Green Meadows A Greystar Property

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1 June 2, 2014 FINANCIAL PERFORMANCE LED LIGHTING INVESTMENT A Greystar Property 6/2/2014 1

2 Key Observations From our Analysis Day One Value Positive Cash Flow Financial Measures Increased Property Value Lighting Quality Investment Payback Sustainability Recycling (lamps and Equipment) Business Value Monthly Operational Expense is reduced $1800 or 0.26% Lease (Buy Back) returns $ in positive cash flow over five years Exceed Investment grade in all cases. Property value increase of $ on an $49900 after tax investment Equal or better than existing (Pilot study) Direct Purchase Payback is 2.27 years; Lease Purchase (Buy Back) 0.15 Green Business practices have marketing value VPP and ISO Certified (reporting included) Key Facts and Observations Commercial and Industrial lighting design and installation since Exclusive LED Manufacturer and Supplier since 2011 Manufacturer s Guarantee 5 years. Rated life of lamps at least 50,000 hours More than 500 LED Retrofits nationally since 2011 Installation contractors LED certified, Master Electricians licensed in the state of installation 6/2/2014 2

3 Annual Electrical Benefit $22,400 Existing $35,000 $30,000 $25,000 Total Benefit 1 Year $29,719 $22,005 25,000 20,000 15,000 $7,500 LED Benefit $14,900 $20,000 $15,000 $10,000 $5,000 $ $7,714 Existing LED Benefit Improves Operating Margins 10,000 5,000 Operational Benefit (Savings) 1Year 5 Years Existing LED Benefit Existing LED Benefit Electric Only $22,354 $ 7,488 $14,866 $111,769 $37,441 $ 74,329 Maintenance (Labor estimate) $ 4,295 $ 226 $ 4,069 $ 21,475 $ 1,130 $ 20,344 Maintenance (Material estimate) $ 3,071 $ $ 3,071 $ 15,353 $ $ 15,353 Total $29,719 $ 7,714 $22,005 $148,597 $38,571 $110,026 6/2/2014 3

4 $160,000 $140,000 $120,000 $100,000 $80,000 Realized Benefit to Accumulated Gross Cost $60,000 $40,000 $20,000 $ Realized Benefit Gross Cost (Purchase) Gross Cost (Lease) Year 1 Year 2 Year 3 Year 4 Year 5 Year Realized Gross Cost Gross Cost Benefit (Purchase) (Lease) Year 1 $ 29,700 $ 57,600 $ 21,600 Year 2 $ 59,400 $ 65,400 $ 40,000 Year 3 $ 89,200 $ 73,100 $ 58,400 Year 4 $ 118,900 $ 80,800 $ 76,800 Year 5 $ 148,600 $ 88,500 $ 95,200 6/2/2014 4

5 $160,000 $140,000 $120,000 $100,000 Improves Cash Flow $80,000 $60,000 $40,000 $20,000 $ $(20,000) $(40,000) Benefit Realized Net Cost (Lease) Net Cost (Purchase) Year 1 Year 2 Year 3 Year 5 Year 4 Year Benefit Net Cost Net Cost Realized (Lease) (Purchase) Year 1 $ 29,700 $ 8,100 $ (27,900) Year 2 $ 59,400 $ 19,400 $ (6,000) Year 3 $ 89,200 $ 30,800 $ 16,100 Year 4 $ 118,900 $ 42,100 $ 38,100 Year 5 $ 148,600 $ 53,400 $ 60,100 6/2/2014 5

6 Key Financial Facts and Purchase Options Fact At Purchase Year 1 Year 5 Material Cost (Lights and Fixtures) $ 54,249 Installation Cost (Optional Purchase) $ 18,393 ewaste Recycling and Reporting Fee $ 2,515 Maintenance Contract (Optional Purchase) $ Performance Guarantee (Optional Purchase) Not Avail. Cumulative Savings (Electrical and Maintenance) $ 110,026 Property Value Increase (Operational Savings / Cap rate) $ 275,064 Lease Amount Financed $ 67,105 $ 55,795 $ Lease $ $ 16,424 $ 82,121 Facts and Measures Opportunity Lost Cost (Lease) : $4, Key Financial Measures Lease vs. Direct Purchase Direct Lease Payback (Years) 2.3 ROI (Net Benefits/Cost) 34.0% 40.0% Net Present Value (NPV) $ 25,621 $ 28,774 Internal Rate of Return (IRR) 33.8% 172% Investment Assumptions Expectations Factor Amount Financed $ 67,105 Lease Term (months) 60 Interest Rate Charged 8.25% Lease Payment $ 1,369 Closing Cost $ 500 Cap Rate 8% Tax Rate 35% Cost of Capital 3% 6/2/2014 6

