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PNW Economics
<br />
<br />Page 3
<br />Prepared for: City of Eugene
<br />Prepared by: PNW Economics
<br />Response to MUPTE Citizen Advisory Committee Meeting #2 Questions
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<br />REVISED Scenario 1: Market-Achievable Rents
<br />Market-Achievable Rents Pro Forma Without MUPTE
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<br />Table 2 expresses the revised pro forma replacing Table 11 from the original MUPTE application
<br />review document. With corrected, lower operating expenses and corrected, higher absorption
<br />vacancy as explained:
<br />• The project performs more poorly in Year 1 with estimated cash-on-cash return of -
<br />12.6%.
<br />• Starting in Year 2, the project does perform better with lower per-unit operating
<br />expenses, with cash-on-cash return of -2.4% and lesser losses through Year 4 of the
<br />project.
<br />• Without MUPTE, and only achieving market rents, the project is not financially feasible.
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<br />Table 2 – REVISED Scenario 1 Pro Forma Without MUPTE: Market-Achievable Rents Only (Replaces Review Table 11)
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<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 /> - Stabilized 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 ($959,362) ($23,083) ($23,775) ($24,489) ($25,223) ($25,980) ($26,760) ($27,562) ($28,389) ($29,241)
<br /> Year 1 Absorption Vacancy 37%($884,114)$0 $0 $0 $0 $0 $0 $0 $0 $0
<br /> Year 1 Model Unit and Concessions ($75,248)($23,083)($23,775)($24,489)($25,223)($25,980)($26,760)($27,562)($28,389)($29,241)
<br /> = Effective Gross Income $1,720,289 $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 ($456,348) ($764,630) ($787,569) ($811,196) ($835,532) ($860,598) ($886,416) ($913,008) ($940,399) ($968,611)
<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)$1,208,184 $1,916,363 $1,975,370 $2,036,201 $2,098,912 $2,163,561 $2,230,208 $2,298,916 $2,369,748 $2,442,770
<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 ($879,353) ($171,174) ($112,167) ($51,336)$11,375 $76,024 $142,671 $211,379 $282,211 $355,233
<br />Cash-on-Cash Return -12.6% -2.4% -1.6% -0.7% 0.2% 1.1% 2.0% 3.0% 4.0% 5.1%
<br />Value - 6% Cap Rate 6%$20,136,398 $31,939,377 $32,922,838 $33,936,687 $34,981,867 $36,059,351 $37,170,140 $38,315,269 $39,495,802 $40,712,838
<br />Maximum Private Loan (6% Interest)
<br />Loan-to-Cost (Applicant Plan)79%($27,000,000)
<br />Loan-To-Value 75%($23,954,533) ($3,045,467)If negative, represents a gap in maximum debt due to insufficient NOI under Loan-to-Value method
<br />Debt Coverage Ratio 1.2 ($22,196,751) ($4,803,249)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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