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HomeMy WebLinkAboutItem 7: Resolution 4966 Approving a MUPTE for 10th and Charnelton ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: Resolution 4966 Approving a Multiple-Unit Property Tax Exemption for th Residential Property Located at 10 Avenue and Charnelton Street, Eugene, Oregon (WG Development Co. /Applicant) Meeting Date: February 23, 2009 Agenda Item Number: 7 Department: Planning and Development Staff Contact: Nan Laurence www.eugene-or.gov Contact Telephone Number: 682-5340 ISSUE STATEMENT The City Council is asked to approve or deny a resolution granting a Multiple-Unit Property Tax Exemption (MUPTE) for the residential portion of the mixed-use development proposed by WG th Development at 10 and Charnelton in downtown Eugene. BACKGROUND In 1975, the Oregon legislature adopted the enabling statutes for the MUPTE program. This incentive was created as an implementation tool to complement the state land-use laws that were approved in 1973. The intent was to “stimulate the construction of rental housing in the core areas of Oregon’s urban centers…” In July 1977, the City Council adopted the provisions through a resolution “. . . to complement the Eugene Community Goals and Polices adopted in 1974 which stated that ‘High density dwellings should be encouraged close-in to accommodate those people who prefer to live near the center of activity’…” Since that time both the state statutes and Eugene’s implementation of them have been amended. For instance, multi-family ownership is now allowed in addition to rental housing. Most recently, the council amended E.C. 2.945 through 2.947 to add a new transit-oriented MUPTE area in November 2008. In July 2008, the Urban Renewal Agency (URA) selected WG Development as the preferred th development team for the 10 and Charnelton redevelopment site. WG proposed a mixed-use development with approximately 80 residential units in three floors over two floors of office. The two floors of commercial development will include approximately 51,000 square feet of commercial space; the commercial space is not subject to the tax exemption. The property is currently owned by the URA. The agency and WG have signed a Purchase and Sale Agreement that stipulates that WG buys the property on or before March 31, 2009, for the purposes of the mixed-use development as described above. The Planning Director has reviewed the application for any potential code conflicts and found none at this time. The site is zoned C-3 Major Commercial. The site is vacant and part of the site is used for surface parking. Z:\CMO\2009 Council Agendas\M090223\S0902237.doc The Planning and Development Director has reviewed this application and recommends approval. This report is included as Exhibit B in the resolution approving the MUPTE. A copy of this MUPTE application will be placed in the council office for review. Public Comments A display advertisement was published in the Register-Guard on December 30, 2008, soliciting comments for 30 days. No comments were received during the 30-day period ending January 28, 2009. The Downtown Neighborhood Association reviewed the proposed project in July 2008, and voted in support of the project. The association was contacted specific to the MUPTE application on December 23, 2008, and has not offered any comments. Design Features Consistent with the council’s stated interests in the adopted MUPTE Standards and Guidelines, this application proposes high density housing in the core of downtown. Although the design for the project has not yet been finalized, the developers have stated their intention to construct a dense, multi-story development with the following design features: Compliance with Leadership in Energy & Environmental Design (LEED) and Green Building ? Community Standards Higher quality materials that contribute to longevity ? Prominent entry facing the public street ? Sidewalks with a minimum width of 15 feet, enhanced paving and street trees ? Impact and Need for Tax Exemptions to Encourage Housing The City and other local taxing districts forgo revenue when property is exempted from taxes. This project proposes new construction on a property that is underdeveloped and under-utilized based on the zoning and property potential. The land continues to be taxed during the exemption period. The improvements will bring substantial revenue, after ten years, beyond what is currently being collected. Fiscal Impact The property is currently in public ownership and is tax exempt. Once the property is in private ownership and the proposed project is complete, the development will pay annual taxes on the non- housing commercial portion and a yet to be determined amount on the land itself. While the City will forgo an estimated $131,526 annually on the housing portion during the 10-year exemption period, this