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Clayton Lane

VIEWS: 14 PAGES: 21

									      Clayton Lane


           by


  David B. Agnew, Esq.

Thomas G. Thibodeau, Ph.D.




    November 8, 2007




            1
    It was October 1999 and Randy Nichols was getting his tires changed at the Cherry Creek
Sears in Denver, Colorado when he had a very intriguing idea. The Sears property is surrounded
by some of the most affluent retail, residential and office properties in Denver. Cherry Creek
Mall is just across 1st Avenue to the south. The Mall is a one million square foot regional
shopping center anchored by Foley‟s, Lord & Taylor, Neiman Marcus, and Saks Fifth Avenue.
The mall has over one-hundred sixty specialty retail shops including The Body Shop, Cartier,
Eddie Bauer, Tiffany‟s and The Sharper Image and is a major tourist attraction for the city. The
Cherry Creek North Shopping District is located just north and east of Sears. The streets in
Cherry Creek North are filled with boutiques, art galleries, outdoor cafes and some of Denver‟s
best restaurants. The Denver Country Club is located about 1/2 mile west of Sears. Founded in
1901, the Denver Country Club (DCC) is the oldest and most exclusive Country Club in Denver.

    The Cherry Creek residential neighborhood surrounds the Cherry Creek North Shopping
District. These neighborhoods contain some of the most exclusive residences in Denver (e.g.
Cherry Creek North, Denver Country Club, the Polo Club, Belcaro, Hilltop and Crestmoor).
The average annual income for households residing within a one mile radius of Sears exceeds
$120,000 per year. Prices for Denver Country Club homes start at $1.2M and increase to $5M.
Prices for the Polo Club homes start at $1.3M and go to $7M. The average per square foot price
for these homes is $500.

    Finally, the neighborhood serves as the headquarters for Janus Capital Group and has
attracted numerous other niche financial firms including Founders, Invesco, Merrill Lynch,
Mellon, American National Bank and Charles Schwab. Janus is a leader in the mutual fund
industry with over $100B in assets under management. Outside the United States, Janus has
offices in London, Hong Kong, Tokyo and Milan. Janus is in the market for a new corporate
headquarters. Janus management has expressed an interest in staying in the Cherry Creek North
neighborhood, but none of the area office properties can accommodate Janus‟ requirement for
160,000 square feet of space. In addition, the vacancy rate for office space in Cherry Creek
North is currently 8.2%, less than one-half the rate for the Denver metropolitan area.

    Neighborhood parking is a major problem. There is inadequate parking available for existing
commercial uses and the Cherry Creek North Business Improvement District (CCN BID) is
anxious to remedy the situation. The CCN BID was formed in 1989 as a „quasi-municipality‟ to
facilitate business activity in Cherry Creek North. The CCN BID has taxing authority and can
use tax revenues to finance both public and private infrastructure for the neighborhood.

    The Cherry Creek North neighborhood is located two miles southeast of downtown Denver.
The area is served by Colorado and University Boulevards (running north/south) and Speer
Boulevard that runs east-west. Sears is also located within two miles of Interstate 25. Interstate
25 provides excellent access to the major transportation arteries in Denver (Interstate 70 to the
north and C-470 to the south). The Denver International Airport is located about 15 miles
northeast of Cherry Creek North.




                                                 2
Cherry Creek North




        3
    The nearest quality hotel is located in downtown Denver. Consequently, travelers who shop
in Cherry Creek and people who visit relatives in the Cherry Creek North residential
neighborhoods have to stay downtown in order to enjoy upscale accommodations.

    Sears currently owns 9.5 acres of land in the Cherry Creek North neighborhood. In addition
to the 130,000 square foot Sears store, the land owned by Sears contains a 57,000 square foot
Whole Foods store, a 20,000 square foot Sears Tire, Battery and Auto Store (TBA) and surface
parking for these retailers. The Sears store is 40 years old and desperately needs major
renovations including remodeling the interior, adding an entrance for the public, and adding a
loading dock. Over the past several years, Sears has attempted to gain approval from the City of
Denver for a series of redevelopment proposals. Each of these attempts has met with fierce
resistance from the residential neighborhoods surrounding the site and none have been
successful. Nevertheless, Sears continues to be very interested in redeveloping the entire site in
order to maximize the value of its property.

