George,

Here is a spreadsheet that illustrates the payout of investment and builders 
profit.  Check my math, but it looks like all the builders profit would be 
recouped in the first year of operation.  At permanent financing $1.1 would 
be paid, leaving only .3 to pay out in the 1st year.



Since almost 80% of builders profit is repaid at the same time as the 
investment, I feel the 65/35 is a fair split.  However, as I mentioned 
earlier, I think we should negotiate to layer on additional equity to you as 
part of the construction contract.  

Just to begin the brainstorming on what a construction agreement might look 
like here are a few ideas:

 1.  Fixed construction profit of $1.4 million.  Builder doesn't benefit from 
higher cost, rather suffers as an equity holder.

 2.  +5% equity for meeting time and costs in original plan ($51/sq ft, phase 
1 complete in November)
      +5% equity for under budget and ahead of schedule
      -5% equity for over budget and behind schedule

This way if things go according to plan the final split would be 60/40, but 
could be as favorable as 55/45.  I realize that what is budget and schedule 
must be discussed and agreed upon.

Feel free to call me at home (713)463-8626


Phillip