|
Two Example Pro-Formas
<br />Based on two recent MUPTE applications, staff created example pro-formas that demonstrate 1)
<br />the lack of feasibility in free market multi-unit developments within the MUPTE boundary and
<br />2) the ability of MUPTE to correct the market imperfection.
<br />
<br />The pro-formas use conservative assumptions about property value growth and market
<br />assumptions about vacancy and operating expenses. The model assumes that assessed property
<br />values increases by 2% per year. The vacancy rate is assumed at 5% of rental income and
<br />operating expenses are estimated at 20% of rental income, both standard assumptions in financial
<br />underwriting.
<br />
<br />Example A: The pro-forma below is based on a nine-unit development with four-bedrooms in
<br />each unit. The rent is $1.00 per square foot.
<br />
<br />Pro-Forma: Without MUPTE
<br />
<br />
<br />Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10
<br />
<br />Rent Income$ 172,800$ 174,528$ 176,273$ 178,036$ 179,816$ 181,615$ 183,431$ 185,265$ 187,118$ 188,989
<br />
<br /> - Vacancy (5%)$ 8,640$ 8,726$ 8,814$ 8,902$ 8,991$ 9,081$ 9,172$ 9,263$ 9,356$ 9,449
<br />
<br /> = Effective Gross Rent$ 164,160$ 165,802$ 167,460$ 169,134$ 170,826$ 172,534$ 174,259$ 176,002$ 177,762$ 179,539
<br />
<br /> - Operating Exp (20%)$ 34,560$ 34,906$ 35,255$ 35,607$ 35,963$ 36,323$ 36,686$ 37,053$ 37,424$ 37,798
<br />
<br /> = NOI
<br />$ 129,600$ 130,896$ 132,205$ 133,527$ 134,862$ 136,211$ 137,573$ 138,949$ 140,338$ 141,742
<br />
<br /> - Debt Service$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740$ 127,740
<br />
<br /> = CF
<br />$ 1,860$ 3,156$ 4,465$ 5,787$ 7,122$ 8,471$ 9,833$ 11,209$ 12,598$ 14,002
<br />
<br />Cash on Cash Return 0%1%1%1%1%2%2%2%3%3%
<br />
<br />Example A shows Cash flow in Year 1 at $1,800 and Cash on Cash return at 0%. By year 10 the
<br />cash flow increases to $14,000 with a Cash on Cash return at 3%.
<br />
<br />Example B: The pro-forma below is based on a 14-unit development with two, three, four, and
<br />five bedroom units. The rent per square foot is $1.11 for two-bedroom units, $1.23 for three-
<br />bedroom units, $1.37 for four bedroom units, and $1.31 for five-bedroom units.
<br />
<br />Pro-Forma: Without MUPTE
<br />
<br />
<br />Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10
<br />
<br />Rent Income$ 288,000$ 290,880$ 293,789$ 296,727$ 299,694$ 302,691$ 305,718$ 308,775$ 311,863$ 314,981
<br />
<br /> - Vacancy (5%)$ 14,400$ 14,544$ 14,689$ 14,836$ 14,985$ 15,135$ 15,286$ 15,439$ 15,593$ 15,749
<br />
<br /> = Effective Gross Rent$ 273,600$ 276,336$ 279,099$ 281,890$ 284,709$ 287,556$ 290,432$ 293,336$ 296,270$ 299,232
<br />
<br /> - Operating Exp (20%)$ 57,600$ 58,176$ 58,758$ 59,345$ 59,939$ 60,538$ 61,144$ 61,755$ 62,373$ 62,996
<br />
<br /> = NOI
<br />$ 216,000$ 218,160$ 220,342$ 222,545$ 224,770$ 227,018$ 229,288$ 231,581$ 233,897$ 236,236
<br />
<br /> - Debt Service$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000$ 219,000
<br />
<br /> = CF
<br />$ (3,000) $ (840) $ 1,342$ 3,545$ 5,770$ 8,018$ 10,288$ 12,581$ 14,897$ 17,236
<br />
<br />Cash on Cash Return -1%0%0%1%1%2%2%2%3%3%
<br />
<br />Example B shows Cash flow in Year 1 at - $3,000 and Cash on Cash return at -1%. By year 10
<br />the cash flow increases to $17,200 with a Cash on Cash return at 3%.
<br />
<br />
|