    Randy Nichols is a developer with 15 years experience developing office and multifamily
properties in the Denver metropolitan area. Randy decides to approach Sears with a proposal to
redevelop the 9.5 acres. The plan includes building: (1) a new 160,000 square foot corporate
headquarters for Janus; (2) a 196 room four-star hotel to accommodate Cherry Creek North
tourists; (3) 25 unit high-end residential “for sale” condominiums ; (4) 135,000 square feet of
retail space; (5) the improvements that Sears so desperately needs; and (6) plenty of parking.

    A newly created private street, Clayton Lane, will divide the redeveloped site, running
parallel to Detroit Street and between 1st and 2nd Avenues. The retail on the east side of Clayton
Lane will be able to accommodate restaurants and boutique retail while the west side of Clayton
Lane will be able to accommodate some larger retail stores.

    The new corporate headquarters for Janus will be a seven-story, 160,000 square foot Class
“AA” office property. The building will be situated between First and Second Avenue and
between Detroit and Clayton Lane. Randy believes he can get Janus to sign a fifteen year lease
at prevailing market rents. His plan is to build and lease the building and then sell the property
to a long-term real estate investor.

    The 196-room hotel will be located just to the north and west of the Janus corporate
headquarters on Clayton Lane. JW Marriott, one of Marriott‟s most exclusive hotel brands, will
be approached to operate the facility. This brand caters to affluent travelers who demand high
levels of personal service. Hotel amenities will include an outdoor event facility, a fitness center,
7,000 square feet of ballroom and meeting space and a full service restaurant.

    The 25 residential condos on Clayton Lane will provide residents with easy access to the
area‟s employment centers and retail establishments. These condos will be located above the
retail at 2nd Avenue and Clayton Lane. Condo amenities will include private patios, fireplaces
and epicurean kitchens.

   The plan includes four parking facilities. The first is a new Parking Structure, a five story,
above ground facility that also provides for a new Sears Auto Center in the basement, 16,000



                                                 4
square feet of retail space on the first floor, 5,500 square feet of office space on the second floor,
and parking spaces for 454 cars. The second and third are the new East Parking Garage, a three
level below grade structure that will provide parking for 529 cars and the new West Parking
Garage, a four level below grade parking structure with 495 parking spaces. The fourth parking
area consists of surface parking located in front of Whole Foods.

    The proposed development poses numerous challenges. The major challenges include: (1) at
least one neighborhood homeowner association is strongly opposed to any new development; (2)
the proposed development is not allowed under current zoning; (3) Randy‟s firm has never
developed either hotel or retail properties, and (4) Randy will need to identify and secure
additional equity investors for the project. In addition, mixed use developments are typically
difficult to finance. Lenders usually have their own area of expertise (e.g. office property
lending) and tend to not venture into other property types. Consequently, Randy is going to have
to convince several different lenders to provide construction and permanent financing. This will
be particularly challenging for the residential condominiums since they will be located above the
retail space on the west side of Clayton Lane.

     The attached exhibits provide the proposed project‟s financials. The City of Denver is
willing to provide $4.7M to purchase parking for 199 cars. The City‟s contribution will be used
to finance a portion of the Parking Structure. In addition, Randy intends to sell the improved
hotel site to a hotel developer at cost. Exhibit 1 lists shared site costs and shared project
expenses. Shared project level costs consist of the expenses associated with renovating Sears,
architects‟ fees, engineering costs and legal fees. Shared site costs consist of site design,
temporary parking (while the permanent parking structure is being built), surveys, street costs,
drainage work, and the costs of relocating utilities. Exhibits 2 through 7 provide development
costs and a stabilized cash flow proforma (Exhibit 2), for the Janus Corporate Headquarters
(Exhibit 3), for the hotel retail (Exhibit 4), for the hotel site development (Exhibit 5), for the
retail space west of Clayton Lane (Exhibit 6), and for the condominiums (Exhibit 7). Exhibit 8
provides information on parking space requirements associated with the new improvements; and
Exhibit 9 provides financing information.

