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Page 2 <br />Prepared for: City of Eugene <br />Prepared by: PNW Economics, LLC <br />Market & Financial Analysis of Gordon Lofts MUPTE Program Application <br />•Development assumptions including debt, equity, income and expense escalation were found <br />to be reasonable. The only caveat to this finding is the fact that financing of the project as <br />planned may materialize differently as the project is on land to be leased from Lane County <br />rather than purchased and owned fee simple by the developer. Although too early to tell now, <br />perceived risk of such an arrangement could lead to less favorable lending terms. <br />•A MUPTE of $378,635 beginning in the first project year and growing by 3% annually <br />thereafter is found to be critical to the success of the project from a financial feasibility <br />perspective. Pro forma analysis found: <br />o The project will only be financially feasible, in terms of appropriate cash-on-cash <br />return for equity investment in the project, with the MUPTE exemption and <br />implausibly assuming the development manages to earn Amenity Based Income. <br />o Assuming the project only earns market-achievable rents but does not earn Amenity <br />Based Income, the project is not estimated to be financially feasible with or without <br />MUPTE, with negative cash-on-cash return prevailing for several years. <br />October 17, 2018, Work Session – Item 2