Yea I went back and read your post again and I think I see where you
put in the present value - within the difference between the 13+
million and the 8+ million.
Very interesting stuff and thanks for posting it.
--- In AsburyPark@yahoogroups.com, "dsher4" <[EMAIL PROTECTED]> wrote:
>
> Or to put really simply, this is a municipal Bond structure.
>
>
>
> --- In AsburyPark@yahoogroups.com, "dsher4" <dsher4@> wrote:
> >
> > the 10% takes all of that into account. Think of this as a bond
> to
> > the investor. Just like people put up a $100 to get a 4%
> guaranteed
> > return from the U.S treasury. Doubling your money requires some
> > risk parameters
> >
> > --- In AsburyPark@yahoogroups.com, "justifiedright"
> > <justifiedright@> wrote:
> > >
> > > The investor would want a discount for present value.
> > >
> > > They aren't going to give you 50 cents now for 50 cents they
are
> > > going to get from a meter 10 years from now, so you can invest
> it
> > > and double the money.
> > >
> > > They may as well invest it and double their money.
> > >
> > >
> > >
> > > --- In AsburyPark@yahoogroups.com, "dfsavgny" <dfsavgny@>
wrote:
> > > >
> > > > --- In AsburyPark@yahoogroups.com, "dsher4" <dsher4@> wrote:
> > > > >
> > > > >
> > > > > The present value of that stream of free cash flows
> (assuming
> > a
> > > 10
> > > > > year deal with a 10% rate of return to the investor would
be
> > > 8.258
> > > > > million. After 10 years the meters would revert back to
the
> > > town's
> > > > > ownership. So using those numbers an investor would be
> > willing
> > > to put
> > > > > up 8.258 million to the town up front for the right to
> collect
> > > 1.344
> > > > > million per year for 10 years. The investor gets a 10%
> > return,
> > > Asbury
> > > > > get's a big up front payment to bridge a budget gap and
the
> > > meters
> > > > > revert back to the town after year 10 so Asbury doesn't
> > mortgage
> > > its
> > > > > future earnings power.
> > > > >
> > > > > Dan S.
> > > > >
> > > >
> > > > Your math only holds true for a short period (no reversionary
> > > > interest) and does not account for appreciation (increase in
> > > parking
> > > > fees). What do you mean by return? IRR or return ON capital
> or
> > cap
> > > > rate - a return OF and ON capital.
> > > >
> > > > There is a difference between YIELD (Y) and CAP (R) rates.
> > Because
> > > R =
> > > > Y - Change in Value, if there is appreciation (increase in
> value
> > as
> > > > there always is - and would be in this case IF the operator
> could
> > > > increase parking fees over the 10-year period), Y (yield,
> > discount,
> > > > interest rate or IRR) is almost always higher than the R
(cap
> > > rate).
> > > >
> > > > Thus, if the investor is looking for an IRR of 10%, the cap
> rate
> > is
> > > > lower. I was going to reply to oaks post that I would think
a
> > cap
> > > rate
> > > > of 6%-8% would be appropriate. Last year it was probably
under
> > 5%.
> > > >
> > > > At 6%, the $1.344M would be worth $22.4M assuming the income
> > stream
> > > > could be capitalized into perpetuity ($1.344/6%). Under
> > something
> > > like
> > > > Oak suggests (75-year term) direct capitalization would be
more
> > > > appropriate than your discounting method, and even that does
> not
> > > > account for an increase in the income over the 10-years. (a
> CAP
> > > rate
> > > > reflects the relationship between a SINGLE estimate of
income
> and
> > > > value, while a YIELD rate is the relationship between a
SERIES
> of
> > > > incomes and value.)
> > > >
> > > > The parking spaces in AP are very valuable but SHOULD not be
> > > leased in
> > > > my opinion, unless on a short-term basis with kickers and
> > sharing
> > > of
> > > > revenues.
> > > >
> > > > Getting the money up front would only makes us blow it.
> > > >
> > >
> >
>
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