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HomeMy WebLinkAbout11-13-01 SUMM OF SIGN ASSUMP/ACCOUNTING //-13i ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 (1) NATURE OF FORECASTS These forecasts present, to the best of knowledge and belief of management and its manager, the Orono Senior Housing, LLC's (the Organization) expected financial position, activities and cash flows as of December 31, 2001, 2002, 2003, 2004, 2005 and 2006 and for period from November 1, 2001 (inception) through December 31, 2001 and the years ending December 31, 2002, 2003, 2004, 2005 and 2006. Accordingly, the forecasts reflect its judgment as of October 25, 2001, the date of these forecasts, of the expected conditions, and its expected course of action. The assumptions disclosed herein are those that management believes are significant to the forecasts. However, there will usually be differences between projected and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Management has no responsibility to update this report for events and circumstances occurring after the date of this report. (2) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies used for the forecasted financial statements are the policies expected to be used in preparing historical financial statements. Organization - Orono Senior Housing, LLC is a limited liability company organized in accordance with the laws of the State of Minnesota, the sole member of which is the Wedum Foundation, a Minnesota non-profit corporation and a tax exempt organization under Section 501(c)(3) of the Internal Revenue Code. Tax status - The Organization is currently treated as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and a similar section of Minnesota state statutes and, accordingly, is not subject to income taxes on operating income. While the Organization is generally exempt from income taxes, it is subject to taxes on unrelated trade or business income and on excess lobbying expenses. For the forecasted period the Organization has not forecasted any unrelated trade or business income or excess lobbying expenses. Financial statement presentation - The financial statements are presented in accordance with Statement of Financial Accounting Standards No. 117, "Financial Statements of Not-for-Profit Organizations," which requires the Organization to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Unrestricted net assets include net assets not subject to donor-imposed stipulations and are available for general purposes. Temporarily restricted net assets include net assets subject to donor-imposed stipulations that will be met by action of the Organization and/or the passage of time. Permanently restricted net assets are subject to donor-imposed stipulations and must be maintained permanently by the Organization. These forecasts assume there will not be any temporarily or permanently restricted net assets. ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES - continued DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 Use of estimates - In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents - The Organization includes as cash equivalents certificates of deposit and all other investments with maturities of three months or less when purchased which are readily convertible into known amounts of cash. Fixed assets - Fixed assets are recorded at cost. Depreciation is forecasted using the straight-line method over estimated useful lives of thirty years for buildings and seven years for equipment. Expenditures for major renewals and betterments, which substantially increase the useful lives of existing assets, are capitalized. Maintenance and repairs are charged to operating expenses as incurred. Debt issuance costs - The costs of issuance of bonds have been forecasted to be capitalized and amortized over the life of the related bonds using the straight-line method which approximates the interest method. Debt service reserve fund - The debt service reserve fund includes forecasted funds to provide a reserve for payment of principal and interest on the Senior Bonds (as described herein) in the event cash flows are insufficient to meet debt service requirements. (3) FORECASTED PROJECT CONSTRUCTION AND FINANCING Project construction - These forecasts assume in November 2001 the Organization is expected to begin construction of the