5% (eff. 1/2006) 5Feb05

The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

All Brokers Commercial Real Estate Services

Sample Lease vs. Buy Analysis

520-770-9221

Page 4 of 19

Sale Analysis for Taxes

SALE ANALYSIS

Client:

ABC Co.

Purchased Property: 48 Aubrey Way

Sale Price

Land

Building

Less Selling Costs

(A)

Net Selling Price

$2,290,948 $7,582,298

-$503,536

Purchase Price

Land

Building

Construction Costs

Other Costs - Capital

(B)

Total Cost of Purchase

$1,879,375 $5,638,125

$582,000 $187,938

Depreciation Booked

Building Purchase Cost *

Construction Costs *

Other Costs - Capitalized *

(C)

Total Depreciation Adjustments

$1,445,673 $149,231 $48,189

(D) Adjusted Cost Basis (B - C)

* Depreciation Portion of Capital Gain

Building Recapture Cost Recovery

[Recapture IRS Section 1250 Depreciation]

Building Purchase Cost

Construction Costs

Other Costs - Capitalized

(E)

Total subject to Recapture

Loan Fees First Loan - Fees, Initial Cost Second Loan - Fees, Initial Cost

$113,393 $36,448

First Loan - Amount of Fees Amortized Second Loan - Amt. of Fees Amortized

$37,798 $36,448

(F)

Net Write-Off of Loan Fees (taxed at Regular Tax Rate)

$8,287,438

$1,643,093

$1,445,673 $149,231 $48,189

$149,841 $74,245

Page A3 12Feb05 Revision 1.0

$9,369,710

$9,369,710

$6,644,345

$6,644,345

$1,643,093

$75,595

(G) Capital Gain (A - D) (H) Taxable Capital Gain at the Capital Gains Tax Rate (A - D - E) (I) Capital Gains Tax @ 15% (H x % x -1) (J) Recapture Section IRS 1250 Depreciation Tax @ 25% (E x % x -1) (K) Net Write-Off of Loan Fees @35% (F x %) (L) After Tax Profit (Loss) (G + I + J + K)

Includes Cost Recovery / Recapture 1250 Depreciation for LLC's and Sole Proprietorships

$1,082,272 -$162,341 -$410,773 $26,458

Sale Analysis on a Tax Basis used for computing the Tax Impact after Selling the property

$2,725,365

-$162,341 -$410,773

$26,458 $2,178,710

The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

Sample Lease Vs. Buy Analysis

All Brokers 520-770-9221

Page 5 of 19

Financial Summary & Comparison of Key Costs

FINANCIAL SUMMARY Client: Leased Property: Purchased Property:

ABC Co. 253 Green Steet 48 Aubrey Way

Page 1 12Feb05 Revision 1.0

Year

(analysis starts 10 / 2005)

Year Dates

Months Each Year

LEASE ANALYSIS

COST (Tax deductible expenses only) Rent Depreciation All Other Costs Total PreTax Cost

Yr. 1

Yr. 2

10/05-9/06 10/06-9/07

12

12

Lease Analysis:

Cost

Cash Flow

PreTax NPV

75A6ft,2e5rT0ax NP7V78,938

50,000

50,000

407,500 417,688

1,213,750 1,246,625

Yr. 3 10/07-9/08

12

875,243 50,000

428,130 1,353,372

Yr. 4 10/08-9/09

12

901,500 50,000

438,833 1,390,333

Yr. 5 10/09-9/10

12

928,545 50,000

449,804 1,428,349

Yr. 6 10/10-9/11

12

956,401 50,000

461,049 1,467,450

Yr. 7 10/11-9/12

12

985,093 50,000

472,575 1,507,668

Yr. 8 10/12-9/13

12

Yr. 9 10/13-9/14

12

Yr. 10 10/14-9/15

12

Can be extended for a 30 year analysis.

