|
Cash return well below the market-expected 10% to 15% level. The Cash on Cash only reaches
<br />2
<br />six percent by year 10. Third, the project valuation is well below the amount needed to qualify
<br />3
<br />for conventional financing. At project stabilization, the projected value of the property is $32
<br />million. The total cost of the project is $35.5 million and requires $25.9 million in bank debt. At
<br />70% loan to value, the project needs to be valued at $37 million to qualify, a valuation gap of $5
<br />million.
<br />
<br />The Pro-Forma below shows that the project improves with the MUPTE. The debt service is
<br />1.15. The Cash on Cash reaches 8% by year ten, only slightly below the market expectation.
<br />The project valuation is 74% loan to value, which is closer to loan to value ratios currently in the
<br />market.
<br />
<br />
<br />Year 1Year 2Year 10
<br />With MUPTE
<br />
<br />
<br />Rent Income$ 3,095,179$ 3,157,083$ 3,699,025
<br /> - Vacancy$ 154,759$ 157,854$ 184,951
<br /> = Effective Gross Rent$ 2,940,420$ 2,999,228$ 3,514,074
<br /> - Operating Exp$ 773,795$ 789,271$ 924,756
<br /> - Property Tax
<br />$ (187,680)$ (191,434)$ (224,295)
<br />(saved by MUPTE)
<br /> = NOI
<br />$ 2,354,305$ 2,401,391$ 2,813,613
<br /> - Debt Service$ 2,050,301$ 2,050,301$ 2,050,301
<br /> = CF
<br />$ 304,004$ 351,090$ 763,311
<br />Cash on Cash Return 3%4%8%
<br />Value
<br />$ 34,878,597$ 35,576,169$ 41,683,152
<br />Debt Coverage Ratio
<br /> 1.15
<br />
<br />
<br />2
<br /> Cash Flow divided by the equity that is invested by the developer
<br />3
<br /> The value is determined by NOI divided by the capitalization rate.
<br /> 2
<br />
|