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lender have yielded a negotiated reduction to 0.8 spaces per bedroom based on other project
<br />features, such as proximity to the transit line.
<br />
<br />Pro-Forma
<br />The pro-forma in this memo is derived from applying market-based assumptions (described
<br />below) to the information provided by the developer.
<br />
<br />
<br />Without MUPTEYear 1Year 2Year 10
<br />
<br />Income$ 9,946,200$ 10,045,700$ 10,878,100
<br />
<br />
<br /> - Vacancy (6%)$ 602,400 $ 608,500 $ 658,900
<br />
<br /> = Effective Gross Rent$ 9,343,800$ 9,437,200$ 10,219,200
<br />
<br /> - Operating Exp (32%)$ 2,990,000$ 3,019,900$ 3,270,100
<br />
<br />
<br /> = NOI$ 6,353,800$ 6,417,300$ 6,949,100
<br />
<br /> - Debt Service$ 4,699,800$ 4,699,800$ 4,699,800
<br />
<br /> = CF$ 1,654,000$ 1,717,500$ 2,249,300
<br />
<br />
<br />Cash on Cash Return 6%6%8%
<br />
<br />Value$ 87,639,000$ 88,514,000$ 95,850,000
<br />
<br />DCR 1.35
<br />
<br />
<br />Rents & Vacancy
<br />Income for the pro-forma is based on the following:
<br />
<br />Residential rents from $1.48 - $1.88 per square foot per month (based on unit type)
<br />Commercial rent $1.50 per square foot per month
<br />Parking $35 per month per space
<br />Miscellaneous (vending, fees, & cleaning) at 2% of residential income
<br />
<br />The pro-forma uses market assumptions for vacancy: 5% for residential and commercial income
<br />and 30% for parking. The vacancy rate of 6% is the blended average for all income. An 1%
<br />annual escalation rate is used for the income.
<br />
<br />Operating Expenses
<br />For most multi-family projects, the standard assumption for operating expenses is 25% to 30%.
<br />Operating expenses assumed for the proposed Capstone project are estimated at 32% of effective
<br />gross rental income. Slightly higher operating cost are expected from enhanced on-site
<br />management personnel costs and the operation and maintenance costs associated with higher
<br />than standard amenities such as open space, structured parking, pools, and furnished units. An
<br />1% annual operating expense escalation rate is assumed.
<br />
<br />Debt & Interest Rate
<br />Debt service is based on a 30-year fixed loan at 6.5% from Fannie Mae. The City’s financial
<br />advisor at Western Financial Group confirmed that the interest rate assumption is reasonable
<br />
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