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Prepared for: City of Eugene <br />Prepared by: PNW Economics <br />DRAFT Response to MUPTE Citizen Advisory Committee Questions: Obie Companies Application <br />MEMORANDUM <br />To: Amanda Nobel Flannery <br />Anne Fifield <br />CITY OF EUGENE <br />From: Bill Reid, Principal <br />PNW ECONOMICS <br />Subject: Response to MUPTE Citizen Advisory Committee Meeting #2 Questions <br />Date: September 11, 2018 <br />This memorandum is intended as a response to three questions raised at the City of Eugene <br />MUPTE citizen advisory committee Meeting #2 where my follow-up was required for <br />clarification. Each question is answered in turn below: <br />1.Address the year 2 annual operating expenses of $832k (instead of $764k). <br />Consultant Response: Upon review, there does seem to have been a math error in the <br />spreadsheet calculation for Year 2 operating expenses and every year forward in each of the <br />scenarios. Results have been revised to express Year 2 operating expenses equaling $764,630 <br />and escalating by 3.0% annually each year thereafter. New pro forma results reflecting this <br />change can be found in the answer to Question 2 below, which also indicated another revision <br />to analysis. <br />2.Confirm the year 1 total absorption vacancy in your tables is 20% (rather than 25%). <br />Consultant Response: Upon review, the absorption vacancy estimate was indeed including the <br />5% stabilized vacancy rate for a total of 25%. The line of questions regarding appropriate <br />absorption vacancy rate in Year 1 did lead me to the need to perform an absorption analysis <br />assuming the project fully leases by the end of the first year. Table 1 details the annual average <br />vacancy rate that the project will experience in the first 12 months assuming: <br />•The project is 20% leased by the end of the first month of operation. <br />•The project requires eleven months to lease up all but 7 units: the vacant model unit <br />and 5% stabilized vacant units (six units). <br />Assuming 20% occupancy by end of the first month and one year to stabilized occupancy plus a <br />vacant model unit, the annual absorption vacancy rate a is 37%. This is higher than either the <br />20% absorption vacancy rate incorrectly stated as the assumption in the original review <br />document, and higher than the 25% effective absorption vacancy rate in the original review <br />document pro forma tables. It is clear, however, that both 20% and 25% absorption vacancy <br />Exhibit C to Attachment E <br />October 17, 2018, Work Session – Item 2