Sunrise on Superior assisted living facility, which is expected to open in October 2002. The purchase and development of this property is forecasted as follows: Building and land $ 6,320,646 Equipment 1 73,211 rchitectural 164,300 evelopment costs 333,577 6,891,646 et capitalized interest: - Capitalized construction period interest 408,851 Interest earned - project fund (55,494 ) Interest earned -capitalized interest fund (10,973 ) Interest earned - debt service reserve fund (11,476 ) Net capitalized interest 330,908 $ 7,222,554 ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES - continued DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 The construction of these units is expected to be funded as follows: Net bond proceeds (see Financing below) $ 6,637,520 Interest income - project fund 55,494 Deferred note payable 200,000 6,893,014 Total development construction costs (see page 7) (6,891,646 ) Working capital $ 1,368 Financing - These forecasts assume the construction is expected to be financed with $7,730,000 Senior Housing Revenue Bonds (Series 2001A), $210,000 Taxable Senior Housing Revenue Bonds (Series 2001B), $250,000 of subordinated bonds (Series 2001C), and $200,000 of deferred notes payable all issued by the City of Orono, Minnesota in November 2001. The Series 2001A Bonds and the Series 2001B Bonds are collectively referred to as the Senior Bonds. The assumptions for the total bond issue is as follows: Gross bond proceeds $ 8,190,000 Less: Capitalized interest fund 564,307 Markeing and lease up fund 70,000 Debt service reserve fund 573,806 _ Debt issuance costs 344,367 1,552,480 Net bond proceeds $ 6,637,520 Land sale - These forecasts assume the Organizaton, with bond proceeds will purchase the land for this development for $837,558. In consideration for the Organization's development of the land for senior housing the Organization will sell the land to the City of Orono for a $837,558 note. This note is a tax imcrement financing (TIF) note payable over 20 years including interest at 7%. ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES - continued DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 The financing for the construction is expected to have the following principal reductions during the forecast periods ending December 31: Series 2001A [Series 2001B Series 2001C 001 $ 0 $ 0 $ 0 002 0 0 0 2003 0 0 0 004 0 50,000 32,673 ►005 0 55,000 44,845 ►006 0 65,000 55,372 The Series 2001A bonds are expected to have a maturity date of November 1, 2036, bear an average interest rate of 6.125%, and be secured by a leasehold mortgage lien and security interest in the project, an assignment of rents and leases of the project and certain amounts held in the debt service reserve fund. The Series 2001B bonds are expected to have a maturity date of November 1, 2007, bear interest at 8.0%, and be secured by a leasehold mortgage lien and security interest in the project, an assignment of rents and leases of the project and certain amounts held in the debt service reserve fund. The subordinated bonds payable (Series 2001C) and bear interest at 9.0%. The subordinated bonds are payable after all payments of debt service on the Senior Bonds, after payment of operating expenses, and after funding certain reserves, funds and accounts. The bonds will be delivered and interest will accrue at certain performance measures. These forecasts assume the debt service reserve fund will earn 2% interest annually for the Senior Bonds. (4) FORECASTED REVENUES The forecasted revenues are based on management's judgment and experience in owning and managing senior independent living facilities. The facility is scheduled to open in October 2002. The forecasted revenue assumptions are as follows: Residential - Forecasted residential revenue includes the expected rent for the units. These forecasted rents are expected to increase 3% annually. ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES - continued DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 Parking - Forecasted parking revenues are based on $40 per month charge per resident. These revenues are expected increase 3% annually. (5) FORECASTED EXPENSES The forecasted expenses are based on management's judgment and experience in the management and ownership of senior independent living facilities. Operating expenses - Forecasted operating expenses inlcude the salaries, insurance, repairs, contract services and utilities required to operate the facility. These forecasts assume these expenses will be approximately $12,900 per month, beginning October 2002, increasing 4% annually for the future years. Real estate taxes - Forecasted real estate taxes are based on management's assumption of the assessment of real estate taxes. These forecasts assume real estate taxes will increase 4% annually. (6) MAJOR ASSET AND LIABILITY ASSUMPTIONS Accounts payable - Forecasted accounts payable are estimated at approximately 10% of estimated operating expenses. ORONO SENIOR HOUSING, LLC FORECASTED FINANCIAL STATEMENTS DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 INDEX TO FORECASTED FINANCIAL STATEMENTS Page Report of Independent Public Accountants 2 Forecasted Financial Statements: Forecasted Statements of Financial Position 3 Forecasted Statements of Activities 4 Forecasted Statements of Cash Flows 5 Summary of Significant Assumptions and Accounting Policies 6 - 10 Forecasted Supplementary Information: Forecasted Schedules of Debt Service Coverage 11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Orono Senior Housing, LLC: We have examined the accompanying forecasted statements of financial position, activities and cash flows of Orono Senior Housing, LLC as of December 31, 2001, 2002, 2003, 2004, 2005 and 2006, and for the period from November 1, 2001 (inception) through December 31, 2001 and the years ending December 31, 2002, 2003, 2004, 2005 and 2006. Orono Senior Housing, LLC's management is responsible for the forecast. Our responsibility is to express an opinion on the forecast based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included such procedures as we considered necessary to evaluate both the assumptions used by management and the preparation and presentation of the forecast. We believe that our examination provides a reasonable basis for our opinion. In our opinion, the accompanying forecast is presented in conformity the guidelines for presentation of a forecast established by the American Institute of Certified Public Accountants, and the underlying assumptions provide a reasonable basis for management's forecast. However, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Our examinations of the financial forecasts were made for the purpose of forming an opinion on whether the financial forecasts are presented in conformity with AICPA guidelines for presentation of a financial forecast and whether the underlying assumptions provide a reasonable basis for the forecasts. The forecasted supplementary information on page 11 is presented for purposes of additional analysis and is not a required part of the financial forecasts. Such information has not been subjected to the procedures applied in the examination of the financial forecasts, and, accordingly, we express no opinion or any other form of assurance on it. Furthermore, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Minneapolis, Minnesota November 8, 2001 Mike Gaffron -Orno model (1).xls Page 1 Increase 3.00% Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Number c 31 36 41 46 51 56 61 62 1,071 1,071 1,071 1,103 1,103 1,103 1,103 1,103 33,201 38,556 43,911 50,744 56,260 61,775 67,291 68,394 2002 2003 2004 115,668 783,222 845,351 5 875 4,375 10 616 6,160 18 1,050 18,900 4 738 2,952 11 1,100 12,100 4 1,250 5,000 6 1,435 8,610 4 1,600 6,400 2001 62 1,040 64,497 Increase 3.00% 2002 1,071 Mike Gaffron - Orno model (1).xls Page 2 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 62 62 62 62 62 62 62 62 62 1,103 1,103 1,103 1,103 1,103 1,103 1,103 1,136 1,136 68,394 68,394 68,394 68,394 68,394 68,394 68,394 70,446 70,446 Mike Gaffron -Orno model (1).xls Page 3 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 62 62 62 62 62 62 62 62 62 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 1,136 70,446 70,446 70,446 70,446 70,446 70,446 70,446 70,446 70,446 875 5 4,375 616 10 6,160 1,050 18 18,900 735 4 2,940 1,100 11 12,100 1,250 4 5,000 1,435 6 8,610 1,600 4 6,400 62 1,040 Mike Gaffron -Orno model (1).xls Page 41 Dec-04 62 1,136 70,446 Mike Gaffron -Orno model (1).xls Page 5 70,000 5.40% 3,779 105,000 5.60% 5,879 110,000 5.80% 6,379 115,000 5.90% 6,784 125,000 6.00% 7,499 7,205,000 6.12% 441,234 7,730,000 6.10% 471,554 ,nk £ffron -Orno model (1).xls 30% . 