Agenda Packet 10-17-18 Work Session

Home Browse Search

Gordon Lofts MUPTE Application MUPTE REVIEW PANEL MINORITY REPORT 100518 B. Analysis Should Exclude Moderate Income Fee from Without MUPTE Budget The applicant included the moderate income fee in the budget and used the same budget for the without MUPTE and with MUPTE scenarios. The applicant would not be required to pay the fee if no MUPTE is awarded. The consultant stated that “the permanent ﬁnancing would be reduced by the absence of the fee in the without MUPTE scenario.” 8/29/18 Memo at 3. The Consultant, however, continued to include the fee in his revised pro formas for the without MUPTE scenario (9/11/18 Memo). The fee should be excluded from the without MUPTE budget and loan amounts. C. Retail Lease Income ($321,372) (~$25,000 difference; 10,000, not 9,231 SF) The consultant calculated retail lease income based upon $2.50/square foot escalated by 3.5% for 2 years, or roughly $2.68/square foot (consultant used 2.6780625). This amount times 9,231 square feet per month times 12 = $296,654, the amount used by the consultant. The City, in response to a question, said the retail square feet should be 10,000. City 9/4/18 Answers at 2. This results in retail lease income of $321,368, an increase of $24,714 to the consultant’s total for Year 1, and increases retail lease income for Years 2-10. D. Property Tax Payment Discount ($10,368): People paying property taxes in Oregon are entitled to a 3% discount for paying by the November 15 due date for property assessed as of January 1 of that year. ORS 308.210; 311.505. The consultant stated: “The Applicant could certainly modify its pro forma to reﬂect this discount, should they choose to do so. The reduction would increase cash ﬂow each year, as well as cash-on-cash return for the Applicant, though modestly.” 8/29/18 Memo at 2-3. E. Year 2 Apartment Operating Expenses Should Be $764,630, not $832,658 The consultant chose to use national average apartment expenses rather than the expenses used by the applicant. The consultant used $5,800 per unit expenses (multiplied by 3% for each of two years to get $6,153) for Year 1. Using the consultant’s national average apartment operating expense ﬁgure of $6,338/unit for Year 2 (3% increase above $6,153) times 127 units, less 5% stabilized Vacancy, results in Year 2 apartment expenses of $764,630. The consultant initially used $832,658, which is higher by $67,978. The Consultant acknowledged this error, and used the lower amount in his revised pro formas. 9/11/18 Memo at 1. This reduces apartment operating expenses for Years 2-10. Year 1 expenses are increased due to application of only 5% stabilized vacancy as discussed below. F. First Year Vacancy Should be 5% rather than 20% - 42% The applicant used a 5% vacancy assumption for each of the 10 years including for Year 1. The consultant initially used Year 1 vacancy of 20% of projected income (GPI), characterizing the vacancy as absorption vacancy. Since he also included 5% stabilized vacancy in Year 1, his total Year 1 vacancy assumption was 25%. In his subsequent Memo (9/11/18), the consultant almost doubled his absorption vacancy assumption from 20% to 37%. He continued to include 5% stabilized vacancy in Year 1, resulting in a total Year 1 vacancy assumption of 42%. The MUPTE application should be considered using a 5% Year 1 vacancy assumption. The applicant, who has the burden of demonstrating that, absent the exemption, the project would not be ﬁnancially viable, used 5% Year 1 vacancy. The Olive Lofts MUPTE applicant used 5% Year 1 vacancy. The two prior large MUPTE projects, Core Campus and Capstone, Page