Item A: Capstone Collegiate Communities Student Housing Development Proposal

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Phased Project (See Exhibit 2)  Proposed developing the project in two phases, the first phase east of Olive Street and the second phase west of Olive Street.  Staff adjusted Capstone’s projected tax exemption savings to more accurately reflect the projected assessed value.  Capstone updated the pro-forma to reflect the added project costs associated with phasing: approximately $2.2 million.  The added costs require Capstone to increase the loan amount by approximately $2 million and to increase the equity contribution by approximately $240,000.  Without MUPTE, the return on investment is projected at 5% 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. Updated Phased Project - With Tax Lot 900 (See Exhibit 3)  Proposed developing the project in two phases, the first phase east of Olive Street and the second phase west of Olive Street.  Expanded the project footprint to include tax lot 900.  Staff adjusted Capstone’s projected tax exemption savings to more accurately reflect the projected assessed value.  Capstone updated the pro-forma to reflect the added project costs associated with revised construction cost estimates from a general contractor, design modifications, and cost related to the inclusion of tax lot 900: approximately $6.4 million in total.  The adjustments require Capstone to increase the loan amount by approximately $4.5 million and increase the equity contribution by approximately $1.9 million when compared to the Phased Project.  Capstone updated the pro-forma to reflect the additional units possible from developing tax lot 900, including the increased revenue and increased operating costs associated with the additional units.  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. At this point in the progression of Capstone’s due diligence, there has been no agreement reached regarding tax lot 900 and no current plan to acquire the property. Therefore, the most likely scenario is the Phased Project (Exhibit 2) that does not include tax lot 900. However, in any of the three scenarios, staff concludes that the tax exemption is needed to generate a return on investment sufficient to attract the required equity.