7 =Data Entry Originates from Manufacturer's Proposal Existing Lights (Before Retrofit) 1 month 1 year 5 years 10 years Electric Only $ 1,863 $ 22,354 $ 111,769 $ 223,538 Maintenance (Labor estimate) $ 358 $ 4,295 $ 21,475 $ 42,949 Maintenance (Material estimate) $ 256 $ 3,071 $ 15,353 $ 30,706 Total $ 2,477 $ 29,719 $ 148,597 $ 297,193 After LED Retrofit 1 month 1 year 5 years 10 years Electric Only $ 624 $ 7,488 $ 37,441 $ 74,881 Maintenance (Labor estimate) $ 19 $ 226 $ 1,130 $ 2,261 Maintenance (Material estimate) $ $ $ T.B.D. Total $ 643 $ 7,714 $ 38,571 $ 77,142 Project Detail Retrofit Options Cost Deduction Y LED lights $ 54,249 $ 25, Y Installation $ 18,393 Y ewaste Recycle (estimate) $ 2,515 N Maintenance Contract $ N Performance Guarantee $ Financing Finance Amt. Amt Financed Installment Rate Term Closing Cost $ 67,105 $ 1, % $ $ 500 6/2/2014 7

8 LED Solution Existing Investment Cost Initial Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Total 5 Year Lights and Fixtures (if any) 54,249 54,249 15,353 Less: Tax Deduction (25,424) (25,424) Net 28,824 28,824 15,353 Installation 18,393 18,393 ewaste Recycling and Reporting Fee 2,515 2,515 1,535 Labor (marginal failure at initial install) Cert of Performance Investment Total 49,932 49,932 16,888 Cost of Lighting (Electrical Only) 7,488 7,488 7,488 7,488 7,488 37, ,769 Maintenance (Labor estimate) ,130 21,475 Total Cash Outlay 49,932 7,714 7,714 7,714 7,714 7,714 88, ,132 Cash Flow: Initial Outlay: Total Initial Investment $ 49,932 Add: Tax Deduction $ 25,424 Total Initial Outlay $ 75,356 $ 75,356 Annual Cash Flow Savings: Cash Required for LED Retrofit $ 7,714 Less: Cash Required for Existing Lights $ (29,719) Benefit of LED Retrofit over Existing Lights $ (22,005) $ (22,005) $ (22,005) $ (22,005) $ (22,005) $ (110,026) Labor (Marginal Failure at Initial Install) $ 200 Total Accumulated Savings $ (109,826) Total Cash Flow $ (34,469) Present Value (excluding benefit of tax deduction): Initial Outlay $ (75,356) Less: Present Value of Annual Savings $ 100,977 Total Return $ 25,621 Rate of Return on Initial Investment Before Tax 34.00% Payback (years) 2.3 Estimated Increase in Property Value $ 275,064 GREEN MEADOWS DIRECT PURCHASE DETAIL 6/2/2014 8

9 LED Solution Existing Investment Cost Initial Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Total 5 Year Lease Payment (Lights, Options, and Closing Cost) $ 500 $ 16,424 $ 16,424 $ 16,424 $ 16,424 $ 16,424 $ 82,621 $ 15,353 Less: Tax Deduction $ $ (5,748) $ (5,748) $ (5,748) $ (5,748) $ (5,748) $ (28,742) $ $ 500 $ 10,676 $ 10,676 $ 10,676 $ 10,676 $ 10,676 $ 53,879 $ 15,353 Installation Incl. Incl. Incl. Incl. Incl. Incl. Incl. $ ewaste Recycling and Reporting Fee $ 2,515 $ $ $ $ $ $ $ 1,535 Labor (marginal failure at initial install) $ 200 $ $ $ $ $ $ $ Cert of Performance $ $ $ $ $ $ $ $ Investment Total $ 3,215 $ 10,676 $ 10,676 $ 10,676 $ 10,676 $ 10,676 $ 53,879 $ 16,888 Cost of Lighting (Electrical Only) $ $ 7,488 $ 7,488 $ 7,488 $ 7,488 $ 7,488 $ 37,441 $ 111,769 Maintenance (Labor estimate) $ $ 226 $ 226 $ 226 $ 226 $ 226 $ 1,130 $ 21,475 Total Cash Outlay $ 3,215 $ 18,390 $ 18,390 $ 18,390 $ 18,390 $ 18,390 $ 92,450 $ 150,132 Cash Flow: Initial Cash Outlay $ 3,215 Annual Lease Installments $ 16,424 $ 16,424 $ 16,424 $ 16,424 $ 16,424 $ 82,121 Annual Cash Flow Savings: Cash Required for LED Retrofit $ 7,714 Less: Cash Required for Existing Lights $ (29,719) Benefit of LED Retrofit over Existing Lights $ $ (22,005) $ (22,005) $ (22,005) $ (22,005) $ (22,005) $ (110,026) Net Benefit $ 3,215 $ (5,581) $ (5,581) $ (5,581) $ (5,581) $ (5,581) $ (27,904) Present Value (excluding benefit of tax deductions): Closing Cost & Labor (marginal failure on initial install) $ 3,215 Present Value: Annual Lease Installments $ (75,218) Annual Savings $ 100,777 Total Return $ 28,774 Rate of Return on Initial Investment Before Tax 39.96% Payback (years) 0.1 Estimated Increase in Property Value $ 275,064 GREEN MEADOWS LEASE PURCHASE DETAIL 6/2/2014 9