Agenda Packet 10-17-18 Work Session

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Page 3 Prepared for: City of Eugene Prepared by: PNW Economics, LLC Market & Financial Analysis of Gordon Lofts MUPTE Program Application 2. Review of Market Rent & Lease Income Assumptions Apartment Market Analysis: Documented Rents This section of the report provides a discussion of apartment rents that the Applicant has documented will be charged at the proposed project. Apartment rents are discussed as follows: 1. Profile of the proposed apartment unit mix, unit sizes, monthly gross rents, and monthly rents per square foot. 2. Comparison of the proposed apartment gross rents with comparable and competitive apartment projects in the downtown Eugene market area. 3. Comparison of the proposed apartment rents per square foot with comparable and competitive apartment projects in downtown Eugene. Comparison of the proposed project to other, comparable apartment projects in the downtown Eugene market is important as it gives contextual evidence for how well-suited the project is given prevailing rents that renters seeking to live downtown are willing to pay. • Rents that are below market indicate the project will be at a competitive advantage because it is a relative bargain. • Rents that are above market indicate the project is more expensive, which can be acceptable to renters if new rents are not too much higher and new, high quality units are worth the price premium. • New projects with rents that are too ambitiously high will be uncompetitive in the market, leasing more slowly and potentially hindering the apartment developer’s ability to earn sufficient rent income in time to meet expenses and/or debt service, which threatens financial viability of the project. Applicant Documented Project Apartment Rents Table 1 provides a profile of the apartment component of the proposed project, Gordon Lofts. Information is taken directly from the “Unit Mix” table on page 2 of the Gordon Lofts MUPTE application. PNW Economics has gone one step further with the application-provided information and calculated rents per square foot, which is simply gross monthly rents divided by the unit size earning that rent. • Appropriate for an urban downtown market, the proposed project has a strong emphasis on smaller units including Studio apartments (69 total – 468 square feet) and One-bedroom apartments (53 total – 642 square feet). • Gross monthly rents that renters would pay are planned to range from $1,171 monthly (Studio units) to $2,756 monthly (Two-bedroom units). The average gross rent at the project based on unit mix is estimated to be $1,417 monthly. October 17, 2018, Work Session – Item 2