As used in the performance data presented herein, the following terms have the following meanings:
“Acquisition Underwriting” reflects estimated cash flows for each investment that were projected based on SRE’s base case business plan, assumptions and cash flow projections for the applicable investment as of the acquisition date.
“Current Yield” is calculated as the net cash flow generated from an investment over the stated period divided by the equity invested in a particular investment.
“Current Projections” represent returns reflecting (i) Realized Value and (ii) Unrealized Value.
“Disposition Date” represents a) for fully realized investments, the actual date realized; b) for partially realized, unrealized or under contract investments, SRE’s assumption of the date in which the investment will be fully realized.
“Exit Cap Rate” represents the capitalization rate for equity or, where applicable, hybrid investments that generate the residual value included in the Unrealized Value.
“Fair Value” represents an estimated fair market value of the unrealized portion of the Invested Capital. These estimated Fair Values are unaudited and subject to change. SRE’s procedures for determining Unrealized Fair Value are determined in accordance with GAAP and the terms of the applicable partnership or limited liability company agreement. Fair values of private investments are determined pursuant to Financial Accounting Standards Codification Topic 820: Fair Value Measurements and Disclosures, effective as of September 15, 2009. Topic 820 establishes a hierarchy for inputs used in measuring fair value, and a substantial majority of SRE’s investments are Level 3 in the hierarchy. Level 3 fair value measurement primarily relies on unobservable inputs for which there is little, if any, market activity for the investment. The inputs into the determination of Fair Value are based upon the best information in the circumstances and may require significant management judgment or estimation and the use of models to value the investment. In most cases, SRE utilizes discounted cash flow (“DCF”) modeling in order to derive a net present value of each investment based on assumptions about the particular investment, the market conditions, and the relative level of risk. The cash flows used in the DCF model are the same Unrealized Value cash flows used to calculate the investment IRR and multiples. The Unrealized Values presented herein may not be indicative of ultimate realizable value. The actual realized return on all unrealized investments will depend on future operating results, the value of the interests at the time of disposition, market conditions at or before the time of disposition and any related transaction costs and the manner of sale, all of which may differ from the assumptions used herein. Market conditions and legal and contractual restrictions on transfer may limit the liquidity of unrealized interests. Accordingly, the actual realized value and rate of return on all unrealized investments may differ materially from the values indicated herein.
The “Fund” or the “Funds” represents Fund I, Fund II, Fund III, Fund IV, or collectively all four Funds or some subset thereof, as applicable.
“Fund Net Returns to the LPs” represent a Fund’s Net IRRs and Net Multiples, which are based on actual or projected, as applicable, capital inflows to and outflows from the Fund. Fund Net Returns to the LPs are calculated using the same assumptions for investments as calculated for Gross IRR, along with actual fees and expenses to date, and projected fees, expenses, and carried interest distributions over the expected life of the applicable Fund. Actual Fund net returns may vary depending on overall timing and size of investments and performance of the applicable Fund.
“Gross Equity Multiple” or “Gross Multiple” represents:
For investment level returns, the sum of Realized Value and Unrealized Value divided by the Invested Capital or Maximum Invested Capital and does not reflect any reduction in returns arising from management fees or other expenses or carried interest distributions. Gross Equity Multiples or Gross Multiples is used for the presentation of investment level returns on both a levered and unlevered basis as limited partners are not able to invest on a deal by deal basis. Fees, expenses, and carried interest are calculated on a total Fund basis for the Funds.
For To-Date Equity Multiple, the sum of Realized Value and Fair Value divided by Invested Capital or Maximum Invested Capital
For Total Gross Levered Multiple, the same methodology outlined above, aggregated across a Fund’s investments.
For Total Unlevered and Fund Total Acquisition Underwriting, the Weighted Average of the investment level returns.
“Gross IRR” is calculated as follows:
For investment level returns, based on the actual capital inflows to and outflows from the particular investment, and does not include management fees, carried interest and certain other Fund expenses, which, if accounted for, would reduce returns and in the aggregate are expected to be substantial. Gross IRRs for investments not fully realized have been calculated by utilizing the Projected Cash Flows used for the GAAP fair value financial statements as of June 30, 2023. Gross IRR is used for the presentation of investment level returns on both a levered and unlevered basis as limited partners are not able to invest on a deal by deal basis. Fees, expenses, and carried interest are calculated on a total Fund basis for the Funds.
For To-Date IRR, IRR is calculated based on the same methodology outlined above, based on the sum of Realized Value and Fair Value.
For Total Gross Levered IRR, IRR is calculated based on the same methodology outlined above, based on cash flows aggregated across a Fund’s investments.