     Sears and Whole Foods are very concerned about losing revenue during the redevelopment.
Sears management insists that customers have convenient access to parking throughout the
development period. Randy addresses these concerns by proposing that the redevelopment take
place in three phases. The Parking Structure will be built first during Phase I of the project. The
new Sears Tire and Battery Store will be located in the basement of the Parking Structure.
Finally, the Parking Structure will accommodate 16,222 square feet of additional retail space and
5,572 square feet of office space. The new corporate headquarters for Janus, the JW Marriott
Hotel, and 46,729 square feet of retail space will be developed in Phase II. Finally, 63,731
square feet of additional retail space and the 25 residential condominiums will be built in Phase
III. Phase I is expected to take 12 months; Phase II 24 months and Phase III about 15 months.

   Commercial property construction loans are typically between 200 and 300 basis points
above LIBOR but Denver area construction lenders underwrite loans at LIBOR plus 450 basis
points. The target loan to cost ratio on a commercial property construction loan is 75%.
Construction loan fees are typically in the range of 100 to 150 basis points. The current LIBOR



                                                  5
is 4.0%. The current market rate for permanent financing is between 7.0% and 8.5%. Market
cap rates are currently in the 8.00% to 9.00% range and depend on the property type.

    The project is expected to cost around $150M. The land is valued at $14,020,000. Randy
has $5M of his own money to invest in the venture, but will have to obtain the remaining equity
from outside partners.


                                           Questions


Questions for Real Estate Finance and Investments

1. Sears is going to retain ownership of TBA and Sears will pay the partnership a nominal
   $1/year in rent for the space. Sears will pay the partnership $30.75psf in rent for the
   renovated first floor space. Whole Foods will not require any renovations and will pay the
   partnership $10.35psf rent. In addition, Phase I construction/renovation is expected to
   provide rental income from the speculative office space and from some parking (Exhibit 2).
   Phase II construction is expected to provide revenues from the retail space located inside the
   JW Marriott Hotel. The improved hotel site will be sold to a hotel developer at cost.
   Consequently, revenues from the rooms located in the completed hotel property should be
   excluded from the valuation of the project (but the retail space inside the hotel should be
   included). Phase II is also expected to provide revenues from Janus, from some retail space
   and from parking. Phase III is expected to provide revenues from condominium sales, from
   retail space, and from more parking. Using the market cap rates in Exhibit 9, what is the
   market value of the completed proposed development? What happens to the estimated
   market value of the completed project if cap rates increase (or decrease) by 100bp; by 200bp
   and by 300pb across property types?

2. Develop a quarterly pro-forma that illustrates the timing and amounts of the project‟s
   expected cash flows. Assume that the shared costs are incurred uniformly over the first 12
   months of the development and that the land and shared costs are allocated to the beginning
   of each development phase. Also assume that soft costs and hard costs are distributed
   uniformly over each Phase‟s development period. Explicitly state any other assumption you
   need to make.

3. In addition to Sears‟ $14.2M land contribution, the City‟s $4.7M payment for parking and
   Randy‟s $5M, how much equity does Randy have to raise for this project?

4. Ignoring the existing zoning regulations, does the proposed mix of uses maximize the value
   of the land? If not, what mix of uses would you propose?




                                                6
                                                  Exhibit 1
                                           Shared Project Expenses

Shared Project Level Costs                                                                         Cost
     Soft Costs
           TBA Lost Profits                                                                       $550,000
           Sears Predevelopment Expenses                                                          $500,000
           Lifestyle Retail Developer Predevelopment Expenses                                      $20,204
           Entitlement Fees                                                                       $300,000
                      Nichols                                                        $200,000
                      Sears                                                          $100,000
           Architecture/Engineering
                      Initial Conceptual Design                                                     $59,132
                      Initial Design Support                                                        $69,908
                      Sears Modifications/Coordination                                            $162,000
                      Design Support                                                                $51,000
           Legal & Consultants                                                                    $200,000
           Offsite Requirements (CCN)                                                             $150,000
           Total Soft Costs                                                                      $2,062,244

     Hard Costs
           Additional Parking                           197   spaces     $20,795                 $4,096,538
           Modifications to Sears
                      Loading Dock                                                                $600,000
                      Interior Improvements/Fire Rated Wall                                       $300,000
                      Corner Entrance                                                             $100,000
           Total Hard Costs                                                                      $5,096,538

     Total Shared Project Level Costs                                                            $7,158,782


