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<br />Prepared for: City of Eugene
<br />Prepared by: PNW Economics, LLC
<br />Market & Financial Analysis of Gordon Lofts MUPTE Program Application
<br />Scenario 1: Market-Achievable Rents
<br />Market-Achievable Rents Pro Forma Without MUPTE
<br />Table 11 reports the resulting pro forma analysis of Gordon Lofts without MUPTE assuming the
<br />project earns market-achievable rents only, but cannot earn the additional Amenity Based Income due
<br />to that additional rent being found to be aggressive for the downtown Eugene apartment market.
<br />Results indicate that without the tax exemption, the project would earn a -10.7% cash-on-cash return
<br />for year 1 and would earn a negative cash-on-cash return until year 6 of the analysis. The project is not
<br />feasible and would certainly not be developed given the early and consistent losses. Basically,
<br />development costs are unsubstantiated by potential income from rent. As a further sign of being
<br />unfeasible:
<br />•There is an estimated debt gap of $3,995,814 (loan-to-value method), meaning that the project
<br />doesn’t earn enough income to justify the development’s planned $27 million loan.
<br />•There is also an estimated debt gap of $5,591,197 assuming the more stringent debt coverage
<br />ratio method of figuring the potential maximum loan for the project.
<br />Table 11 – Scenario 1 Pro Forma Without MUPTE: Market-Achievable Rents Only
<br />Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
<br />2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
<br />Apartment Rent Income $2,415,543 $2,488,010 $2,562,650 $2,639,529 $2,718,715 $2,800,277 $2,884,285 $2,970,814 $3,059,938 $3,151,736
<br />Retail Lease Income $296,654 $307,037 $317,784 $328,906 $340,418 $352,332 $364,664 $377,427 $390,637 $404,309
<br />Amenity Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
<br />Misc. Income 4%$108,488 $111,802 $115,217 $118,737 $122,365 $126,104 $129,958 $133,930 $138,023 $142,242
<br />Gross Project Income $2,820,686 $2,906,849 $2,995,651 $3,087,173 $3,181,498 $3,278,713 $3,378,907 $3,482,170 $3,588,598 $3,698,287
<br /> - Vacancy 5%($141,034) ($145,342) ($149,783) ($154,359) ($159,075) ($163,936) ($168,945) ($174,109) ($179,430) ($184,914)
<br /> - Absorption Vacancy & Concessions ($679,134) ($23,083) ($23,775) ($24,489) ($25,223) ($25,980) ($26,760) ($27,562) ($28,389) ($29,241)
<br /> = Effective Gross Income $2,000,517 $2,738,423 $2,822,093 $2,908,325 $2,997,200 $3,088,798 $3,183,202 $3,280,500 $3,380,779 $3,484,132
<br /> - Apartment Operating Expense ($606,304) ($832,658) ($857,638) ($883,367) ($909,868) ($937,164) ($965,279) ($994,237) ($1,024,064) ($1,054,786)
<br /> - Retail Operating Expense ($55,758) ($57,430) ($59,153) ($60,928) ($62,756) ($64,638) ($66,578) ($68,575) ($70,632) ($72,751)
<br /> + MUPTE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
<br /> = Net Operating Income (NOI)$1,338,455 $1,848,335 $1,905,302 $1,964,031 $2,024,576 $2,086,995 $2,151,346 $2,217,687 $2,286,083 $2,356,595
<br /> - Debt Service (79% Loan-to-Cost)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)($2,087,537)
<br /> = Before Tax Cash Flow ($749,082) ($239,202) ($182,235) ($123,506) ($62,961) ($542)$63,809 $130,150 $198,546 $269,058
<br />Cash-on-Cash Return -10.7% -3.4% -2.6% -1.8% -0.9% 0.0% 0.9% 1.9% 2.8% 3.8%
<br />Value - 6% Cap Rate 6%$22,307,590 $30,805,581 $31,755,028 $32,733,843 $33,742,938 $34,783,254 $35,855,760 $36,961,457 $38,101,376 $39,276,580
<br />Maximum Private Loan (6% Interest)
<br />Loan-to-Cost (Applicant Plan)79%($27,000,000)
<br />Loan-To-Value 75%($23,104,186) ($3,895,814)If negative, represents a gap in maximum debt due to insufficient NOI under Loan-to-Value method
<br />Debt Coverage Ratio 1.2 ($21,408,803) ($5,591,197)If negative, represents a gap in maximum debt due to insufficient NOI under Debt Coverage Ratio method
<br />Total Development Cost $34,000,000
<br />Developer-Planned Equity (Total Cost Less Loan)$7,000,000
<br />October 17, 2018, Work Session – Item 2
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