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PNW Economics <br />Page 7 <br />Prepared for: City of Eugene <br />Prepared by: PNW Economics <br />Response to MUPTE Citizen Advisory Committee Meeting #2 Questions <br />3.Varying mortgage rate and amortization assumption questions. <br />PNW Economics again reviewed the Independence Landing planning pro formas utilized by the <br />City of Independence and Tokola Properties, the lead master-developer of the mixed-use <br />project. Tokola Properties, with a successful track record of 4-story to 5-story mixed-use <br />developments in Gresham, Hillsboro, and currently Independence assumed the following <br />permanent debt terms: <br />•5.5% fixed annual rate, 30-year amortization, $8.7 million principal (2016). <br />Accordingly, we continue to hold the opinion that a $27 million commercial loan with a 25-year <br />amortization and 6.0% annual rate is a reasonable assumption for Obie Companies under the <br />circumstances. <br />•The project is on leased land, and though the term is 99 years, the effective collateral <br />for a lender would be the current value of annual lease income from the land after <br />default through Year 99, which is a riskier asset than the liquidity of property owned <br />fully fee simple. <br />•Rates have increased since 2016. <br />•Obie Companies does not have a track record of 7-story apartment development in <br />multiple markets, and would be viewed as a riskier undertaking than for an established <br />lender relationship with Tokola Properties, with successful track record of downtown, <br />mixed-use redevelopment in different Oregon cities. <br />The issue is further treated in the original Gordon Lofts/Obie Companies MUPTE Application <br />review document. <br />October 17, 2018, Work Session – Item 2