     Project Level Costs Allocated on Per Square Foot Basis
                                                Square
                                                  Feet      Share      Hard Cost     Soft Cost   Total Cost
           Phase I Retail                         16,222     3.31%       $168,730      $68,274    $237,005
           Phase I Office                          5,572     1.14%        $57,956      $23,451      $81,407
           Janus Office                          170,315    34.76%     $1,771,503     $716,814   $2,488,317
           Janus Retail                           12,224     2.49%       $127,146      $51,448    $178,594
           Office Retail -- 1st and Clayton       12,328     2.52%       $128,228      $51,886    $180,113
           Hotel Retail                           22,177     4.53%       $230,670      $93,338    $324,008
           Hotel JV                              141,000    28.78%     $1,466,588     $593,435   $2,060,022
           West of Clayton Lane Retail            63,731    13.01%       $662,887     $268,228    $931,115
           Residential                            46,420     9.47%       $482,830     $195,370    $678,200
           Total                                 489,989 100.00%       $5,096,538   $2,062,244   $7,158,782




                                                        7
                                              Exhibit 1
                                       Shared Project Expenses


Shared Site Costs                                                                       Cost
    Soft Costs
      Site Design                                                                      $289,000
      Temporary Parking                                                                $200,000
      Survey of Adjacent Buildings                                                      $25,000
      Art                                                                              $150,000
      Total Soft Costs                                                                 $664,000

    Hard Costs
         Streets                                                                      $2,960,000
         1st and Clayton Crossing                                                        $15,000
         Demo of TBA                                                                     $54,000
         TBA Remediation Cost                                                            $57,000
         Drainage Work                                                                 $250,000
         Utility Relocation
                 Utility Contractor                                                    $671,000
                 Xcel                                                                  $176,319
                 Quest                                                                    $5,264
         Total Hard Cost                                                              $4,188,583

    Total Shared Site Costs                                                           $4,852,583

    Site Costs Allocated on Per Square Foot Basis
                                    Square
                                      Feet    Share          Hard Cost    Soft Cost   Total Cost

    Phase I Retail                      16,222     3.31%      $138,671     $21,983     $160,654
    Phase I Office                       5,572     1.14%        $47,631     $7,551       $55,182
    Janus Office                       170,315    34.76%     $1,455,907   $230,799    $1,686,707
    Janus Retail                        12,224     2.49%      $104,495     $16,565     $121,060
    Office Retail -- 1st and Clayton    12,328     2.52%      $105,384     $16,706     $122,090
    Hotel Retail                        22,177     4.53%      $189,576     $30,053     $219,629
    Hotel JV                           141,000    28.78%     $1,205,313   $191,074    $1,396,387
    West of Clayton Lane Retail         63,731    13.01%      $544,793     $86,364     $631,157
    Residential                         46,420     9.47%      $396,813     $62,905     $459,718
    Total                              489,989   100.00%     $4,188,583   $664,000    $4,852,583




                                                  8
                                               Exhibit 2
                                                Phase I


                                                                              Total
Development ProForma                Quantity            Unit   Unit Cost    Expense
 Land Cost Allocation                                                       $1,020,000
 Share of Project Costs                                                      $318,412
 Site
    Site Development                                                         $215,836
    Utility Relocation
        Utility Contractor                                                         $0
        Xcel                                                                       $0
        Qwest                                                                      $0
    Total Site                                                               $215,836

 Soft Costs
   Architecture                                                              $370,000
   Engineering/Consulting                                                    $270,000
   Design Reimburasables                                                       $50,000
   Space Planning                                                               $9,194
   RE Comm. (Office - Broker)                                                  $27,860
   RE Comm. (Office - In House)                                                $13,930
   RE Comm. (Retail)                                                         $145,998
   Construction Loan Fee                                                     $229,500
   Signage & Equipment                                                       $100,000
   Construction Interest                                                     $700,000
   City Fees, Utility Tap, Taxes                                             $150,000
   Closing, Legal, Appraisal                                                 $150,000
   Marketing                                                                   $25,000
   Insurance                                                                 $150,000
   Letter of Credit                                                          $313,000
   Contingency                     % of site +    hard costs       3.43%     $488,673
   Development Fee/C.M.            % of devel.    cost             3.00%     $580,781
   Total Soft Cost                                                          $3,773,936

