PROJECT
HARBORLINE

Executive Summary

Meridian Peak Partners LLC (the “Sponsor”) has an executed purchase and sale agreement, dated June 30, 2026PSA §1.6, to acquire the Harborline Building — a vacant 84,000-SFAssumptions!B4, 1988Assumptions!B6-built tilt-wall warehouse with 21-footAssumptions!B7 clear height on 4.60 acresAssumptions!B5 in southeast Austin — for $10,800,000Assumptions!B12, or $128.57/SFLoan Summary!D29. The business plan converts the building through a 7-monthAssumptions!B21 program into 77 small-bay commercial storage units (66,300 NRSF) and nine office/flex suites (8,700 SF)OM · Unit Mix at a budgeted cost of $2,900,000Assumptions!B20. With closing costs of $960,600Assumptions!B17, total capitalization is $14,660,600Debt Sizing!B8, or $174.53/SFLoan Summary!D32. Committee approval is requested before the due-diligence period expires at 5:00 p.m. CT on July 30, 2026PSA §1.5, after which the full $1,000,000 deposit becomes non-refundablePSA §1.4.

Basis. The contract price is 90% of the $12,000,000Debt Sizing!B11 as-is appraisal of the vacant building, and the all-in basis of $174.53/SF sits below the $241.00Comps!E21–$260.00Comps!E22/SF range paid for stabilized small-bay assets in the Austin sale-comp set. On the underwritten stabilized value the project creates 37.2%Loan Summary!B39 of value over its total basis.

Underwriting discipline. This memorandum is generated from the Sponsor's underwriting workbook, not from the seller's marketing book. The model rebuilds revenue from the bottom up — its FY2 small-bay rent line of $1,995,000CF - Base!C7 equates to $30.09/NRSF, roughly 7% below the $32.38/SF scheduled in the offering memorandumOM · Revenue Assumptions — and then applies a further 9.0%Assumptions!B24 underwriting haircut to sponsor effective gross income, with revenue and expenses grown at 3.0%Assumptions!B25 per year. On that basis the plan stabilizes in FY3 at $1,357,839CF - Base!D31 of net operating income (a 63.2%CF - Base!D32 NOI margin), versus the approximately $1,292,900OM · Investment Summary the seller markets on an un-haircut basis by Year 2.

Financing. Bluebonnet Commercial Bank has term-sheeted a $9,529,390Debt Sizing!B20 bridge facility at 65% of total costAssumptions!B42 — $6,480,000Debt Sizing!B15 funded at close (60%Assumptions!B43 of purchase) and $3,049,390Debt Sizing!B16 of future funding for capex and carry — priced at 1M Term SOFR + 3.75%SOFR!B5 with a rate cap purchased at close, for an initial term of 12 months plus two 6-month extensions. At the forward-curve all-in rate of 7.73%SOFR!E43, stabilized FY3 coverage is 1.84xCF - Base!D36 interest-only and stabilized LTV is 47.4%Debt Sizing!B22.

Returns and downside. Stabilized yield on cost is 9.26%CF - Base!D31 ÷ Debt Sizing!B8 against a 6.75%Assumptions!B36 underwritten exit capitalization rate, producing a stabilized value of $20,116,127CF - Base!B43 — profit at exit of $5,455,527CF - Base!B43 − Debt Sizing!B8 and 1.37xCF - Base!B43 ÷ Debt Sizing!B8 coverage of total cost. The workbook does not carry a levered IRR or equity-multiple computation, so returns are presented on the measures the model actually produces. If the conversion fails outright, the bear-case industrial re-lease value of $12,406,625CF - Bear!B26 still covers the loan 1.30xCF - Bear!B26 ÷ Debt Sizing!B20. The Committee is asked to approve with conditions (Section 10).

Transaction & Parties

Parties

Key contract terms

Timeline to close

Diligence flag: the underwriting carries the site at 4.60 acresAssumptions!B5 while the OM markets 5.50 fenced acres; the survey ordered under the PSA must reconcile the legal description before the deposit goes hard (Section 10, condition 3).

Sources & Uses of Funds

Sources

Uses

Component percentages are shown at one decimal and may not foot to subtotals due to rounding; dollar amounts foot exactly ($10,800,000 + $960,600 + $2,900,000 = $14,660,600; $9,529,390 + $5,131,210 = $14,660,600).

Funding mechanics

The bridge facility funds $6,480,000Debt Sizing!B15 at closing — capped at 60%Assumptions!B43 of the purchase price — with the remaining $3,049,390Debt Sizing!B16 drawn as future funding against conversion capex and carry during the 7-monthAssumptions!B21 program. Sponsor equity of $5,131,210Loan Summary!B25 funds the balance of the purchase price and closing costs at the closing table, so the equity is fully invested before material future-funding draws begin.