3.0% 10% . 3.0% 3.0% 3.0% Page 6 Income increase 3.0% 3.0% Expense increase 4.0% 4.0% ORONO SENIOR HOUSING,LLC FORECASTED SCHEDULES OF REVENUES AND EXPENSES FOR THE TWO MONTHS ENDING DECEMBER 31,2001 AND THE YEARS ENDING DECEMBER 31,2002,2003,2004,2005 AND 2006 2001 2002 2003 2004 2005 2006 Changes in net assets,unrestricted: Revenue: Residential $- $115,668 $783,222 $845,351 $870,711 $896,832 Parking - 4,453 30,154 32,546 33,522 34,528 3.9% TIF - - - - - - 90.0% Interest income 9,734 61,429 67,806 66,144 64,463 62,660 Total revenue 9,734 181,550 881,182 944,041 968,696 994,021 Net assets released from restrictions Satisfaction of restrictions - - - - - - Total unrestricted revenues and support 9,734 181,550 881,182 944,041 968,696 994,021 Expenses: Salaries - 3,328 20,767 21,597 21,597 21,597 1,664 19,968 Contract services - 3,562 22,225 23,114 23,114 23,114 1,781 21,370 Utilities - 8,947 55,827 58,060 58,060 58,060 4,473 53,680 Real estate taxes - 18,228 75,828 78,862 82,016 85,297 6,078 General and administrative - 1,600 9,984 10,383 10,799 11,231 800 9,600 Insurance - 1,250 7,800 8,112 8,112 8,112 625 7,500 Professional fees - 417 2,600 2,704 2,704 2,704 208 2,500 Repairs and maintenance - 1,997 12,461 12,960 12,960 12,960 999 11,982 Management fee - 4,805 32,535 35,118 36,169 37,254 4.00% Letter of credit fee 625 3,750 3,750 3,750 3,750 1.50% 250,000 Replacement reserve - 1,550 9,300 9,300 9,300 9,300 775 Interest - 122,638 510,830 504,905 492,096 478,087 Depreciation - 42,135 252,809 252,809 252,809 252,809 Amortization - 11,479 68,873 68,873 68,873 68,873 Total expenses - 222,560 1,085,590 1,090,546 1,082,360 1,073,149 Increase in net assets,unrestricted 9,734 (41,010) (204,408) (146,505) (113,663) (79,128) Net assets,unrestricted-beginning - 9,734 (31,276) (235,684) (382,189) (495,853) Net assets,unrestricted-ending $9.734 $(31 276) $(235 684) $(382 189) $(495 853) $(574.981) See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron OSIEFAUT{Q5J---8ER 31,2002,2003,2004,2005 AND 2006 Pagel .,m._ .. .. See Accountant's Compilation Report Beginning 2001 2002 2003 2004 2005 2006 Cash - - - -_ Resident receivable: Lodging - 120,121 813,376 877,897 904,233 931,360 Percentage 2% 2% 2% 2% 2% 2% Balance -. 2 402_ 16.268 17 558, 18 085. 18 627 Resident receivable: Lodging - - - - - - Percentage 2% 2% 2% 2% 2% 2% Balance - - - - - - - 2 14 26 38 50 62 Payment 2000 2001 2002 2003 2004 2005 2006 Note receivable: Land sale 6,494 834,333 814,175 792,559 769,381 744,528 717,877 834,333 814,175 792,559 769,381 744,528 717,877 Current portion: Land sale 20,158 21,615 23,178 24,854 26,650 28,577 20,158 21,615 23,178 24,854 26650 28,577 Note receivable-net $- $814,175 $792,559 $769,381 $744,528 $717,877 $689,301 Interest income: Land sale 240 7.00% 9,734 57,698 56,236 54,668 52,987 51,184 $9.734 _ $57 698 $56.236 $54,668 $52,987 $51,184 Construction in progress: Beginning - 2,794,295 - - - - Additions: Building construction fund 6,320,558 1,172,239 4,110,761 - Land acquisition 837,558 - - Development fee 333,577 333,577 Architectural 164,300 164,300 Furniture&Fixtures 73,211 73,211 Organizational costs 200,000 Less: land sale - 6,891,646 Capitalized interest Capitalized interest 408,851 20,660 388,192 Project fund-interest income (55,494) (3,456) (52,038) Capitalized interest fund (10,973) (1,881) (9,092) - - - - Debt service fund-interest income (11,476) (1,913) (9,563) Total cost additions 330,908 2,794,295 4,428,259 - - - - Reclassification 7,222,554 (7,222,554) Ending 2,794,295 - - - - - Beginning_ 20.01 2002 2003 2004 2005 2006 PROPERTY ADDITIONS: Land - 837,558 - - - - Buildings - 6,019,996.29 - - - - Equipment - 365,000 - - - - Replacement reserves - - - - Total 7,222,554 - - DEPRECIATION EXPENSE Prior Year - - 42,135 252,809 252,809 252,809 Land Buildings 30 - 33,444 167,222.12 - - - Equipment - 8,690 43,452.38 - - Total -. 42 135, 252 809. 252 809 252 809 252.809 Net property and equipment 7,180,419 6 927 610, 6 674 801. 6 421 991. 