 Hard Costs
   Structured Parking
       Partnership                         233    spaces         $17,204    $4,008,532
       City of Denver                      199    spaces         $23,618    $4,700,000
       Below Grade                          26    spaces         $21,827     $567,502
       Total Parking                       458    spaces         $20,883    $9,276,034

    Construction Costs
       Sears Improvements               74,920    gsf             $32.38    $2,425,910
       Tire/Battery/Auto                21,789    gsf             $20.65     $449,943
       Tenant Finish
          Office                         5,572                    $25.00     $139,300
          Retail                        16,222                    $27.33     $443,347
          Tire/Battery/Auto             21,789                    $33.93     $739,301
          Fixture Allowance                                                  $557,352
    Total Hard Costs                                                       $14,031,186

 Total Project Cost                                                        $19,359,370

                                                  9
                                                  Exhibit 2
                                                   Phase I

Stabilized Cash Flow Pro Forma

         INCOME                                    Space               Rent            Revenue
               Retail
                     Sears Basement                        21,789                              $1
                     1st Floor                             16,222       $30.75          $498,827
                     2nd Floor                                  0                              $0
               Whole Foods (existing)                      53,126       $10.35          $549,854
               Spec Office                                  5,572       $20.38          $113,557
               Parking Structure                              233      $108.19          $302,499
               Total Income                                                            $1,464,738

         EXPENSES

                 Retail Vacancy                            5.00%    of gross income      $34,675
                 Office Vacancy                            5.00%    of gross income       $9,021
                 Reserve                                    $0.10   psf                   $9,671
                 Total Expenses                                                          $53,366

         NET OPERATING INCOME                                                          $1,411,372

Notes:              Space is per rentable square foot; parking is per parking space
                    Rent is NNN; parking revenue is per month
                    Operating expenses are estimated at $12 psf

Financing

         City of Denver Parking                                                        $4,700,000

         Debt
                 Construction Loan                                                    $11,169,737
                 Permanent Loan                                                       $12,500,000




                                                      10
                                            Exhibit 3
                                 Janus Office Building and Retail

                                                                                     Total
Development ProForma                       Quantity        Unit       Unit Cost    Expense
 Land Cost Allocation                                                              $6,390,000

 Share of Project Costs                                                            $2,847,024

 Site
    Site Development                                                               $1,929,856

 Soft Costs
    Architecture                                                                   $1,550,000
    Design Reimburasables                                                           $124,000
    Space Planning                                                                  $314,604
    RE Comm. (Janus - Broker)                                                      $1,101,114
    RE Comm. (Janus - In House)                                                     $235,953
    RE Comm. (Retail)                                                               $196,416
    Construction Loan Fee                               of loan amt       1.36%     $635,120
    Signage                                                                         $100,000
    Construction Interest                                                          $3,000,000
    City Fees, Utility Tap, Taxes                                                   $750,000
    Closing, Legal, Appraisal                                                       $450,000
    Warranty Reserve                                                                  $50,000
    FF&E                                                                              $50,000
    Marketing                                                                         $50,000
    Insurance                                                                       $300,000
    Contingency                          %of shared + soft + hard         6.86%    $3,468,719
    Development Fee/C.M.                 %of development costs            2.79%    $1,687,128
    Total Soft Cost                                                               $14,063,054

 Hard Costs
   Structured Parking                            500   spaces           $21,663   $10,831,500

    Construction Costs
      Building Cost - Office                 170,315   gross sf          $92.11   $15,687,715
      Building Cost - Retail                  24,552   gross sf          $60.00    $1,473,120
      Janus Upgrades                         157,302   rentable sf       $24.76    $3,894,798
      Total Construction Costs                                                    $21,055,632

    Tenant Finish
      Office                                 157,302   rentable sf       $10.24    $1,610,772
      Retail
         Janus Office                         12,224   rentable sf       $70.98     $867,660
         1st and Clayton                      12,328   rentable sf       $70.98     $875,041
      Total Tenant Work                                                            $3,353,473

    Total Hard Costs                                                              $35,240,606

 Total Project Cost                                                               $60,470,540