1,014,646 50,000

484,389 1,549,035

1,045,085 50,000

496,499 1,591,584

1,076,438 50,000

508,912 1,635,350

Taxes @ 35%

424,813

AfterTaxes

788,938

Before Tax NPV @ 8%

After Tax Net Present Value Discounted @ 8%

436,319 810,306

473,680 879,692

486,616 903,716

499,922 928,427

513,607 953,842

527,684 542,162 557,055 572,372 979,984 1,006,873 1,034,530 1,062,977

CASH FLOW PreTax Cost Depreciation Capital

1,213,750 (50,000) 500,000

1,246,625 (50,000)

1,353,372 (50,000)

1,390,333 (50,000)

1,428,349 (50,000)

1,467,450 (50,000)

1,507,668 (50,000)

1,549,035 (50,000)

1,591,584 (50,000)

1,635,350 (50,000)

PreTax Cash Flow

1,663,750 1,196,625 1,303,372 1,340,333

AfterTax Cash Flow

1,238,938 760,306 829,692 853,716

Cash Flow -- Before Tax NPV @ 8% Cash Flow -- AfterTax Net Present Value Discounted @ 8%

Purchase Analysis: Cost

Cash Flow

PURCHASE ANALYSIS

PreTax NPV

COST (Tax deductible expenses only)

AfterTax NPV

Interest Expense

487,636 482,187 476,328 470,026

Depreciation/Amortization

175,379 175,379 175,379 175,379

Opportunity Cost

53,426

55,189

57,009

58,890

All Other Costs

382,923 392,496 402,308 412,366

PreTax Cost without Sale

1,099,364 1,105,250 1,111,024 1,116,660

PreTax Capital (Gain)/Loss on Sale

PreTax Deprec. Recapture 1250

Net Write-Off of Loan Fees

Total PreTax Cost

1,099,364 1,105,250 1,111,024 1,116,660

1,378,349 878,427

463,247 175,379

60,833 422,675 1,122,133

1,122,133

1,417,450 903,842

342,402 168,089

62,840 433,242 1,006,572

1,006,572

1,457,668 929,984

336,533 168,089

64,912 444,073 1,013,607

1,013,607

1,499,035 956,873

330,271 168,089

67,054 455,175 1,020,589

1,020,589

1,541,584 1,585,350 984,530 1,012,977

323,590 168,089

69,266 466,554 1,027,499

1,027,499

316,461 168,089

71,551 478,218 1,034,319 (1,082,272) (1,643,093)

75,595 (1,615,451)

Tax (w/o Sale) @ 35%

(384,777)

Capital Gains Tax on Sale @ 15%

Depreciation Recapture Tax @ 25%

Loan Fee Write-Off Taxed @ 35%

AfterTaxes

714,586

Before Tax NPV @ 8%

After Tax Net Present Value Discounted @ 8%

(386,838) (388,858) (390,831) (392,746)

718,413 722,166 725,829 729,386 SUMMARY - Cash Flow associated with the Purchase and Sale of the property.

CASH FLOW PreTax Cost w/o Sale Depreciation Purchase Costs - Capital & TI$ Sale Price Selling Expenses Loan(s) (less fees) Principal Reduction on Loan(s)

1,099,364 (175,379) 8,287,438

1,105,250 (175,379)

1,111,024 (175,379)

1,116,660 (175,379)

1,122,133 (175,379)

(6,734,734) 74,877

80,326

86,185

1,144,019

92,487

99,266

(352,300) 654,272

1,006,572 (168,089)

87,631

(354,763) 658,845

1,013,607 (168,089)

93,499

(357,206) 663,383

1,020,589 (168,089)

99,761

(359,625) 667,874

(362,012) 162,341 410,773 (26,458) (1,430,807)

1,027,499 1,034,319 (168,089) (168,089)

106,443

(9,873,245) 503,536

4,806,510 113,571

PreTax Cash Flow

2,551,565 1,010,197

AfterTax Cash Flow

2,166,788 623,360

Cash Flow -- Before Tax NPV @ 8%

Cash Flow -- After Tax Net Present Value Discounted @ 8%

COMPARISON - Lease vs. Buy

Lease - PreTax Cost Purchase - PreTax Cost Difference Cumulative Difference

1,213,750 1,099,364

114,386 114,386

1,246,625 1,105,250

141,375 255,761

1,021,830 1,033,769 2,190,040 C63o2m,9p7a2rison (6A4n2n,9u3a8l & 1,797,293 Cumulative differences): Cost PreTax Cash Flow AfterTax Cash Flow

1,353,372 1,111,024

242,348 498,109

1,390,333 1,116,660

273,672 771,782

1,428,349 1,122,133

306,216 1,077,997

926,114 573,814

1,467,450 1,006,572

460,878 1,538,875

939,018 584,255

1,507,668 1,013,607

494,061 2,032,936

952,261 595,055

1,549,035 1,020,589

528,447 2,561,382

965,852 (3,583,399) 606,228 (3,398,755)

1,591,584 1,027,499

564,085 3,125,468

1,635,350 (1,615,451) 3,250,800 6,376,268

Lease - PreTax Cash Flow Purchase - PreTax Cash Flow Difference Cumulative Difference

1,663,750 2,551,565 (887,815) (887,815)

1,196,625 1,010,197

186,428 (701,388)

PreTax Cash Flow/sf - Leasing 50,000 sf; Purchasing 48,500 sf

Lease PreTax Cash Flow/sf/yr

$33.28

$23.93

Purchase PreTax Cash Flow/sf/yr

$52.61

$20.83

Difference

($17.76)

$3.73

Cumulative Difference

($17.76) ($14.03)

1,303,372 1,021,830

281,542 (419,846)

$26.07 $21.07

$5.63 ($8.40)

1,340,333 1,378,349 1,417,450 1,457,668

1,033,769 2,190,040 926,114 939,018

306,564 (811,691) 491,336 518,650

(113,282) (924,973) (433,637)

85,013

Compares costs on a per square foot basis.

$26.81 $21.31

$6.13 ($2.27)

$27.57 $45.16 ($16.23) ($18.50)

$28.35 $19.10

$9.83 ($8.67)

$29.15 $19.36 $10.37

$1.70

1,499,035 952,261 546,774 631,787

$29.98 $19.63 $10.94 $12.64

1,541,584 965,852 575,732

1,207,520

1,585,350 (3,583,399) 5,168,748 6,376,268

$30.83 $19.91 $11.51 $24.15

$31.71 ($73.88) $103.37 $127.53

Lease - AfterTax Cash Flow Purchase - AfterTax Cash Flow Difference Cumulative Difference

1,238,938 2,166,788 (927,850) (927,850)

NPV calculated starting 10 / 2005 (beginning of mo. payment)

760,306 623,360 136,946 (790,904)

829,692 632,972 196,720 (594,184)

853,716 642,938 210,779 (383,405)

878,427 1,797,293 (918,867) (1,302,272)

903,842 573,814 330,029 (972,243)

929,984 584,255 345,729 (626,514)

956,873 595,055 361,818 (264,696)

984,530 606,228 378,302 113,606

1,012,977 (3,398,755) 4,411,732 4,525,338

Total

120

9,318,138 500,000

4,565,378 14,383,516

5,034,231 9,349,285 9,731,229 6,325,299

14,383,516 (500,000) 500,000

14,383,516 9,349,285 9,885,516 6,479,586

4,028,681 1,717,338

620,970 4,290,029 10,657,018 (1,082,272) (1,643,093)

75,595 8,007,248

(3,729,956) 162,341 410,773 (26,458)

4,823,948 6,221,086 3,871,019

10,657,018 (1,717,338) 8,287,438 (9,873,245)

503,536 (784,205) 934,046

8,007,248 4,823,948 7,116,089 4,766,022

14,383,516 8,007,248 6,376,268

14,383,516 8,007,248 6,376,268

$28.77 $16.51 $12.75

9,349,285 4,823,948 4,525,338

The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

Sample Lease vs. Buy Analysis

All Brokers 520-770-9221

Page 6 of 19

Compares PreTax Cash Flow (a back-up report)

PRE TAX CASH FLOW Client: Leased Property: Purchased Property:

ABC Co. 253 Green Steet 48 Aubrey Way

Page B 12Feb05 Revision 1.0

Year

(analysis starts 10 / 2005)

Year Dates

Months Each Year

Yr. 1 10/05-9/06

12

Yr. 2 10/06-9/07

12

Yr. 3 10/07-9/08

12

Yr. 4 10/08-9/09

12

Yr. 5 10/09-9/10

12

Yr. 6 10/10-9/11

12

Yr. 7 10/11-9/12

12

Yr. 8 10/12-9/13

12

Yr. 9 10/13-9/14

12

Yr. 10 10/14-9/15

12

Total 120

LEASE ANALYSIS 50,000 square feet

Base Rent Rent Abatement % Increase Total

825,000 (68,750)

756,250

825,000 (70,813) 24,750 778,938

825,000

50,243 875,243

825,000

76,500 901,500

825,000

103,545 928,545

825,000

131,401 956,401

825,000 825,000 825,000 825,000

160,093 189,646 220,085 251,438 985,093 1,014,646 1,045,085 1,076,438

Operating Expenses / Taxes

407,500 417,688 428,130 438,833 449,804 461,049 472,575 484,389 496,499 508,912

Construction Cost

500,000

Total PreTax Cash Flow Cost / Sq.Ft. / Year Cash Flow - Before Tax NPV @ 8%

1,663,750 1,196,625 1,303,372 1,340,333 1,378,349 1,417,450 1,457,668 1,499,035 1,541,584 1,585,350

$33.28

$23.93

$26.07

$26.81

$27.57

$28.35

$29.15

$29.98

$30.83

$31.71

8,250,000 (139,563)

1,207,700 9,318,138

4,565,378

500,000

14,383,516 $28.77

9,885,516

PURCHASE ANALYSIS 48,500 square feet

Land - Purchase Building - Purchase Purchase - Other Capital Total

1,879,375

1,879,375

5,638,125

5,638,125

187,938

187,938

7,705,438

0

0

0

0

0

0

0

0

0

7,705,438

Operating Expenses / Taxes Opportunity Cost Total

382,923 53,426

436,349

392,496 55,189

447,685

402,308 57,009

459,317

412,366 58,890

471,256

422,675 60,833

483,508

433,242 62,840

496,081

444,073 64,912

508,985

455,175 67,054

522,229

466,554 69,266

535,820

478,218 71,551

549,769

4,290,029 620,970

4,910,999

Interest Expense - 1st Loan Interest Expense - 2nd Loan Total

366,661 120,975 487,636

362,417 119,770 482,187

357,889 118,439 476,328

353,057 116,969 470,026

347,902 115,344 463,247

342,402 342,402

336,533 336,533

330,271 330,271

323,590 323,590

316,461 316,461

3,437,185 591,496

4,028,681

First Loan, less fees First Loan - Principle Payment Second Loan, less fees Second Loan - Principle Payment Total

(5,556,257) 63,371

(1,178,477) 11,506

(6,659,857)

67,615

12,711 80,326

72,144

14,042 86,185

76,975

15,512 92,487

82,130 1,144,019

17,136 1,243,286

87,631 87,631

93,499 93,499

99,761

4,806,510 106,443 113,571

99,761 106,443 4,920,081

(749,747) 863,140 (34,458)

70,906 149,841

Cash From Sale Selling Expenses Total

(9,873,245) (9,873,245)

503,536

503,536

0

0

0

0

0

0

0

0

0 (9,369,710) (9,369,710)

Total Cash Flow Cost / Sq.Ft. / Year Cash Flow - Before Tax NPV @ 8%

1,969,565 1,010,197 1,021,830 1,033,769 2,190,040

$39.39

$20.20

$20.44

$20.68

$43.80

926,114 $18.52

939,018 $18.78

952,261 $19.05

965,852 (3,583,399)

$19.32

($71.67)

COMPARISON: Lease - Buy Cost / Sq.Ft.

($6.12)

Shows the difference for Lease vs. Buy on a PreTax Cash Flow basis

$3.73

$5.63

$6.13

($16.23)

$9.83

$10.37

$10.94

$11.51 $103.37

Lease - PreTax Cash Flow Purchase - PreTax Cash Flow

1,663,750 1,196,625 1,303,372 1,340,333 1,378,349 1,417,450 1,457,668 1,499,035 1,969,565 1,010,197 1,021,830 1,033,769 2,190,040 926,114 939,018 952,261

Difference Cumulative Difference

(305,815) 186,428 (305,815) (119,388)

281,542 162,154

306,564 468,718

(811,691) (342,973)

491,336 148,363

518,650 546,774 667,013 1,213,787

NPV calculated starting 10 / 2005 (beginning of mo. payment) The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

1,541,584 1,585,350 965,852 (3,583,399)

575,732 5,168,748 1,789,520 6,958,268

7,425,248 $14.85

7,116,089

$13.92 14,383,516

7,425,248 6,958,268

Sample Lease vs. Buy Analysis

All Brokers 520-770-9221

Page 7 of 19

Compares PreTax Cash Flow (a back-up report)

LEASE vs. BUY ANALYSIS Client: Leased Property: Purchased Property:

ABC Co. 253 Green Steet 48 Aubrey Way

Worksheet 12Feb05

Revision 1.0

Year

(analysis starts 10 / 2005)

Year Dates

Months Each Year

Yr. 1 10/05-9/06

12

Yr. 2 10/06-9/07

12

Yr. 3 10/07-9/08

12

Yr. 4 10/08-9/09

12

Yr. 5 10/09-9/10

12

Yr. 6 10/10-9/11

12

Yr. 7 10/11-9/12

12

Yr. 8 10/12-9/13

12

Yr. 9 10/13-9/14

12

Yr. 10 10/14-9/15

12

COST

PreTax Lease

Annual Total Cumulative Total Present Value @ 8%

Purchase

Annual Total Cumulative Total Present Value @ 8%

Difference

Annual Total Cumulative Total Present Value @ 8%

1,213,750 1,213,750 1,123,843

1,099,364 1,099,364 1,017,929

114,386 114,386 105,913

1,246,625 2,460,375 1,068,780

1,105,250 2,204,614

947,574

141,375 255,761 121,206

1,353,372 3,813,747 1,074,350

1,111,024 3,315,638

881,967

242,348 498,109 192,384

1,390,333 5,204,080 1,021,936

1,116,660 4,432,298

820,779

273,672 771,782 201,157

1,428,349 6,632,428

972,110

1,122,133 5,554,431

763,705

306,216 1,077,997

208,405

1,467,450 8,099,878

924,742

1,006,572 6,561,003

634,311

460,878 1,538,875

290,431

1,507,668 9,607,547

879,710

1,013,607 7,574,611

591,430

494,061 2,032,936

288,280

1,549,035 11,156,582

836,896

1,020,589 8,595,200

551,392

528,447 2,561,382

285,503

1,591,584 12,748,166

796,189

1,027,499 9,622,699

514,005

564,085 3,125,468

282,183

1,635,350 14,383,516

757,483

(1,615,451) 8,007,248

(748,266)

3,250,800 6,376,268 1,505,750

AfterTax Lease

Annual Total Cumulative Total

Purchase Annual Total Cumulative Total

Difference Annual Total Cumulative Total

788,938 788,938

714,586 714,586

74,351 74,351

810,306 1,599,244

718,413 1,432,999

91,894 166,245

879,692 2,478,936

722,166 2,155,165

157,526 323,771

903,716 3,382,652

725,829 2,880,994

177,887 501,658

928,427 4,311,078

729,386 3,610,380

199,040 700,698

953,842 5,264,921

654,272 4,264,652

299,571 1,000,269

979,984 6,244,905

658,845 4,923,497

321,139 1,321,408

1,006,873 7,251,778

663,383 5,586,880

343,490 1,664,898

1,034,530 8,286,308

667,874 6,254,754

366,656 2,031,554

1,062,977 9,349,285

(1,430,807) 4,823,948

2,493,784 4,525,338

Total 120

14,383,516 9,456,039 8,007,248 5,974,826 6,376,268 3,481,212

9,349,285 4,823,948 4,525,338

CASH FLOW ANALYSIS

PreTax Lease

Annual Total Cumulative Total

Purchase Annual Total Cumulative Total

Difference Annual Total Cumulative Total

1,663,750 1,663,750

2,551,565 2,551,565

(887,815) (887,815)

1,196,625 2,860,375

1,010,197 3,561,763

186,428 (701,388)

1,303,372 4,163,747

1,021,830 4,583,593

281,542 (419,846)

1,340,333 5,504,080

1,033,769 5,617,362

306,564 (113,282)

1,378,349 6,882,428

2,190,040 7,807,402

(811,691) (924,973)

1,417,450 8,299,878

926,114 8,733,515

491,336 (433,637)

1,457,668 9,757,547

939,018 9,672,533

518,650 85,013

1,499,035 11,256,582

952,261 10,624,794

546,774 631,787

1,541,584 12,798,166

965,852 11,590,647

575,732 1,207,520

1,585,350 14,383,516

(3,583,399) 8,007,248

5,168,748 6,376,268

AfterTax Lease

Annual Total Cumulative Total Present Value @ 8%

1,238,938 1,238,938 1,147,164

760,306 1,999,244

651,840

829,692 2,828,936

658,636

853,716 3,682,652

627,507

878,427 4,561,078

597,842

903,842 5,464,921

569,574

929,984 6,394,905

542,637

956,873 7,351,778

516,969

Purchase

Annual Total Cumulative Total Present Value @ 8%

2,166,788 2,166,788 2,006,285

623,360 2,790,148

534,431

632,972 3,423,120

502,474

642,938 4,066,057

472,578

1,797,293 5,863,351 1,223,208

573,814 6,437,164

361,600

584,255 7,021,420

340,907

595,055 7,616,475

321,490

Difference

Annual Total Cumulative Total Present Value @ 8%

(927,850) (927,850) (859,121)

136,946 (790,904) 117,409

196,720 (594,184) 156,163

210,779 (383,405) 154,929

(918,867) (1,302,272)

(625,365)

330,029 (972,243) 207,974

345,729 (626,514) 201,730

361,818 (264,696) 195,479

Present value calculated using annual totals

Shows the difference for Lease vs. Buy on

Used for the graphs - The Management Summary uses costs from each indiviaduParel TanaxalCysaissh. Flow basis

The information contained herein has been given to us by sources we deem reliable, but we do not guarantee it. All data should be verified.

984,530 8,336,308

492,510

606,228 8,222,702

303,265

378,302 113,606 189,245

1,012,977 9,349,285

469,204

(3,398,755) 4,823,948 (1,574,281)

4,411,732 4,525,338 2,043,486

14,383,516 8,007,248 6,376,268

9,349,285 6,273,884 4,823,948 4,491,956 4,525,338 1,781,928

Sample Lease vs. Buy Analysis

All Brokers 520-770-9221

Page 8 of 19

16000000

Lease vs. Buy - PreTax Cash Flow Comparison of the Annual and Cumulative Cost

14000000 12000000 10000000

PreTax Cash Flow - Graph shows Cumulative and Annual Costs. When lines cross, cost of Purchasing is cheaper than cost of Leasing

8000000

6000000

4000000

2000000

0 -2000000

Yr. 1

Yr. 2

Yr. 3

Yr. 4

Yr. 5

Yr. 6

Yr. 7

Yr. 8

Yr. 9

Yr. 10

-4000000

-6000000

Intersection is when the cumulative total cost of Purchasing is cheaper than Leasing.

Lease - Annual Cost Purchase - Annual Cost Lease - Cumulative Annual Cost Purchase - Cumulative Annual Cost

Sample Lease vs. Buy Analysis

All Brokers 520-770-9221

Page 9 of 19

 ................
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