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REV: SEPTEMBER 30, 2004

Angus Cartwright III
People
Angus Cartwright, III, an investment advisor, was based in Arlington, Virginia, the home of many members of the DeRight family. In September 2003 his attention focused on the needs of two cousins at different stages of their lives. John DeRight had recently sold his business to a medium-sized public company in exchange for $18 million of the company's stock. He then retired and expected to live comfortably on the $500,000 in dividends paid on the stock plus retirement and other income he had of an equal amount. He felt the need to diversify his investments, however, and planned to sell up to half of his stock and reinvest it in real estate and other investments. Even …show more content…

The buyer would take title upon completion of the construction. For depreciation purposes, the owner would be able to depreciate the full $8.4 million purchase price using a straight-line method over 27.5 years. The gross rentals for the property were estimated at $1,296,000. The projected cash flow from operations after a vacancy allowance of 7% and also reserves, but before financing and leasehold payments, would be $765,700. Cartwright knew that property taxes in
Arlington were about 10% of the gross rents. Since they lived nearby, Cartwright and the DeRights had checked the area closely and concluded that the rental and expense projections were reasonable.
Also under construction in Arlington was The Fowler Building, a two-story, 60,000 square foot office building with 50,000 square feet of rentable space. Leasing for the building had already begun with 60% of the space rented, mostly to small computer and consulting companies. It appeared that in order to get the building rented up quickly, the developer had written leases at below market rents. The Fowler Building was for sale for $9,600,000 million, but the broker was sure it could be purchased for $9,400,000 million. A 10-year, $7.0 million mortgage had been arranged at a 7.5% interest rate, amortized over 25 years. The land was leased for 99 years with annual leasehold payments of $70,000. As with 900 Stony Walk, the buyer of The Fowler Building would