RealAI Pro Forma — Population Agent

The Prato at Midtown doesn't clear at $52.5M under this financing — negative leverage turns a positive unlevered return into a losing levered deal

At $52.5M ($153,509/unit), the T12 in-place NOI of $2,672,376 prices to a 5.09% going-in cap rate — tight for a 1992-vintage garden asset, but consistent with Midtown Atlanta's core-location premium (Walk Score 54, strong transit/bike access, tenant base skewing high-income and highly educated) . The problem is the financing, not the basis: at 65% LTV, a fully-amortizing 10-year Fannie Mae loan prices at 5.82% — 73bps above the going-in yield. That's negative leverage from day one, and a fully-amortizing structure (no IO) compounds it by pulling cash flow into principal paydown rather than distributions.

Metric	Unlevered	Levered
IRR	2.28%	-0.41%1
Equity Multiple	1.21x	0.94x
Avg Cash-on-Cash	4.22%	-11.53%
Total Profit	—	-$1,179,561

The levered IRR of -0.41% against an unlevered 2.28% is a textbook negative-leverage flag — the debt is actively destroying equity value, not enhancing it. Equity multiple is 0.94x: LPs get back less than they put in. Breakeven occupancy comes in at 103% — mathematically impossible on a GPR basis, which tells you the deal leans hard on the property's other income (18.9% of net rent) just to cover OpEx and debt service; going-in DSCR of 1.35x is fine on paper, but Avg DSCR over the hold is a thin 0.52x once average cash flow, not just Year 1, is considered .

What's driving it:

Rent growth is muted. Trailing 24-month in-place rent at the property is flat to slightly down (-0.9% T12) ; the forecast engine's dampened-trend read for the property produces a low-confidence, boom-extrapolation-flagged base case of 0.02%→2.4%/year, ramping to a 10-year average near 1.2% — modest by design given the flat trailing history.
Occupancy is held flat at 95% rather than the engine's raw trend (which degraded to 85% by Year 10 on a low-confidence, boom-extrapolation-flagged fit) — that raw output was overridden with a 95% stabilized assumption as analyst judgment, given trailing 24-month occupancy averaged 96.5% in a market where MSA vacancy sits at ~11.2% .
Exit cap of 5.50% sits 41bps above the 5.09% going-in cap and above the current MSA multifamily cap rate of 5.33% — reasonable given the multifamily cap rate is sitting "rich" (tight) versus its trailing-10-year band , so some normalization into the exit year is the conservative call, not an aggressive one.

The sales comps corroborate the basis gap, not the returns problem. Six recent Midtown/O4W trades ran $191,532–$394,531/unit — all against newer-vintage mid/high-rise product; no true 300+-unit garden comp traded in the metro core in three years. The Prato's $153,509/unit sits well below that set, which is the age/condition discount for a 1992 garden asset, not a red flag on price. The deal's problem is entirely in the capital stack, not the basis.

The lever that fixes this: either the purchase price needs to come down, or the debt needs to be structured with an IO period (the template currently has none) to relieve the amortization drag on cash flow. At the current $52.5M basis and financing terms, this is a No-Go as underwritten — not because the real estate is mispriced, but because the loan is currently structured to lose money relative to holding it unlevered.

One housekeeping note: the Summary tab's "Year Renovated" row is mislinked to the Improvement Rating cell in the underlying template (a pre-existing formula bug, not a data error) — it doesn't touch any return calculation, but you'll see "B-" where "2011" should read if you open that tab.

Comps, market demographics, and tenant intelligence are populated at zip/county/MSA grain in the workbook; a few thin cells (short-term liability tier, county-level permit pipeline, zip/county walk-transit-bike aggregates) are left blank rather than fabricated, per data availability.