                                               11
                                        Exhibit 3
                             Janus Office Building and Retail


Stabilized Cash Flow Pro Forma

         INCOME                        Space           Rent                            Revenue
               Retail
                    1st Floor           19,413             $27.30   NNN                 $529,975
                    2nd Floor            5,139             $20.00   NNN                 $102,780
               Janus Office            157,302             $26.37   NNN                $4,148,054
               Janus Parking               692             $90.00                       $747,360
               Storage                   2,000             $12.00   NNN                   $24,000
               Total Income                                                            $5,552,169

         EXPENSES

                Retail Vacancy           5.00%    of gross income                        $46,369
                Parking Operator         8.00%    of income                              $59,789
                Reserve                   $0.10   psf                                    $18,185
                Total Expenses                                                          $124,343

         NET OPERATING INCOME                                                          $5,427,825

Notes:              Space is per rentable square foot; parking is per parking space
                    Rent is NNN; parking revenue is per month


Financing

         Debt
                Construction Loan                                                     $46,762,122
                Permanent Loan                                                        $52,500,000




                                             12
                                              Exhibit 4
                                             Hotel Retail


Development ProForma
                                                                                        Total
                                                 Quantity       Unit      Unit Cost   Expense
      Land Cost Allocation                                                            $1,410,000

      Share of Project Costs                                                           $324,008

      Site
             Site Development                                                          $219,640

      Soft Costs
             Architecture                                                              $210,000
             Design Reimburasables                                                       $16,800
             RE Comm. (Retail - Broker)                                                $199,593
             Construction Loan Fee                          of loan amt       5.00%    $215,000
             Signage                                                                     $50,000
             Construction Interest                                            6.60%    $170,280
             City Fees, Utility Tap, Taxes                                               $44,000
             Closing, Legal, Appraisal                                                   $50,000
             Insurance                                                                   $75,000
             Contingency                         % of shared+soft+hard        4.63%    $214,661
             Development Fee/C.M.                % of development costs       3.00%    $186,999
             Total Soft Cost                                                          $1,432,333

      Hard Costs
            Construction Costs
                     Building Cost - Office        22,177   gross sf         $83.92   $1,861,094
                     Total Construction Costs                                         $1,861,094

             Tenant Finish
                      Tenant                       22,177   rentable sf      $54.15   $1,200,885
                      Total Tenant Work                                               $1,200,885

             Total Hard Costs                                                         $3,061,978

      Total Project Cost                                                              $6,447,959




                                                 13
                                                     Exhibit 4
                                                    Hotel Retail


Stabilized Cash Flow Pro Forma

         INCOME                                     Space                Rent             Revenue
               Retail
                         1st Floor                          13,274        $43.11    NNN    $572,242
                         2nd Floor                           8,903        $22.00    NNN    $195,866
                Total Income                                22,177                         $768,108

         EXPENSES

                Retail Vacancy                                5.00%    of gross income      $51,712
                Reserve                                        $0.10   psf                   $2,218
                Total Expenses                                                              $53,929

         NET OPERATING INCOME                                                              $714,179

Notes:                  Space is per rentable square foot; parking is per parking space
                        Rent is NNN; parking revenue is per month




Financing

         Debt                                                                             $4,506,558
                Construction Loan                                                         $6,320,000
                Permanent Loan




                                                         14
                                              Exhibit 5
                                              Hotel JV


                                                                                   Total
Development ProForma                          Quantity         Unit   Unit Cost   Expense
  Land Cost Allocation                                                                   $0

  Share of Project Costs                                                          $2,060,022

  Site Development                                                                $1,396,387

  Soft Costs
    Architect Fee                                                                  $150,000
    Construction Interest                                                                $0
    Development Fee/C.M.                                                  3.00%          $0
    Total Soft Cost                                                                $150,000

  Hard Costs
    Parking                                           100   spaces      $21,663   $2,166,304
    Construction Costs
        Structural and General Conditions                                         $1,138,831
    Total Hard Costs                                                              $3,305,135

  Total Project Cost                                                              $6,911,544

Property Value: Sold @ cost because neighborhood wanted a hotel.