In addition to the capitalization above, $650,000Reserves!B7 of reserves — a $500,000Assumptions!B55 interest reserve and a $150,000Assumptions!B56 operating-shortfall reserve — are escrowed with the lender at close, funded from sponsor equity and excluded from the LTC cost basis per the workbook's reserve convention. Reserve adequacy is tested in Section 7.

Business Plan

Conversion scope

The plan demises the vacant warehouse into 77 drive-up small-bay commercial storage units totaling 66,300 NRSF (average unit 861 SF) and builds out 8,700 SF of the north storefront elevation into nine office/flex suitesOM · Unit Mix, within the building's 84,000 SFAssumptions!B4 gross leasable area. Scope is non-structural: interior demising, fourteen new grade-level doors (post-conversion loading of 14 grade-level / 2 dock-highAssumptions!B8), selective climate control, LED lighting, and site security. Hard costs are budgeted at $2,610,000Assumptions!B18 with $290,000Assumptions!B19 of soft costs and contingency — $34.52/SF all-in on GLA.

Schedule

Construction runs 7 monthsAssumptions!B21 from permit issuance; permits have been in review since June 2026 and the OM's construction timeline shows mobilization in late 2026 with substantial completion and first move-ins in spring 2027OM · Timeline. The underwriting's FY1 (twelve months ending 8/31/27CF - Base!B4) therefore blends the construction period and early lease-up at a 50%Scenario Assumptions!B11 average economic occupancy.

Lease-up & occupancy ramp

The plan reaches its 90%Assumptions!B31 stabilized occupancy by FY2 and holds it thereafter. That target is set at the middle of the observed competitive set: the five surveyed Austin small-bay facilities run 86%Operating Comps!C9 to 95%Operating Comps!C7 occupied — a 90.2%Operating Comps!C5:C9 simple average — against a submarket industrial vacancy of 4.8%Assumptions!B29.

Rent posture

The model's small-bay rent line opens at $1,900,000CF - Base!B7 in FY1 and $1,995,000CF - Base!C7 in FY2 — $30.09/NRSF on the 66,300-SF unit pool, versus the OM's scheduled $32.38/SF blended rateOM · Revenue Assumptions. Achieved small-bay lease comps in the Austin set average $28.11Comps!D14/SF/yr SF-weighted across 57,100 SFComps!C14 of executed deals (range $25.50Comps!D9–$33.00Comps!D10), and the comp units are materially larger than Harborline's 861-SF average bay — smaller bays clear higher per-SF rents. The Sponsor's own portfolio has achieved $21.10Operating Comps!C16–$28.75Operating Comps!C15/SF in secondary Texas markets, supporting the Austin premium without relying on it: the 9.0%Assumptions!B24 EGI haircut in Section 5 absorbs roughly the gap between the model rent line and the comp average.

Management plan

The facility will be operated on the Sponsor's existing small-bay platform (six operating assets across San Antonio, Fort Worth, Round Rock, El Paso, Tulsa and WacoOperating Comps rows 13-18) under a management agreement priced in the model at 5% of underwritten EGICF - Base!A22. Underwriting carries dedicated on-site payroll of $118,000CF - Base!B23 in FY1, lease-up marketing of $60,000CF - Base!B25 stepping down to $45,000CF - Base!C25 at stabilization, and ancillary income lines (fees, tenant insurance, truck and equipment rental) totaling $230,000CF - Base!B9 + CF - Base!B10 in FY1. Refinance or sale at stabilization is the exit; both paths are tested in Sections 6 and 8.

Financial Summary — Base Case, FY1–FY5

All figures below are recomputed line-by-line from the workbook's CF - Base tab (fiscal years ending August 31, 2027CF - Base!B4 onward). FY1 and FY2 revenue and expense lines are hard inputs; later years grow at 3.0%Assumptions!B25. Negative amounts in parentheses.

Reading the table

• Haircut discipline. Underwritten EGI equals sponsor EGI less the 9.0%Assumptions!B24 haircut in every year — the model runs the plan on 91%Scenario Assumptions!C4 of the sponsor's revenue. Concessions are carried at 0.5% of gross potential revenue from FY3CF - Base!D13 after larger lease-up concessions in FY1–FY2.
• Expenses. Ten expense lines including real estate taxes of $195,000CF - Base!B21 in FY1 (grown 3.0%/yr) and a management fee computed at 5% of underwritten EGICF - Base!A22. The stabilized 63.2%CF - Base!D32 NOI margin is consistent with small-bay storage operations.
• FY1 carry. FY1 NOI of $365,110CF - Base!B31 covers only 0.50xCF - Base!B36 of interest computed conservatively on the fully-funded balance; actual FY1 interest on a draw basis is $658,007Reserves!B17, and the funded interest reserve carries the gap (Section 7).
• Debt service basis. Interest-only at the forward all-in rates of 7.62%SOFR!C43 (FY1), 7.72%SOFR!D43 (FY2) and 7.73%SOFR!E43 (FY3 onward) on the full $9,529,390Debt Sizing!B20 commitment.