For Total Unlevered and Fund Total Acquisition Underwriting, IRR is calculated based on the Weighted Average of the investment level Gross IRRs.
“Invested Capital” represents a Fund’s equity contributed to an investment to-date, as of June 30, 2023.
“LTC” represents the loan to cost ratio. For Fund level LTC, the calculation is based on the weighted average of each applicable investment.
“Maximum Invested Capital” represents the maximum cumulative invested equity outstanding across the duration of an investment.
“Net Equity Multiple” or “Net Multiple” represents the sum of the Fund’s Realized Value and Unrealized Value divided by the Fund’s Total Equity or Maximum Invested Capital. The Fund’s Realized Value, Total Equity and Maximum Invested Capital include capital contributions for management fees and certain other Fund expenses and carried interest distributions. The actual expenses, fees and carried interest distributions with respect to a particular Fund or investment entity may differ from each other and from those proposed for or expected to be incurred by the Funds.
“Net IRR” is calculated based on the Fund’s Realized Value and Unrealized Value. The Fund’s Realized Value includes capital contributions for management fees and certain other Fund expenses, and projected carried interest distributions. The actual expenses, fees and carried interest distributions with respect to a particular Fund or investment entity may differ from each other and from those proposed for or expected to be incurred by the Funds.
“Projected Cash Flows” represents the sum of all projected estimated cash flows from investments through the Disposition Date for each investment. Estimated cash flows are projected based on SRE’s business plan, assumptions and cash flow projections for the applicable investment as of June 30, 2023 (including property-specific and local real estate market conditions). While such projected performance is based on good faith assumptions that SRE believes are reasonable (including, without limitation, (a) rents, occupancy and other property cash flows, (b) future capitalization rates, (c) interest rates, (d) operating and other expenses, (e) indebtedness, (f) taxes, (g) development costs and plans, (h) legal and contractual restrictions on transfer that may limit liquidity and holding period and (i) timing and manner of expected exit), actual cash flows will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and time and manner of sale, all of which may differ from the underlying assumptions on which the applicable projected performance is based. In addition, there are many risk factors that could cause the assumptions of SRE to prove to be incorrect. These risks therefore could cause the actual performance of the investments to be materially different from the current projected performance. Such risks may include, without limitation: (i) future operating results; (ii) interest rates; (iii) availability and costs of financing; (iv) economic and market conditions; (v) exit date; (vi) increases in construction costs; (vii) force majeure events (e.g., terrorist attacks, extreme weather conditions, earthquakes and war); (viii) supply/demand imbalances; (ix) litigation and disputes relating to investments with joint venture partners or other third parties; (x) changes in zoning and other laws; (xi) inability to obtain necessary licenses and permits; (xii) competition; and (xiii) changes in tax law and tax treatment and disallowance of tax positions. No single methodology or approach is necessarily used in the determination of the value of projected cash inflows or outflows, and such methodologies and methods vary by investment. There are no assurances that any of these projections will be achieved (and actual results will vary from the projections and variations may be significant).
“Realized Value” represents the sum of all historical cash flows from investments through June 30, 2023, including actual distributions and disposition proceeds in respect of the Invested Capital.
“SRE Equity” includes Committed Equity amounts for a Fund and, if applicable, LP and third-party co-investors that a Fund has brought into any investment.
“To-Date” IRR and Equity Multiple are based on the Realized Value and Fair Value of investments.
“Total Equity” includes SRE Equity and any Committed Equity amounts of any joint venture partners, as applicable.
“Total Fund Equity” and “Fund Committed Equity” represents equity committed to an investment by the applicable Fund or Funds, which reflects Invested Capital to date and projected equity contributions. Due to the fact that not all SRE investments are fully funded at closing (for example, loan proceeds or capital improvement projects funded over a two-year period), the Committed Equity represents the maximum equity expected to be contributed to an investment, taking into consideration financing proceeds or debt assumed at acquisition.
“Total Investment Size” and “Total Capitalization” represent the total purchase price plus any anticipated additional capital expenditures for equity investments; the total loan proceeds for debt investments; or the total combination of loan proceeds and other equity investment for hybrid investments. The difference between Total Investment Size and Total Fund Equity is attributable to co-investors and third-party joint venture partners investing in the same investment with the fund, as well as financing proceeds or debt assumed at acquisition.
“Unrealized Value” represents the following:
For Current Projected Returns, Unrealized Value represents Projected Cash Flows.
For To-Date IRR and To-Date Equity Multiple, Unrealized Value represents the Fair Value of an investment.
“Weighted Average” for Fund investments is based on Total Fund Equity.