may be balanced by the income that is received from the commercial space and the land. Impact and Need for Tax Exemptions to Encourage Housing The City and other local taxing districts forgo revenue when property is exempted from taxes. This project proposes new construction on a property that is underdeveloped and underused based on the zoning. The land continues to be taxed during the exemption period. The improvements will bring substantial revenue, after ten years, beyond what is currently being collected. th The pro-forma for the 10 and Charnelton development (Attachment C) indicates three key reasons that the project would not be built without MUPTE. First, the debt coverage ratio is low at 1.06 instead of the common bank preference for 1.25 or higher. Second, the perceived risk is high demonstrated by the Cash on Cash return well below the market-expected 10% to 15% level. The Cash on Cash only reaches Z:\CMO\2009 Council Agendas\M090223\S0902237.doc six percent by year 10. Third, the project valuation is well below the amount needed to qualify for conventional financing. At project stabilization, the projected value of the property is $32 million. The total cost of the project is $35.5 million and requires $25.9 million in bank debt. At 70% loan to value, the project needs to be valued at $37 million to qualify, a valuation gap of $5 million. Timing This application was submitted on December 18, 2008. If the council does not act within 180 days the application is considered approved. RELATED CITY POLICIES MUPTE is enabled by state statute. The City of Eugene has participated in the MUPTE program since 1978. Encouraging housing in the core area is consistent with numerous adopted planning and policy documents. Examples include: Growth Management Policies Policy 1 Support the existing Eugene Urban Growth Boundary by taking actions to increase density and use on existing vacant land and under-used land within the boundary more efficiently. Policy 2 Encourage in-fill, mixed-use, redevelopment, and higher density development. Policy 3 Encourage a mix of business and residential uses downtown using incentives and zoning. Downtown Plan Living Downtown Policy 1: Stimulate multi-unit housing in the downtown core and on the edges of downtown for a variety of income levels and ownership opportunities. COUNCIL OPTIONS The council may approve the exemption, deny the exemption, or may delay approval in order to request additional information from the developer to determine that a satisfactory public benefit has been met. CITY MANAGER’S RECOMMENDATION The City Manager recommends approving the resolution to grant the exemption. SUGGESTED MOTION Move to adopt Resolution 4966 approving a Multiple-Unit Property Tax Exemption for residential property th located at 10 Avenue and Charnelton Street, Eugene, Oregon (WG Development Co. /Applicant) ATTACHMENTS A. Resolution approving a property tax exemption B. Resolution denying approval C. Pro Forma staff analysis Z:\CMO\2009 Council Agendas\M090223\S0902237.doc FOR MORE INFORMATION Staff Contact: Nan Laurence Telephone: (541) 682-5340 Staff E-Mail: nan.laurence@ci.eugene.or.us Z:\CMO\2009 Council Agendas\M090223\S0902237.doc ATTACHMENT A RESOLUTION NO. _____ A RESOLUTION APPROVING A MULTIPLE-UNIT PROPERTY TAX th EXEMPTION FOR RESIDENTIAL PROPERTY LOCATED AT 10 AVENUE AND CHARNELTON STREET, EUGENE, OREGON (W&G DEVELOPMENT CO./APPLICANT). The City Council of the City of Eugene finds that: th A. The Eugene Urban Renewal Agency is the owner of real property located at 10 Avenue and Charnelton Street, Eugene, Oregon, more particularly described in the legal description attached as Exhibit A (”the property”). The Eugene Urban Renewal Agency and W&G Development Co. are parties to a pending purchase and sale agreement through which W&G Development Co. will acquire ownership of the property. The sale is expected to close not later than March 31, 2009. W&G Development Co. has submitted an application pursuant to the City’s Multiple-Unit Property Tax Exemption Program (Sections 2.945 and 2.947 of the th Eugene Code, 1971), with respect to residential units identified as 10 and Charnelton (“the project”) to be constructed on the property. B. A display ad soliciting recommendations or comments from the public was published in the Register-Guard on December 30, 2008, and advised that written comments would be accepted for a period of 30 days from the date of publication. Recommendations or comments were also solicited from the Planning Commission, and other interested City departments, agencies, and neighborhood groups. No comments were received in response to the ad. C. The Report and Recommendation attached as Exhibit B, which was prepared by the Executive Director of the Planning and Development Department (“the Director”) as designee of the City Manager, recommends that the application