Item A: Capstone Collegiate Communities Student Housing Development Proposal

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ATTACHMENT B Planning & Development Community Development City of Eugene th 99 W. 10 Avenue M Eugene, Oregon 97401 EMORANDUM (541) 682-5443 (541) 682-5572 FAX www.eugene-or.gov Date: May 4, 2012 To: Mayor Piercy and City Council From: Denny Braud, Senior Development Analyst Subject: Capstone Phased Project Financial Analysis Following the April 25 Council work session, Councilor Brown requested the Capstone financial pro-forma analysis for the proposed phased project scenario, including the full ten-year return on investment projection. Capstone’s MUPTE application submitted in January anticipated a non- phased scenario that included simultaneous development of the properties east and west of Olive Street (Original Project). Since the initial submittal, Capstone’s due diligence on the project has informed two updates to the original pro-forma. The first update adjusted the pro-forma to include phasing the project (Phased Project). The second update to the pro-forma assumed the phased scenario with cost, revenue, and operating expense adjustments associated with the addition of tax lot 900 to the project footprint (Updated Phased Project). As noted in the April 23 Agenda Item Summary, staff performed a financial analysis for the Original Project pro-forma and each of the phased pro-formas. Considering the range of unit counts and financial considerations for each of the potential scenarios, staff opted to present the financial analysis and conclusions based on the scenario that projected the highest potential return on investment (the Original Project), as the most conservative approach. The following is a summary of the analysis of three project scenarios. The full ten-year projections for each scenario with and without MUPTE are included in Exhibits 1 through 3. Original Project (See Exhibit 1)  Proposed developing full project in a single phase.  Staff adjusted Capstone’s projected tax exemption savings to more accurately reflect the projected assessed value.  Without MUPTE, the return on investment is projected at 6% in year 1 and does not exceed 8% during the ten-year period.  With MUPTE, the return on investment is projected to be 9% in year 1 and reaches 12% by year 10.  Staff’s analysis concludes that the projected return on investment without MUPTE is insufficient to attract the equity investment needed for the project.