Question For Syndicators

[Greg Scully]

When projecting your returns to present to investors, do you use the NOI before or after Cap Ex reserves and asset management fees? Specifically the sales price.

Thanks,

[Brian Burke]

@Greg Scully you don't use either of those options when projecting returns. NOI is the income generated by the property minus operating expenses. That has nothing at all to do with returns.

To calculate (or project) returns, you use cash flow.  

Cash flow is NOI, minus debt service, minus the greater of capX reserves or actual capX, minus partnership/sponsor level fees, plus cash received from refinances or sale, plus the return of cash reserves and impounds when no longer needed.