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_ . - �,�-$�' A. Development Costs Development cost estimates are based on infortnation provided by the Developer, BHV . Innisfree Ventures I, LLC and have been reviewed by KMA for reasonableness. Overall, it is important to note that, per the DDA, the Developer is responsibie for designing and developing a first class retaiUanema Project on Blodc 1. The es6mated development costs are intended to reflect the anticipated costs to meet these requirements. Table 1 presents the estimated direct and indirect construction costs for the retail and cinema component on Block 1. As shown, development costs before land and developer profit are estimated at $25.05 million for the retail/cinema component. The major assumptions behind the development cost estimate are as follows: • Site work costs of approximately $600,000. • For the cinema, it is expected that the theater lease will obligate the Developer to fund a construction allowance of approximately $7.5 million. The balance of the cost to complete the space will be an obligation of the theater operator. • For the ground floor retail space, an allowance of approximately $105 per sq.ft. _ of rentable area for the shell and tenant improvements is included. • Indirect costs are approximately $5,526,000, and include primarily architectural and professional fees, leasing commissions, insurance/bonds/feeslpermits, and general administrative. • Financing costs estimates are based on fees and interest cost to construct the Project. The total financing cost is estimated to be $2,516,000. As summarized in Table 1, total costs forthe Project are estimated at $25.05 million. Total development costs are before the Developer payment for the air rights. Also the costs do not include an aitowance for developer profit and risk e. Net Income Table 2 presents the projected net operating income for the cinema/retail space. The income projections are based upon discussions of lease terms provided by the Developer and our own experience in evaluating cinema anchored mixed-use projects in Califomia. As shown, the theater rent is anticipated to be in the range of $1,750,000 per year, triple net. The rent reflects the fact that the tenant will be installing its own tenant improvements and is consistent with the strengtfi of the location, the projected gross admissions, the size and e�ciency of the building, the cost to construct, and other related factors. Keyeer Merston Associates, Inc. 18610.00'I\017-023.doc Pege 9