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<br />Flow divided by the equity that is invested by the developer) well below the market-expected 10% to <br />15% level. The Cash on Cash only reaches 4% by year ten. <br /> <br />The Pro-Forma below shows that the project improves with the MUPTE. The debt service coverage is <br />1.36. The Cash on Cash return reaches 8% by year ten, only slightly below the market expectation. <br /> <br />Sources <br /> <br />Total Cost <br /> <br />EQ$ 2,198,00034% <br /> <br />Conventional Debt$ 4,202,00066% <br />Total project$ 6,400,000 <br /> <br /> <br />Pro-Forma <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />The pro-forma uses conservative assumptions about property value growth and market assumptions <br />about vacancy and operating expenses. The model assumes that assessed property values increase by <br />2% per year. The vacancy rate is assumed at 5% of rental income and operating expenses are estimated <br />at 25% of rental income, both standard assumptions in financial underwriting. The above listed <br />financial information is based on projections prior to financing, tenanting, and construction. The cap <br />rate was estimated at 6.75%. (The capitalization rate is the ratio between the net operating income <br />produced by an asset and its capital cost - the original price to buy the asset - or alternatively its current <br />market value. Conversations with local appraisers suggest a cap rate of 6.75% on this type of property <br />as appropriate.) <br /> Z:\CMO\2010 Council Agendas\M100208\S1002086.doc <br /> <br />