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Page 21
<br />Prepared for: City of Eugene
<br />Prepared by: PNW Economics, LLC
<br />Market & Financial Analysis of Gordon Lofts MUPTE Program Application
<br />Applicant-Assumed Apartment Rent Income With MUPTE
<br />Table 14 displays the final pro forma analysis for Gordon Lofts with MUPTE and assuming the project
<br />earns both achievable market rents and, aggressively, also earns Applicant-anticipated Amenity
<br />(Based) Income.
<br />As indicated in Table 14, the MUPTE makes a crucial difference in project performance in year 1 with
<br />an estimated cash-on-cash return of 0.3%, but again only if the project implausibly earns planned
<br />rents plus Amenity Income as discussed on page 11 of this report. In year 2, cash-on-cash return is
<br />estimated at 10.0% and above the common, minimum benchmark of 6%. The return measure grows
<br />steadily thereafter and reaches an estimated 20.9% by Year 10 under these more aggressive
<br />assumptions.
<br />MUPTE in this case renders the project feasible under the less-plausible Amenity (Based) Income
<br />assumption of this scenario. But again, PNW Economics notes that Amenity (Based) Income expected
<br />by the Applicant is aggressive for the market and should not be expected to materialize as planned.
<br />Table 14 – Scenario 2 Pro Forma With MUPTE: Market-Achievable Rents with Amenity Income
<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 $563,211 $580,107 $597,511 $615,436 $633,899 $652,916 $672,503 $692,678 $713,459 $734,863
<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 $3,383,897 $3,486,956 $3,593,161 $3,702,609 $3,815,397 $3,931,629 $4,051,410 $4,174,849 $4,302,057 $4,433,150
<br /> - Vacancy 5%($169,195) ($174,348) ($179,658) ($185,130) ($190,770) ($196,581) ($202,571) ($208,742) ($215,103) ($221,657)
<br /> - Absorption Vacancy & Concessions ($819,937) ($23,083) ($23,775) ($24,489) ($25,223) ($25,980) ($26,760) ($27,562) ($28,389) ($29,241)
<br /> = Effective Gross Income $2,394,765 $3,289,525 $3,389,728 $3,492,989 $3,599,404 $3,709,068 $3,822,080 $3,938,544 $4,058,565 $4,182,252
<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)$2,111,338 $2,789,431 $2,874,631 $2,962,439 $3,052,937 $3,146,207 $3,242,334 $3,341,405 $3,443,512 $3,548,747
<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 $23,801 $701,894 $787,094 $874,902 $965,400 $1,058,670 $1,154,797 $1,253,868 $1,355,975 $1,461,210
<br />Cash-on-Cash Return 0.3% 10.0% 11.2% 12.5% 13.8% 15.1% 16.5% 17.9% 19.4% 20.9%
<br />Value - 6% Cap Rate 6%$35,188,968 $46,490,515 $47,910,510 $49,373,989 $50,882,289 $52,436,785 $54,038,897 $55,690,088 $57,391,866 $59,145,784
<br />Maximum Private Loan (6% Interest)
<br />Loan-to-Cost (Applicant Plan)79%($27,000,000)
<br />Loan-To-Value 75%($34,867,886)$7,867,886 If negative, represents a gap in maximum debt due to insufficient NOI under Loan-to-Value method
<br />Debt Coverage Ratio 1.2 ($32,309,283)$5,309,283 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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