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PNW Economics
<br />Page 4
<br />Prepared for: City of Eugene
<br />Prepared by: PNW Economics
<br />Response to MUPTE Citizen Advisory Committee Meeting #2 Questions
<br />Market-Achievable Rents Pro Forma With MUPTE
<br />Table 3 expresses the revised pro forma replacing Table 12 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 -7.2%
<br />instead of -5.3%.
<br />•Starting in Year 2, the project does turn positive cash flow and stronger with lower
<br />operating expenses per unit at 3.1% cash-on-on-cash return.
<br />•Project achieves 6.3% cash-on-cash return in Year 5 rather than Year 6, one year sooner.
<br />•With MUPTE, and only achieving current market rents, the project is still financially
<br />challenged but performs dramatically better.
<br />Table 3 – REVISED Scenario 1 Pro Forma With MUPTE: Market-Achievable Rents Only (Replaces Review Table 12)
<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 $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)$1,586,819 $2,306,357 $2,377,064 $2,449,946 $2,525,069 $2,602,503 $2,682,318 $2,764,589 $2,849,392 $2,936,803
<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 ($500,718)$218,820 $289,527 $362,409 $437,532 $514,966 $594,781 $677,052 $761,855 $849,266
<br />Cash-on-Cash Return -7.2% 3.1% 4.1% 5.2% 6.3% 7.4% 8.5% 9.7% 10.9% 12.1%
<br />Value - 6% Cap Rate 6%$26,446,981 $38,439,278 $39,617,735 $40,832,432 $42,084,485 $43,375,047 $44,705,307 $46,076,490 $47,489,860 $48,946,718
<br />Maximum Private Loan (6% Interest)
<br />Loan-to-Cost (Applicant Plan)79%($27,000,000)
<br />Loan-To-Value 75%($28,829,458)$1,829,458 If negative, represents a gap in maximum debt due to insufficient NOI under Loan-to-Value method
<br />Debt Coverage Ratio 1.2 ($26,713,955) ($286,045)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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