be approved and the exemption granted. In making the recommendation, the Director found that the applicant submitted all materials, documents and fees required by the application and the City as set forth in Section 2.945 of the Eugene Code, 1971, and is in compliance with the policies set forth in the Standards and Guidelines adopted by Administrative Order No. 53-04-03-F. D. The application provides that the project will consist of 60 one-bedroom units, two two-bedroom units, and 21 three-bedroom units, which are not designed for, nor will be used as, transient accommodations. In addition, the project integrates 51,181 square feet of commercial/retail space which is not included in this request for a tax exemption. E. Granting the application is in the public interest. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Resolution – Page 1 of 2 Section 1. The City Council hereby adopts the above findings and the findings of the Executive Director of the Planning and Development Department included in the Report and Recommendation attached as Exhibit B, and approves the application of W&G Development Co. for an ad valorem property tax exemption under the City’s Multiple-Unit Property Tax th Exemption Program for the residential units to be constructed at 10 Avenue and Charnelton Street, Eugene, Oregon, and more particularly described in the legal description attached as Exhibit A, subject to the following conditions: 1. W&G Development Co. shall comply with all of the terms of the Purchase and Sale Agreement between the Eugene Urban Renewal Agency and W&G Development Co., executed on November 25, 2008, including any amendments to that Agreement. 3. The project shall be completed on or before January 1, 2012. 4. The project shall include all of the public benefit design elements as required in the Standards and Guidelines and described in Section 2.2 of the Report and Recommendation attached as Exhibit B. 5. Upon completion, the project shall be in conformance with all local plans and planning regulations, including special or district-wide plans developed and adopted pursuant to ORS Chapters 195, 196, 197, 215 and 227. Section 2. The residential units to be constructed upon the property described in Section 1 above are declared exempt from local ad valorem property taxation beginning July 1 of the year following certification of completion and continuing for a continuous period of ten years unless earlier terminated in accordance with the provisions of Section 2.947 of the Eugene Code, 1971. Section 3. The City Manager, or the Manager’s designee, is requested to forward a copy of this Resolution to the applicants, and to the other affected taxing districts, within ten days of adoption, and to cause a copy of this Resolution to be filed with the Lane County Assessor on or before April 1 following the date that this Resolution becomes effective. Section 4. This Resolution shall become effective upon the conveyance of the property from the Eugene Urban Renewal Agency to W&G Development Co. In the event that such conveyance does not occur prior to July 1, 2009, this Resolution is automatically repealed. The foregoing Resolution adopted the ____ day of ___________, 2009. ___________________________________ City Recorder 00217953.DOC Resolution – Page 2 of 2 Exhibit A: LEGAL DESCRIPTION th 10 and Charnelton Development Site Parcel 1 Lots 6 and 7, Block 4 of MULLIGAN’S ADDITION TO THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, in Lane County, Oregon. Parcel 2 That certain parcel of land located at the intersection of the alley between Charnelton and Olive th and North of 10 Avenue, being more particularly described as follows: Beginning at the Southeast corner of Lot 7, Block 4, MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence East along the th Northerly line of 10 Street, 14 feet to the Southwest corner of Lot 8, Block 4 in said MULLIGANS’ ADDITION ON THE WEST; thence North 160 feet along the west lines of said lot 8 and lot 5 to the Northwest corner of said Lot 5 in MULLIGAN’S ADDITION ON THE WEST; thence West 14 feet to the Northeast corner of lot 6 in said MULLIGAN’S ADDITION ON THE WEST; thence South along the Easterly line of said lots 6 and 7, 160 feet to the point of beginning, in Eugene, Lane County, Oregon. Parcel 3 Beginning at the Northwest corner of Lot 5, Block 4 MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence South 160 feet along the west line of said Lot 5 and Lot 8, Block 4 to the Southwest corner of said Lot 8 in said MULLIGAN’S ADDITION ON THE WEST; thence East along the South line of said Lot 8 and the South line of Lot 4, Block I of MULLIGAN’S DONATION as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, to the Southeast corner of said Lot 4; thence North 160 feet along the East line of said Lot 4 and Lot 3 to the Northeast corner of said Lot 3, Block I of