6 169 182 Capitalized/prepaid interest fund: Beginning - 545,529 56,552 - - - Additions. Capitalized interest fund 564,307 - - - - - Debt service fund interest income 10,943 Interest income(capitalized) 2.00% 1,881 9,092 Interest income 2.00% 1,818 94 - 566,188 21,854 94 - - Use (20,660) (510 830) (56,646) - - - Ending 545.529 56 552 - - - Project fund: Beginning - 4,058,723 - - - - Additions 6,836,152 - - - - - Interest income 3,456 52,038 Uses (2,780,885) (4,110,761) - - - - !Ake Gaffron - Orno model (1).xls Page 8 Debtervicereserve funder Beginning - 573,806 573.806 573,806 573,806 573,806 Additions 573,806 - - - - - Uses - - Ending 573,806 573,806 573,806 573,806 573 806 573 806 Interest income Capitalized interest 2.00% 1,913 9,563 Operating interest income 2.00% 1,913 11,476 11,476 11,476 11,476_ 1,913 11,476 11,476 11,476 11,476 11,476 Marketing and leaseup fund: Beginning - 70,000 60000 - - - Additions 70,000 - - - - - Uses - (10,000) (60,000) - Ending 70,000, 60 000 - Beginning 2001 2002 2003 2004 2005 2006 Accounts payable: Total expenses - 222,560 1,085,590 1,090,548 1,082,360 1,073,149 Factor 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Total 6.677 32,568 32 718 32.471 32.194 PROJECTED SCHEDULE OF LONG-TERM DEBT Mike Gaffron Omo model (1)nil s ENWING DECEMBER 31,2002,2003,2004,2005 AND 2006 Page9.,. Series B Series A Taxable Sub debt Total Bonds payable: Project fund deposits Building construction fund 5,002,506 225,000 5,227,506 Land acquisition 837,558 837,558 Development fee 333,577 333,577 Architectural 164,300 164,300 ' Furniture&Fixtures 73,211 73,211 Marketing and lease up 70,000 70,000 Deferred city fees 200,000 200,000 Organizational costs - Operating reserve - - 6,681,152 - 225,000 6,906,152 Fund deposits: Capitalized interest fund 519,972 19,677 24,658 564,307 Debt service reserve fund 573,806 573806 8,190,000 1,093,778 19,877 24,658 1,138,113 564,307 Delivery date expenses: 573,806 Cost of issuance 137,117 8,750 145,867 344,367 Underwriters discount 193,250 5,250 198,500 1,482,480 330,367 14,000 - 344,367 6,707,520 Additional proceeds 1,028 342 1,367 250,000 210,000 Total 8,106,323 33,677 250,000 8,390,000 Taxable bond (176,323) 176,323 Subordinated debt (200,000) (200,000) Bond financing 7,730,000 210,000 250,000 8,190,000 1999 2000 2001 2002 2003 2004 Proceeds of long-term debt: Series A 7,730,000 Taxable 210,000 Total 7,940.000 - - - - 1 2 3 4 5 6 7 BEG Payment BALANCE 2001 2002 2003 2004 2005 2006 2007 Bonds payments: Series A 70,000 105,000 Taxable 85,000 95,000 30,000 - Bonds payable: Series A - - 7,730,000 7,730,000 7,730,000 7,730,000 7,730,000 7,660,000 7,555,000 Taxable - 210,000 210,000 210,000 125,000 30,000 - - Total - - 7,940,000 7,940,000 7,940,000 7,855,000 7,760,000 7,660,000 7,555,000 BEG 1 2 3 Payment BALANCE 2001 2002 2003 2004 2005 2006 2007 2008 Subordinated debt: 56,107 68,550 84,193 41,150 - - Sub debt 250,000 250,000 250,000 193,893 125,343 41,150 0 0 0 0 0 0 0 0 0 0 0 Total 250.005. 250 OOQ 250.00Q 1$3 893 125.34 41 15Q Q 0 Term Rate 2001 2002 2003 2004 2005 2006 2007 2008 Interest expense: Series A 6.10% 19,647 471,530 471,530 471,530 471,530 469,395 464,058 460,855 Series B 8.00% 700 16,800 18,800 13,400 6,200 1,200 - - Less: Capitalized interest (20,660) (388,192) Total (313) 100,138 488,330 484,930 477,730 470,595 464,058 460,855 Subordinated debt: Series C - - - - - - - 30 9.00% 313 22,500 22,500 19,975 14,386 7,492 1,852 0 313 22,500 22,500 19,975 14,366 7,492 1,852 0 Credit Line - - - - - - - - Total - 122 638 510 83Q 504,905. 492.095. 478,087 465 9099_ 460,655 Current Portion: Bond: Series A 0 0 0 0 70,000 105,000 7,555,000 0 Taxable 0 0 85,000 95,000 30,000 0 0 0 0 0 0 0 0 0 0 0 Total 0 0 85,000 95,000 100,000 105,000 7,555,000 0 Subordinated Sub#1 0 0 56,107 68,550 84,193 41,150 0 0 Sub#2 Total 0 0 56,107 88,550 84,193 41,150 0 0 Excess cash flow before sub debt 18,239 166,477 267,468 112,214 137,101 168,386 0 0 50%allocation 1 (8,119) (83,238) (133,734) (58,107) (68,550) (84,193) 0 0 Fusee e,reilehle a its R'r 71R 111 7'i11 RR 1n7 RR ccn Rd 101 n n ( crEdr�sf ,dNrdMONTHS ENDING DECEMBER 31,2001 AND Mike Gaffron OrnoPage 11 DECEMBER 31,2002,:2003,2004,2005_AND 2006.. ..,. .. ..;,_..._.,...__. 