     Construction Costs to Developer
        Land Allocation                                                                   $0
        Share of Project Costs                                                    $2,060,022
        Site Development                                                          $1,396,387
        Parking                                                                   $2,166,304
        Structural and General                                                    $1,138,831
        Shelby/Brenneman Fee                                                       $150,000
        Total                                                                     $6,911,544

Financing   sold to hotel developer at cost                                       $6,911,544
            partnership equity                                                            $0




                                                 15
                                                   Exhibit 6
                                          West of Clayton Lane Retail


Development ProForma
                                                                            Unit        Total
                                               Quantity           Unit      Cost      Expense
     Land Cost Allocation                                                             $3,820,000

     Share of Project Costs                                                            $931,115

     Site
            Site Development                                                           $631,157

     Soft Costs
          Architecture                                                                 $510,000
          Design Reimburasables                                                          $40,800
          RE Comm. (Retail Broker)                                                     $637,310
          Construction Loan Fee                            of loan amt      1.25%      $228,750
          Signage                                                                        $85,399
          Construction Interest                                             6.50%      $810,000
          City Fees, Utility Tap, Taxes                                                $300,000
          Closing, Legal, Appraisal                                                    $150,000
          Marketing                                                                    $100,000
          Insurance                                                                    $150,000
          Contingency                         % of shared+site+soft+hard    3.11%      $611,357
          Development Fee/C.M.                % of development cost         3.00%      $694,312
          Total Soft Cost                                                             $4,317,928

     Hard Costs
         Structured Parking                         177    spaces          $21,663    $3,834,358

            Construction Costs
                    Building Cost - Retail       63,731    gross sf         $79.29    $5,053,231
                    Total Construction
                    Costs                                                             $5,053,231

            Tenant Finish
                    Crate & Barrel               37,175    rentable sf      $80.70    $3,000,023
                    Retail                       26,556    rentable sf      $58.59    $1,555,916
                    Total Tenant Work                                                 $4,555,939

            Total Hard Costs                                                         $13,443,528

     Total Project Cost                                                              $23,143,728




                                                      16
                                                Exhibit 6
                                       West of Clayton Lane Retail


Stabilized Cash Flow Pro Forma

         INCOME                                            Space          Rent                   Revenue
              Retail
                       Crate and Barrel 1st Floor             14,983      $38.00   NNN            $569,354
                       Crate and Barrel 2nd Floor             22,192      $27.00   NNN            $599,184
                       1st Floor (spec)                       26,556      $32.26   NNN            $856,697
                Sears                                        129,787                       $1           $1
                Parking
                        West Parking Garage                        495    $83.27                  $494,624
                        Clayton Street                              14   $218.75                    $36,750
                        East Garage                                                                 $43,800
                Total Income                                                                     $2,600,409

         EXPENSES

                Retail Vacancy                                5.00%      of gross income          $139,500
                Slippage                                                                           $50,000
                Reserve                                        $0.10     psf                       $19,352
                Total Expenses                                                                    $208,852

         NET OPERATING INCOME                                                                    $2,391,557

Notes:                 Space is per rentable square foot; parking is per parking space
                       Rent is NNN; parking revenue is per month


Financing

         Debt                                                                                   $18,300,000
                Construction Loan                                                               $21,160,000
                Permanent Loan




                                                      17
                                                       Exhibit 7
                                                      Residential

Residential ProForma
                                                                          Market
                                                         Number of       Value per                Sales
      SALES REVENUE                                        Units           Unit                  Revenue

              2nd Floor One Bdrm                                     5    $575,000                $2,875,000
              2nd Floor Two Bdrm                                     9    $675,000                $6,075,000
              3rd Floor One Bdrm                                     4    $650,000                $2,600,000
              3rd Floor Two Bdrm                                     7    $775,000                $5,425,000
              Parking Revenue                                        6     $35,000                 $210,000
              Reimbursed Marketing                                                                   $46,000
              Total Income                                                                       $17,231,000

                                                                                        Unit       Total
      EXPENSES                                            Quantity         Unit         Cost      Expense
           Land Cost                                                                              $1,380,000
           Shared Project Expenses                                                                 $678,233
           Hard Costs
                     Site                                                                          $459,741
                     Building                                  46,420       gross sf      $179    $8,309,180
                     Parking                                       50        spaces    $21,663    $1,083,150
                     Total Hard Costs                                                             $9,852,071