Scenario Analysis

The workbook carries three fully-built cash-flow scenarios on identical mechanics — base and bull on the conversion plan, bear on outright plan failure with the building re-let as bulk industrialScenario Assumptions!B6 at the $9.75Assumptions!B28/SF NNN market rent after twelve months of downtime.

Bull case

The bull case runs the sponsor plan without haircut (100%Scenario Assumptions!C5 of sponsor EGI), a faster ramp to 95%Scenario Assumptions!E12 occupancy, and a 6.50%Assumptions!B38 exit — stabilized NOI of $1,685,117CF - Bull!D31 and value of $25,924,870CF - Bull!B43, an 11.49% yield on cost. The Committee should treat this as upside calibration, not underwriting.

Bear case — the credit backstop

The bear case abandons the conversion entirely: twelve months dark, then lease-up to 93%Scenario Assumptions!E13 as bulk industrial at market rent. Even so, FY3 industrial NOI of $775,414CF - Bear!D14 capped at the 6.25%Assumptions!B32 industrial cap rate produces $12,406,625CF - Bear!B26 of value — recovering 84.6%CF - Bear!B26 ÷ Debt Sizing!B8 of total cost, covering the loan 1.30xCF - Bear!B26 ÷ Debt Sizing!B20 (76.8%Debt Sizing!B24 LTV), and carrying debt service at 1.05xCF - Bear!D20 by FY3 against a 1.00xAssumptions!B47 sizing floor. The equity loss in that scenario, ($2,253,975)CF - Bear!B26 − Debt Sizing!B8, is 43.9%(Debt Sizing!B8 − CF - Bear!B26) ÷ Loan Summary!B25 of invested equity — painful but not a wipeout, because the day-one basis is 90%Assumptions!B12 ÷ Debt Sizing!B11 of as-is appraised value.

Bear FY1 NOI is ($8,400)CF - Bear!B14 during downtime — the funded reserves (Section 7) and the completion/carry package in the loan documents are sized with this in view.

Debt Summary — Bluebonnet Bridge Facility

Facility terms

Leverage profile

Sizing tests (workbook Debt Sizing tab)

All five sizing tests pass as computed on the workbook's Debt Sizing tab (rows 28–32). The binding constraints are loan-to-cost (at its 65% maximum exactly) and as-is LTV (79.4% against an 80% ceiling) — the loan cannot be upsized without breaching both.

Financial Covenants & Reserves

Covenant package (draft loan documents, Article 7)

Coverage on each basis — kept separate

Model basis (interest-only, forward curve, fully-funded balance): stabilized FY3 DSCR of 1.84xCF - Base!D36 and debt yield of 14.2%CF - Base!D37 ($1,357,839CF - Base!D31 ÷ $9,529,390Debt Sizing!B20).

Covenant basis (stipulated 10.55% constant, trailing NOI): the same stabilized FY3 NOI tests at 1.35xCF - Base!D31 ÷ Cov Book · Tests!B10 against the 1.25x minimum — $101,150CF - Base!D31 − 1.25 × Cov Book · Tests!B10 (7.4%) of annual NOI headroom. During lease-up the trailing-twelve debt-yield test is the tight one: the covenant workbook models the first tested trailing-twelve NOI at $914,821Cov Book · Tests!B13, a 9.60%Cov Book · Tests!D22 debt yield against the 9.0% floor — only 0.60% of headroom until stabilized quarters season into the trailing window. The covenant commencement date must therefore sit after the projected FY2 ramp (condition 1, Section 10).

Reserves & carry adequacy (workbook Reserves tab)

FY2 cash flow after debt service turns positive at $572,273Reserves!B26, so the funded reserves are only required through the construction-and-lease-up year. The workbook's adequacy flagReserves!B28 reads ADEQUATE with a 55% cushion over the modeled FY1 shortfall.

Exit & Valuation

Exit cap rate rationale

The underwriting exits at a 6.75%Assumptions!B36 capitalization rate on stabilized FY3 NOI. That is deliberately wide of the market evidence: the three stabilized small-bay sales in the comp set cleared at 6.50%Comps!F20 (8000 Cameron Rd, Mar-26), 6.70%Comps!F21 (12800 Harris Ridge Blvd, Feb-26) and 6.20%Comps!F22 (4500 S Congress Ave, Aug-25), and the full six-sale set — including as-is industrial trades — averages 6.53%Comps!F24. The underwritten exit therefore carries a 22 bps cushion to the blended comp average, and the seller's own marketing implies a materially richer $20.7M at a 6.25% cap on un-haircut NOIOM · Investment Summary.