2001 2002 2003 2004 2005 2006 Cash flows from operating activities: Increase(decrease)in net assets(deficit),unrestricted $9,734 $(41,010) $(204,408) $(146,505) $(113,663) $(79,128) Adjustments to reconcile increase(decrease)in net assets(deficit),unrestricted to cash flows from operating activities: Depreciation and amortization - 53,614 321,683 321,683 321,683 321,683 Change in operating assets and liabilities: Resident receivables - (2,402) (13,865) (1,290) (527) (543) Accounts payable - 6,677 25,891 149 (246) (276) Cash flows from operating activities 9,734 16,878 129,301 174,036 207,247 241,736 Cash flows from investing activities: Change in project fund (4,058,723) 4,058,723 - - - - Change in capitalized interest fund (545,529) 488,976 56,552 - - - Change in marketing and leaseup fund (70,000) 10,000 60,000 - - - Cash paid for construction in progress (2,794,295) (4,428,259) - - - - Receipts of note receivable 3,225 20,158 21,615 23,178 24,854 26,650 Purchases of fixed assets,including improvements - - - - - - Payment to debt service reserve fund (573,806) - - - - - Cash flows from investing activities (8,039,128) 149,599 138,168 23,178 24,854 26,650 Cash flows from financing activities: Proceeds from bonds payable 7,940,000 - - - - - Proceeds from subordinated debt 250,000 - - - - - Payments for debt issuance costs (344,367) - - - - - Payments on bonds payable - - - (85,000) (95,000) (100,000) Payments on subordinated debt - - - (56,107) (68,550) (84,193) Proceeds from deferred note payable 200,000 Cash flows from financing activities 8,045,633 - - (141,107) (163,550) (184,193) Increase in cash and cash equivalents 16,239 166,477 267,468 56,107 88,550 84,193 Cash and cash equivalents,beginning of period - 16,239 182,716 450,184 506291 574,841 Cash and cash equivalents,end of period $16 239_ $182 716_ $450 184 $506 291. $574 841. $659 034 Supplemental cash flows information: Cash paid for interest,net of capitalized interest $- $122,638 $510,830 $504,905 $492,096 $478,087 Noncash investing and financing activities: Note receivable received for sale of land $637 558 Construction in progress transferred to property $- $7 222 554 $- $- $- $- See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron -Orno model (1).xls Page 12 ORONO SENIOR HOUSING,LLC FORECASTED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2000,2001,2002 AND 2003 2000 2001 2002 2003 2004 2005 2006 Assets: Current assets: Cash and cash equivalents $- $16,239 $182,716 $450,184 $506,291 $574,841 $659,034 Resident receivables - - 2,402 16,268 17,558 18,085 18,827 Current portion of note receivable - 20,158 21,615 23,178 24,854 26,850 28,577 Total current assets - 36,397 206,734 489,830 548,702 619,576 706,238 Assets limited to use: Debt service reserve fund - 573,806 573,806 573,806 573,806 573,806 573,806 Capitalized interest fund - 545,529 56,552 - - - Marketing and lease up fund - 70,000 60,000 - - - - Project fund - 4,058,723 - - - - - Construction in progress - 1,956,737 - - - - Total assets limited to use - 7,204,795 690,358 573,806 573,806 573,806 573,806 Fixed assets,net - - 8,342,861 6,090,052 5,837,243 5,584,433 5,331,624 Notes receivable,net - 814,175 792,559 769,381 744,528 717,877 689,301 Debt issuance costs,net - 344,367 332,888 264,015 195,141 128,268 57,395 Total assets $- $8 399,734 $8 365 401 $8,186 884 $7 899.420 $7.621.961 5 7 358.363 Liabilities and net assets(deficit): Current liabilities: Current portion of bonds payable 0- $- $- $85,000 $95,000 $100,000 $105,000 Current portion of subordinated debt - - - 56,107 68,550 84,193 41,150 Accounts payable - - 6,677 32,568 32,716 3Z471 32,194 Total current liabilities - - 6,677 173,675 196,267 216,664 178,344 Bonds payable,net of current portion - 7,940,000 7,940,000 7,855,000 7,760,000 7,660,000 7,555,000 Subordinated debt,net of current portion - 250,000 250,000 193,893 125,343 41,150 0 Deferred note payable - 200,000 200,000 200,000 200,000 200,000 200,000 Total liabilities - 8,390,000 8,398,677 8,422,568 8,281,610 8,117,814 7,933,344 Net assets(deficit): Unrestricted - 9,734 (31,276) (235,884) (382,189) (495,853) (574,981) Temporarily restricted - - - - - Total net assets - 9,734 (31,276) (235,884) (382,189) (495,853) (574,981) Total liabilities and net assets $- $8 399,734 $8,365,401 $8,186,884 $7 899 420 $7,621,961 $7,358,363 See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron -Orno model (1).xIS THE YEARS ENDING DECEMBER 31,2002,2003,2004,2005 AND 2006 Page 20 Interest income 3.0% 3.0% 3.0% 3.0% 3.0% Income increase 3.0% Expense increase 4.0% ORONO SENIOR HOUSING,LLC FORECASTED STATEMENTS OF FINANCIAL POSITION DECEMBER 31,2001,2002,2003,2004,2005 AND 2006 2001 2002 2003 2004 2005 2006 Assets: Current assets: Cash and cash equivalents $16,239 $182,716 $450,184 $506,291 $574,841 $659,034 Resident receivables - 2,402 16,268 17,558 18,085 18,627 Current portion of note receivable 20,158 21,615 23,178 24,854 26,650 28,577 Total current assets 36,397 206,734 489,630 548,702 619,576 706,238 Assets limited to use: Debt service reserve fund 573,806 573,806 573,806 573,806 573,806 573,806 Capitalized interest fund 545,529 56,552 - - - - Project fund 4,058,723 - - - - - Construction in progress 1,956,737 - - - - - Total assets limited to use 7,134,795 630,358 573,806 573,806 573,806 573,806 Fixed assets,net - 6,342,861 6,090,052 5,837,243 5,584,433 5,331,624 Notes receivable,net 814,175 792,559 769,381 744,528 717,877 689,301 Debt issuance costs,net 344,367 332,888 264,015 195,141 126,268 57,395 Total assets $8.329.734 $8.305,401 $8,186,884 $7,899,420 $7.621.961 $7.358,363 Liabilities and net assets(deficit): Current liabilities: Current portion of bonds payable $- $- $85,000 $95,000 $100,000 $105,000 Current portion of subordinated debt - - 56,107 68,550 84,193 41,150 Accounts payable - 6,677 32,568 32,716 32,471 32,194 Total current liabilities - 6,677 173,675 196,267 216,664 178,344 Bonds payable,net of current portion 7,940,000 7,940,000 7,855,000 7,760,000 7,660,000 7,555,000 Subordinated debt,net of current portion 250,000 250,000 193,893 125,343 41,150 0 Deferred note payable 200,000 200,000 200,000 200,000 200,000 200,000 Total liabilities 8,390,000 8,396,677 8,422,568 8,281,610 8,117,814 7,933,344 Net assets(deficit): Unrestricted 9,734 (31,276) (235,684) (382,189) (495,853) (574,981) Total net assets(deficit) 9,734 (31,276) (235,684) (382,189) (495,853) (574,981) Total liabilities and net assets(deficit) $8.399.734 $8.365.401 $8.186.884 $7.899.420 $7.621,961 $7.358.363 See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron -OrtlO model (1).xlgORECASTED SCHEDULES OF REVENUES AND EXPENSES Page 21 FOR THE TWO MONTHS ENDING DECEMBER 31,-2001 AND THE YEARS ENDING DECEMBER 31,2002,2003,2004,2005 AND 2006 2001 2002 2003 2004 2005 2006 Changes in net assets,unrestricted: Revenue: Residential $- $115,668 $783,222 $845,351 $870,711 $896,832 Parking - 4,453 30,154 32,546 33,522 34,528 Interest income 9,734 61,429 67,806 66,144 64,463 62,660 Total revenue 9,734 181,550 881,182 944,041 968,696 994,021 Expenses: Salaries - 3,328 20,767 21,597 21,597 21,597 Contract services - 3,562 22,225 23,114 23,114 23,114 Utilities - 8,947 55,827 58,060 58,060 58,060 Real estate taxes - 18,228 75,828 78,862 82,016 85,297 General and administrative - 1,600 9,984 10,383 10,799 11,231 Insurance - 1,250 7,800 8,112 8,112 8,112 Professional fees - 417 2,600 2,704 2,704 2,704 Repairs and maintenance - 1,997 12,461 12,960 12,960 12,960 Management fee - 4,805 32,535 35,116 36,169 37,254 Repair and maintenance fee - 625 3,750 3,750 3,750 3,750 Letter of credit fee - 1,550 9,300 9,300 9,300 9,300 Interest - 122,638 510,830 504,905 492,096 478,087 Depreciation - 42,135 252,809 252,809 252,809 252,809 Amortization - 11,479 68,873 68,873 68,873 68,873 Total expenses - 222,560 1,085,590 1,090,546 1,082,360 1,073,149 Increase in net assets(deficit),unrestricted 9,734 (41,010) (204,408) (146,505) (113,663) (79,128) Net assets(deficit), unrestricted-beginning - 9,734 (31,276) (235,684) (382,189) (495,853) Net assets(deficit), unrestricted-ending $9,734, $(31,276) $(235,684) $(382,189), $(495,853) $(574,981) See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron -Orno model (1).xls FORECASTED STATEMENTS OF CASH FLOWS Page 22 L_._ FOR THE TWO MONTHS-ENDING DECEMBER31,2001 AND THE YEARS ENDING DECEMBER 31,2002,2003,2004,2005 AND 2006 2001 2002 2003 2004 2005 2006 Cash flows from operating activities: Increase(decrease)in net assets(deficit),unrestric $9,734 $(41,010) $(204,408) $(146,505) $(113,663) $(79,128) Adjustments to reconcile increase(decrease)in net assets(deficit),unrestricted to cash flows from operating activities: Depreciation and amortization - 53,614 321,683 321,683 321,683 321,683 Change in operating assets and liabilities: Resident receivables - (2,402) (13,865) (1,290) (527) (543) Accounts payable - 6,677 25,891 149 (246) (276) Cash flows from operating activities 9,734 16,878 129,301 174,036 207,247 241,736 Cash flows from investing activities: Change in project fund (4,058,723) 4,058.723 - - - - Change in capitalized interest fund (545,529) 488,976 56,552 - - - Payments for construction in progress (2,794,295) (4,428,259) - - - - Cash received from note receivable 3,225 20,158 21,615 23,178 24,854 26,650 Payment to debt service reserve fund (573,806) - - - - - Cash flows from investing activities (7,969,128) 139,599 78,168 23,178 24,854 26,650 Cash flows from financing activities: Proceeds from bonds payable 7,940,000 - - - - - Proceeds from subordinated debt 250,000 - - - - - Payments for debt issuance costs (344,367) - - - - - Payments on bonds payable - - - (85,000) (95,000) (100,000) Payments on subordinated debt - - - (56,107) (68,550) (84,193) Proceeds from deferred note payable 200,000 - - - - - Cash flows from financing activities 8,045,633 - - (141,107) (163,550) (184,193) Increase in cash and cash equivalents 86,239 156,477 207,468 56,107 68,550 84,193 Cash and cash equivalents,beginning of perioc - 16,239 182,716 450,184 506,291 574,841 Cash and cash equivalents,end of period $86,239, $172,716. $390,184, $506.291_ $574,841 $659,034 Supplemental cash flows information: Cash paid for interest,net of capitalized interest $-. $122,638. $510,830_ $504,905. $492,096 $478,087 Noncash investing and financing activities: Note receivable received for sale of land $837,558 $- $- $- $- $- Construction in progress transferred to property $- $7,222,554 $- $- $- $- See accompanying summary of significant assumptions and accounting policies and report of independent public accountants. Mike Gaffron -Orno model (1).xls THE YEARS ENDING DECEMBER 31,2002,2003 2004,2005 AND 2006 Page 23 a Interest income 3.0% 3.0% 3.0% 3.0% 3.0% Income increase 3.0% Expense increase 4.0% ORONO SENIOR HOUSING,LLC FORECASTED SCHEDULES OF DEBT SERVICE COVERAGE FOR THE TWO MONTHS ENDING DECEMBER 31,2001 AND THE YEARS ENDING DECEMBER 31,2002,2003,2004,2005 AND 2006 2001 (2 Months) 2002 2003 2004 2.005 2006 Changes in net assets(deficit), unrestricted: Revenue: Residential $- $115,668 $783,222 $845,351 $870,711 $896,832 Parking - 4,453 30,154 32,546 33,522 34,528 Interest income 9,734 61,429 67,806 66,144 64,463 62,660 Total revenue 9,734 181,550 881,182 944,041 968,696 994,021 Expenses: Salaries - 3,328 20,767 21,597 21,597 21,597 Contract services - 3,562 22,225 23,114 23,114 23,114 Utilities - 8,947 55,827 58,060 58,060 58,060 Real estate taxes - 18,228 75,828 78,862 82,016 85,297 General and administrative - 1,600 9,984 10,383 10,799 11,231 Insurance - 1,250 7,800 8,112 8,112 8,112 Professional fees - 417 2,600 2,704 2,704 2,704 Repairs and maintenance - 1,997 12,461 12,960 12,960 12,960 Management fee - 4,805 32,535 35,116 36,169 37,254 Letter of credit fee - 625 3.750 3,750 3,750 3,750 Replacement reserve - 1,550 9,300 9,300 9,300 9,300 Interest - 122,638 510,830 504,905 492,096 478,087 Depreciation - 42,135 252,809 252,809 252,809 252,809 Amortization - 11,479 68,873 68,873 68,873 68,873 Total expenses - 222,560 1,085,590 1,090,546 1,082,360 1,073,149 Increase in net assets(deficit),unrestricted 9,734 (41,010) (204,408) (146,505) (113,663) (79,128) Addback: Interest - 122,638 510,830 504,905 492,096 478,087 Depreciation - 42,135 252,809 252,809 252,809 252,809 Amortization - 11,479 68,873 68,873 68,873 68,873 Subordinated portion of management fee(50%) - 2,402 16,268 17,558 18,085 18,627 50.01 Collection of notes receivable 3,225 20,158 21,615 23,178 24,854 26,650 Cash available for debt service $12,959 $157,803 $665,988 $720,819 $743,053 $765,919 Debt service payments(Series A and B): Bond principal paid - - - 85,000 95,000 100,000 Bond interest paid and accrued 20,347 488,330 488,330 484,930 477,730 470,595 Less:payments from capitalized interest fund (20,347) (488,330) (54,151) - - - Total debt service payments $-_ $-. $434.179_ $569,930 $572,730 $570,595 Debt service coverage ratio - 1.53 1.26_ 1.30. 1.34 Debt service payments(Series A,B and C): Bond principal paid - - - 85,000 95,000 100,000 Bond interest paid and accrued 20,347 488,330 488,330 484,930 477,730 470,595 Less:payments from capitalized interest fund (20,660) (510,830) (56,646) - - - Subordinated debt principal paid - - - 56,107 68,550 84,193 Subordinated interest paid and accrued 313 22,500 22,500 19,975 14,366 7,492 Total debt service payments $- $- $454,184 $646,012 $655,646 $662,280 Debt service coverage ratio - - 1.47 1.12 1.13 1.16 See accompanying summary of significant assumptions and accounting policies and report of independent public accountants.