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Page 19
<br />Prepared for: City of Eugene
<br />Prepared by: PNW Economics, LLC
<br />Market & Financial Analysis of Gordon Lofts MUPTE Program Application
<br />Market-Achievable Rents With MUPTE
<br />Table 12 reports the same pro forma as Table 11, but assumes the project is awarded the MUPTE equal
<br />to $378,635 in its first year and growing by 3% every year thereafter. The project’s estimated cash-on-
<br />cash return in Year 1 is -5.3% and is not expected to reach the typical minimum threshold return of
<br />6.0% until year 6.
<br />In this scenario, where market achievable rents only are earned income, MUPTE certainly dramatically
<br />changes the outcome for return on equity and project feasibility. But the project is still not feasible due
<br />to the -5.3% cash-on-cash return in year 1 and nearly three-year wait for cumulative cash flow to be
<br />positive. As a further sign of being unfeasible:
<br />•There is an estimated debt gap of $1,073,993 assuming the more stringent debt coverage ratio
<br />method of figuring the potential maximum loan for the project.
<br />Table 12 – Scenario 1 Pro Forma With 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 $378,635 $389,994 $401,694 $413,745 $426,157 $438,942 $452,110 $465,673 $479,643 $494,033
<br /> = Net Operating Income (NOI)$1,717,090 $2,238,329 $2,306,996 $2,377,775 $2,450,733 $2,525,937 $2,603,456 $2,683,361 $2,765,726 $2,850,628
<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 ($370,447)$150,792 $219,459 $290,238 $363,196 $438,400 $515,919 $595,824 $678,189 $763,091
<br />Cash-on-Cash Return -5.3% 2.2% 3.1% 4.1% 5.2% 6.3% 7.4% 8.5% 9.7% 10.9%
<br />Value - 6% Cap Rate 6%$28,618,173 $37,305,482 $38,449,926 $39,629,588 $40,845,555 $42,098,950 $43,390,927 $44,722,679 $46,095,434 $47,510,460
<br />Maximum Private Loan (6% Interest)
<br />Loan-to-Cost (Applicant Plan)79%($27,000,000)
<br />Loan-To-Value 75%($27,979,112)$979,112 If negative, represents a gap in maximum debt due to insufficient NOI under Loan-to-Value method
<br />Debt Coverage Ratio 1.2 ($25,926,007) ($1,073,993)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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