              Soft Costs
                        A&E                                              hard costs     4.80%      $472,899
                        Design Reimbursables                                 A&E        8.00%        $37,832
                        Insurance                                                                    $60,000
                        City Fees, Utilities, Taxes                                                  $75,000
                        Closing, Legal, Appraisal                                                  $100,000
                        Signage                                                                      $30,000
                        Marketing                                                                    $50,000
                        Construction Loan Fee                                                      $108,750
                        Construction Interest                              loan amt     8.25%     $1,057,475
                        FF&E                                                                       $150,000
                        HOA dues                                                                     $50,000
                        Contingency                                     hard costs      7.00%      $689,645
                        Development Fee                % of shared+site+hard+soft       3.00%      $414,801
                        Total Soft Costs                                                          $3,296,402

              Total Development Costs                                                            $15,206,706
              Sales Commissions                                                                   $1,037,730
              Closing Costs                                                                        $129,716
              Total Expenses                                                                     $16,374,152

      PROFIT                                                                                       $856,848

Financing
       Debt                                                                                      $12,817,876




                                                          18
                                  Exhibit 8
                                  Parking

Parking Summary

                                    Parking    Parking Ratio        Required
                                     GFA       SqFt per Stall       Spaces
Phase I -- Existing Buildings
     Sears                           119,496              300            398
     Whole Foods                      40,104              300            134
     TBA                               3,600              300             12
     CCN North BID                                                       199
     Surface Parking                                                   (147)
     Clayton Street                                                     (14)
     Subtotal                                                            582

Phase I -- New Construction
     Parking Structure -- Retail     16,222               300             54
     Parking Structure -- Office       5,572              300             19
     Subtotal -- Phase I New Construction                                 73

      Total Phase I                                                     655


Phase II -- New Construction
     WOC Retail
             1st Floor                41,539              300           138
             2nd Floor                22,168              300            74
     Residential
             Lobby                     1,170
             Floors 2-4               45,250                    2         50
     Hotel
             1st Floor Retail         13,274              300            44
             2nd Floor Retail          8,903              300            30
             Hotel                   141,000              600           235
     Janus
             Office Retail            12,224              300             41
             Lobby/Service             2,268              300              8
             Building
             Lobby/Service             6,479              300            22
             Office Floors 2-7       161,568              300           539
     1st & Clayton Retail
             1st Floor                 7,189              300             24
             2nd Floor                 5,139              300             17
     Total Phase II                                                    1,221

Required Spaces
       Total Required by Zoning                                        1,875
       - Shared Parking Credit                                         (394)
       + City of Denver                                                  199
Total Spaces Required                                                  1,680




                                     19
                                        Exhibit 8
                                        Parking



Parking Summary

Parking Supply                                                              Spaces

         New Parking
             Phase I                                                                458
             Parking Garage -- East                                                 529
             Parking Garage -- West                                                 495
             Total New Parking                                                    1,482

         Existing Parking
               Whole Foods                                                           147
               Clayton Street                                                         14
               Total Existing Parking                                                161

         Total Parking                                                            1,643


Parking Allocation                              Required        Built      Reduction
         Janus & Retail                               650          500            (150)
         Hotel Retail                                  74              0            (74)
         Hotel                                        235          100            (135)
         WOC Retail                                   212          177              (35)
         Residential                                   50             50               0
         Shared Parking Credit                      1,221          827             -394

Parking Costs                                       spaces     unit cost   total cost
         Public Financing: CCN BID                       199    $23,618     $4,700,000
         Partnership Financing
               East Garage                               529   $22,441     $11,871,289
               West Garage                               495   $20,832     $10,311,840
               Total                                   1,024   $21,663     $22,183,129




                                           20
                                  Exhibit 9
                              Commercial Financing


                                             Janus Office and
Commercial Properties         Phase I             Retail        Hotel Retail   WOC Retail

      ProForma Cap Rate           8.50%                8.75%          8.50%            8.50%

      Construction Loan
             Amount          $11,169,737         $46,762,122     $4,506,558       $18,300,000
             Variable Rate        6.50%               6.00%          6.60%             6.50%
             Target DCR             1.25                1.12           1.25              1.25
             Target LTV             75%                 75%            75%               75%

      Permanent Loan
            Amount           $12,500,000         $52,500,000     $6,320,000       $21,160,000
            Fixed Rate            8.00%               7.00%          7.50%             7.00%
            Term in Years             30                  30             30                30
            Target DCR              1.25                1.10           1.25              1.25
            Target LTV              75%                 75%            75%               75%




                                        21

								
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