On dollars per foot the exit is likewise inside the evidence: $239.48CF - Base!B44/SF stabilized value versus $245.00Comps!E20, $241.00Comps!E21 and $260.00Comps!E22/SF paid for the stabilized small-bay comparables.

Exit value sensitivity (base-case FY3 NOI of $1,357,839CF - Base!D31)

Sensitivity computed exactly as FY3 NOI divided by the stated cap rate: $1,357,839 ÷ 6.50% = $20,889,824; ÷ 6.75% = $20,116,127; ÷ 7.00% = $19,397,694.

Margin of safety

Because stabilized yield on cost is 9.26%CF - Base!D31 ÷ Debt Sizing!B8, the exit cap rate would have to widen roughly 251 bps — to 9.26%, nearly 40% beyond the worst observed comp — before stabilized value fell below the project's $14,660,600Debt Sizing!B8 total cost. Below the conversion outcome entirely sits the industrial floor: $12,406,625CF - Bear!B26 of bear-case value at the 6.25%Assumptions!B32 industrial cap, and a $12,000,000Debt Sizing!B11 as-is appraisal of the vacant building today — 111%Debt Sizing!B11 ÷ Assumptions!B12 of the contract price before a dollar of capex.

Exit paths

• Sale at stabilization (primary): marketed to the small-bay/self-storage institutional bid that took the three stabilized comps; FY3 timing aligns with the fully-extended loan maturity.
• Refinance (secondary): at the 47.4%Debt Sizing!B22 stabilized LTV and 14.2%CF - Base!D37 stabilized debt yield, a takeout at conventional proceeds retires the bridge without an equity paydown even at materially wider refinancing spreads.

Risks & Mitigants

Ranked in the Committee's customary order of expected severity. Each mitigant cites the specific workbook cell that carries it; none relies on adjustments outside the model.

Recommendation & Conditions

Underwriting recommends that the Committee approve the transaction with conditions: a below-appraisal entry basis (90%Assumptions!B12 ÷ Debt Sizing!B11 of the $12,000,000Debt Sizing!B11 as-is value), a 9.26%CF - Base!D31 ÷ Debt Sizing!B8 stabilized yield on cost built on haircut revenue, $5,455,527CF - Base!B43 − Debt Sizing!B8 of modeled value creation, and a bear case that still covers the loan 1.30xCF - Bear!B26 ÷ Debt Sizing!B20 justify proceeding; the open items below are executable within the diligence window and none reprices the deal if resolved as conditioned.

Conditions to approval

1. Financing executed before the deposit goes hard. Bluebonnet facility documents executed at $9,529,390Debt Sizing!B20 on term-sheet economics (65% LTCAssumptions!B42, 1M SOFR + 3.75%SOFR!B5, 12+6+6), with the covenant commencement date set after the FY2 ramp and evidence of the rate-cap purchase, in each case before the additional deposit is posted on July 31, 2026PSA §2.3(b) — the PSA contains no financing contingencyPSA Art. 6.
2. Construction buy-out. GMP contract with Corvana Build LLC at hard costs not exceeding $2,610,000Assumptions!B18 with customary retainage, liquidated delay damages and completion support; the Corvana development services agreement conformed to the underwritten development/CM fee of $145,000Assumptions!B16 (5% of capex) and counsel's owner-review findings (termination, fee-acceleration and indemnity provisions) resolved before executionOwner Review; DSA.
3. Diligence clean by July 30, 2026PSA §1.5. Satisfactory PCA and Phase I; survey reconciling the underwriting's 4.60-acreAssumptions!B5 site basis with the OM's marketed 5.50 acres; title-policy commitment per PSA §4.6PSA §4.6; estoppels for the three ancillary leases (21,450 RSF)PSA Ex. B.
4. Appraisal confirmation. Lender's appraisal confirming as-is value of at least $12,000,000Debt Sizing!B11 and a prospective stabilized value holding stabilized LTV at or below 50% versus the 47.4%Debt Sizing!B22 underwritten.
5. Reserves and liquidity at close. $650,000Reserves!B7 of reserves ($500,000Assumptions!B55 interest + $150,000Assumptions!B56 operating) escrowed from equity at closing, and sponsor-level unrestricted liquidity maintained at no less than the $750,000Cov Book · Tests!C23 covenant minimum.

Committee sign-off

For the Investment Committee of Meridian Peak Partners LLC: