Introduction

Model Measure Group Name Manager Name Members Name

RPI IRR Partnership General Partner Limited Partner (or Limited)

RPM MIRR Partnership General Partner Limited Partner (or Limited)

RPR IRR LLC Managing Member Group Member (or Member)

RPF MIRR LLC Managing Member Group Member (or Member) The purpose of this Model Documentation is to serve as an explanation of the Limited Partnership /LLC Investment Analysis. In order to do this, we will look at the fictitious Sample Apartments investment used in the documentation for the Real Estate Investment Analysis , but converted to a Partnership investment format. The accompanying explanations should clarify the meaning of the assumptions in the analysis and the methods used in computing the results.

Real Estate Group Investments in the past few decades have evolved largely from the Limited Partnership form to a Limited Liability Company (LLC) form, although the legal and tax environments in many states still favor the Limited Partnership form. Lately, the Tenants-in-Common (TIC) format has arisen to take advantage of the 1031 Exchange provisions of the Income Tax Code. As a consequence, there are several terminologies used to describe Group Investments (and their participants) which, for purposes of financial analysis, are identical. Accordingly, the planEASe Partnership / LLC Models have evolved to use the following terminology which will be used in this documentation to represent investments in whichever of these forms is relevant to your situation:

If you have purchased the Partnership / LLC Models, you have an additional choice to Convert Assumptions on the File Menu at the Assumption Edit Screen. This option allows you to convert Real Estate Investment Analysis Assumption Sets to Partnership / LLC Models Assumption Sets (and vice-versa). Thus you may begin analysis of a property with the Real Estate Investment Analysis , and easily convert the analysis into the Partnership / LLC format when that becomes appropriate. For instance, the test.ru Assumption Set is saved as test.ru as an Real Estate Investment Analysis Assumption Set and test.rp as a Partnership / LLC Models Assumption Set on our distribution disks.

The Partnership / LLC model series contains Loan, Depreciation, Revenue and Expense assumption pages which are identical to the corresponding assumption pages in the Real Estate Investment Analysis . Because these assumption pages are identical, this documentation does not discuss them, and you are referred to the Real Estate Investment Analysis section of this manual for discussion of the assumptions on these pages. Similarly, the first, or Investment Assumptions, page of assumptions is the same as the Real Estate Investment Analysis , and is not repeated here.

When you convert an RU Assumption Set to an RP Assumption Set, all the new assumption values (the Fee and Funding assumption pages as well as the Partnership / Group and Distribution assumptions) are set to zero. Therefore, after you have converted and retrieved a new RP Assumption Set, be sure to go to the Assumption Edit Screen, enter your appropriate Partnership / Group and Distribution assumption values, and save the changed Assumption Set before further processing. To use the newly converted Assumption Set, you must first choose the File/Switch Models Menu Option and choose a model from the appropriate model series.

Don’t use these Partnership / LLC Models until you have completely planned the property and debt structure with the Real Estate Investment Analysis models. Only then should you transfer the analysis into the

Limited Partnership / LLC Investment Analysis and begin to plan your Partnership / LLC. This is not to say that you can’t start with the Limited Partnership / LLC Investment Analysis . Rather, we are trying to lead you into the most efficient way to work with the system, and after planning a few partnerships ourselves, this is the best advice we can give you. If your Cash Flow Before Tax is properly structured (and this is best done with the Real Estate Investment Analysis ), planning the funding and distribution is a snap.

Sensitivity and Risk Analysis may be performed on any assumption value, just as with all other model series. Syndicators will find this to be most useful in structuring the appropriate cash and tax distribution methodologies for a particular property in consideration of the attractiveness of the rate of return for the Limited Partners / Group Members versus their own return from the project. Sensitivity and Risk Analysis are also extremely appropriate for the financial projections shown to the Limited Partners / Group Members because they get away from the typical “one point” analysis included in private placement memoranda, and thereby mitigate the liability involved when events don’t proceed as planned.

Sensitivity Analyses have also proven their worth as discussion papers in regard to questionable assumptions such as the investor’s tax rate and the projected sale price. When produced in investor meetings, these graphs serve the dual purpose of allaying investor concerns and presenting the syndicator as one who has thoroughly investigated and planned the investment from the Limited Partner / Group Member perspective.

There are two choices in regard to the funding of cash shortfalls. Either the Limited Partners / Group Members are assessed for any shortfalls (the assessment amounts are treated as additions to their Partnership / LLC accounts), or the General Partner / Managing Member funds any shortfalls by means of interest-bearing loans to the Partnership / LLC. You choose between these two methods of shortfall funding by entering the proper value for the General Partner / Managing Member Loan Interest Rate. Of course, you may well object that no responsible General Partner / Managing Member would plan a funding shortfall, and we would agree. The problem therein lies with Sensitivity and Risk Analysis once the Partnership /LLC has been planned. These processes automatically change the cash flows associated with the Partnership / LLC, and therefore there must be an automatic method of funding as well or the “books” would be out of balance and the corresponding results would be inaccurate.

Many syndicators avoid assessments because Partnership / LLC agreements with assessment clauses are difficult to market. However, that is no reason to avoid assessments when planning with planEASe, and we hope you won’t. When you begin planning your Partnership / LLC, turn the assessments on (by using a negative General Partner / Managing Member Loan Interest Rate assumption). This means that any funding shortfalls show up in the Limited’s / Member’s Investment column as additional investments due to the automatic assessment. If you don’t do this, the funding shortfalls are met with General Partner / Managing Member loans resulting in strange cash flows in the Distributed to General / Manager column, and you will probably get confused and waste time. After you have everything balanced, you can turn the assessments off in the final copy and for Sensitivity and Risk Analysis.

In designing these models, we have attempted to provide a great amount of flexibility in the use of assumption values so that the software can respond reasonably to the large variety of partnership methodologies currently in use. We solicit your comments and suggestions for particular improvements that will increase the usefulness of the Limited Partnership / LLC Investment Analysis in your business.