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PAGE | 4 <br />12.Are buildings like the proposed building being built in Oregon without a 10-year property tax exemption? <br />There are examples of similar developments being done without abatements, but abatements are common <br />outside of central Portland. <br />13.Is the Contractor overhead and profit normally included in Construction Hard Costs? <br />Yes <br />14.Do banks normally allow an entity which is both owner and developer (“owner/developer”) to claim a developer fee <br />as part of financing for construction costs for market rate multifamily housing construction? Do banks normally <br />finance developer fees for construction of market rate multifamily housing? <br />Banks allow developer fees in this context, and it is a usual practice. The lending limit will be driven by debt <br />coverage ratios, and the cost is only a factor in the loan if the resulting loan to cost ratio is too high. <br />15.Do developer fees normally arise in the context of affordable housing where the public or nonprofit owner is <br />compensating the developer for developing the housing where the developer does not own the development and <br />won’t have the opportunity to profit through ownership of the housing or where the profit is limited due to <br />substantial rent limitations? <br />Developer fees are usually charged whether the developer is part of the ownership group or hired to manage the <br />project. Managing the development process entails real expenses in terms of time and overhead dedicated to a <br />complicated process. Often within an ownership group a development fee will be charged to recognize these costs <br />prior to the distribution of any profits. <br />16.Are the rents in the pro forma in line with market rate rents in the West University neighborhood? <br />The rents are quite high relative to the existing product, but the proximity to the university probably justifies the <br />rent levels. <br />17.How did you calculate the serviceable debt, based on required equity? <br />The serviceable debt level is calculated based on a 1.20 debt coverage ratio. This just reflects that the net <br />operating income at stabilization is 120% or more of the debt service. <br />I hope this is helpful. Not all of the questions are within my area of expertise, particularly construction cost estimating. <br />While I cannot speak with any authority regarding the economics of the other projects discussed, my guess would be <br />that the primary difference in viability may be explained by marginal shifts in construction costs. <br />September 11, 2019, Work Session – Item 1