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<br />
<br />estimated at $1,858 and this will continue to be taxed during the exemption period. Therefore, the $3,453
<br />that is currently being paid in taxes on the existing improvements will come off the tax rolls for ten years
<br />($34,530). However, after ten years an estimated $40,000 will be paid annually. Therefore, the lost
<br />revenue will be recovered in the second year.
<br />
<br />SUMMARY OF PRO FORMA
<br />Annual Return on Fully Taxed With MUPTE
<br />Investment
<br />Owner’s investment 800,000 800,000
<br />Net Operating Income 279,260 311,260
<br />Debt Service 301,410 301,410
<br />Net Income (22,150 9,850
<br />Annual Return on (2.77%) 1.23%
<br />Investment
<br />
<br />Sources
<br />
<br />Total Cost
<br />
<br />EQ
<br />$ 800,000 19%
<br />
<br />Conventional Debt$ 3,475,000 81%
<br />Total project
<br />$ 4,275,000
<br />
<br />
<br />Pro-Forma
<br />
<br />Year 1 Year 2 Year 10
<br />Without MUPTE
<br />
<br /> $
<br />Rent Income 377,040 $ 380,810 $ 412,363
<br /> $
<br /> - Vacancy (5%) 18,852 $ 19,041 $ 20,618
<br /> $
<br />358,188 $ 361,770 $ 391,745
<br /> = Effective Gross Rent
<br /> $
<br /> - Operating Exp (25%) 94,260 $ 95,203 $ 103,091
<br /> $
<br /> = NOI
<br />263,928 $ 266,567 $ 288,654
<br /> $
<br /> - Debt Service 301,410 $ 301,410 $ 301,410
<br /> $ $ $
<br /> = CF
<br />(37,482) (34,843) (12,756)
<br />-5% -4% -2%
<br />Cash on Cash Return
<br /> $ $ $
<br />Value
<br />3,910,000 3,949,000 4,276,000
<br />
<br />Staff reviewed and analyzed the project pro forma. It was also reviewed and approved by the City’s loan
<br />advisory committee. The pro-forma uses conservative assumptions about property value growth and
<br />market assumptions about vacancy and operating expenses. The model assumes that assessed property
<br />values increase by 2% per year. The vacancy rate is assumed at 5% of rental income and operating
<br />expenses are estimated at 25% of rental income, both standard assumptions in financial underwriting.
<br />The listed financial information is based on projections prior to financing, tenanting, and construction.
<br />The cap rate was estimated at 6.75%. (Cap rate and operating expense estimates were made after a
<br />consultation with a commercial appraiser.)
<br /> Z:\CMO\2009 Council Agendas\M090526\S0905262E.doc
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