MULLIGAN’S DONATION; thence West along the North line of said Lot 3 of MULLIGANS’ DONATION and along the North line of said Lot 5 of MULLIGAN’S ADDITION ON THE WEST to the point of beginning, all in Eugene, Lane County, Oregon. (Map No. 17-03-31-13 Tax Lot No. 5100, 5200, 5300, and 6600) Exhibit A: LEGAL DESCRIPTION th 10 and Charnelton Development Site Parcel 1 Lots 6 and 7, Block 4 of MULLIGAN’S ADDITION TO THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, in Lane County, Oregon. Parcel 2 That certain parcel of land located at the intersection of the alley between Charnelton and Olive th and North of 10 Avenue, being more particularly described as follows: Beginning at the Southeast corner of Lot 7, Block 4, MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence East along the th Northerly line of 10 Street, 14 feet to the Southwest corner of Lot 8, Block 4 in said MULLIGANS’ ADDITION ON THE WEST; thence North 160 feet along the west lines of said lot 8 and lot 5 to the Northwest corner of said Lot 5 in MULLIGAN’S ADDITION ON THE WEST; thence West 14 feet to the Northeast corner of lot 6 in said MULLIGAN’S ADDITION ON THE WEST; thence South along the Easterly line of said lots 6 and 7, 160 feet to the point of beginning, in Eugene, Lane County, Oregon. Parcel 3 Beginning at the Northwest corner of Lot 5, Block 4 MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence South 160 feet along the west line of said Lot 5 and Lot 8, Block 4 to the Southwest corner of said Lot 8 in said MULLIGAN’S ADDITION ON THE WEST; thence East along the South line of said Lot 8 and the South line of Lot 4, Block I of MULLIGAN’S DONATION as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, to the Southeast corner of said Lot 4; thence North 160 feet along the East line of said Lot 4 and Lot 3 to the Northeast corner of said Lot 3, Block I of MULLIGAN’S DONATION; thence West along the North line of said Lot 3 of MULLIGANS’ DONATION and along the North line of said Lot 5 of MULLIGAN’S ADDITION ON THE WEST to the point of beginning, all in Eugene, Lane County, Oregon. (Map No. 17-03-31-13 Tax Lot No. 5100, 5200, 5300, and 6600) ATTACHMENT B RESOLUTION NO. _____ A RESOLUTION DENYING A MULTIPLE-UNIT PROPERTY TAX th EXEMPTION FOR RESIDENTIAL PROPERTY LOCATED AT 10 AVENUE AND CHARNELTON STREET, EUGENE, OREGON (W&G DEVELOPMENT CO./APPLICANT). The City Council of the City of Eugene finds that: th A. The Eugene Urban Renewal Agency is the owner of real property located at 10 Avenue and Charnelton Street, Eugene, Oregon, more particularly described in the legal description attached as Exhibit A (”the property”). The Eugene Urban Renewal Agency and W&G Development Co. are parties to a pending purchase and sale agreement through which W&G Development Co. will acquire ownership of the property. The sale is expected to close not later than March 31, 2009. W&G Development Co. has submitted an application pursuant to the City’s Multiple-Unit Property Tax Exemption Program (Sections 2.945 and 2.947 of the th Eugene Code, 1971), with respect to residential units identified as 10 and Charnelton (“the project”) to be constructed on the property. B. A display ad soliciting recommendations or comments from the public was published in the Register-Guard on December 30, 2008, and advised that written comments would be accepted for a period of 30 days from the date of publication. Recommendations or comments were also solicited from the Planning Commission, and other interested City departments, agencies, and neighborhood groups. No comments were received in response to the ad. C. The Report and Recommendation attached as Exhibit B, which was prepared by the Executive Director of the Planning and Development Department (“the Director”) as designee of the City Manager, recommends that the application be approved and the exemption granted. In making the recommendation, the Director found that the applicant submitted all materials, documents and fees required by the application and the City as set forth in Section 2.945 of the Eugene Code, 1971, and is in compliance with the policies set forth in the Standards and Guidelines adopted by Administrative Order No. 53-04-03-F. D. The project consists of the development of 60 one-bedroom units, two two- bedroom units, and 21 three-bedroom units, which are not designed for, nor will be used as, transient accommodations. In addition, the project integrates 51,181 square feet of commercial/retail space which is not included in this request for a tax exemption. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Resolution – Page 1 of 2 Section 1. Notwithstanding the above findings and the Report and Recommendation of the Executive Director of the Planning and Development Department attached as Exhibit B, the City Council denies the application of W&G Development Co. for an ad valorem property tax exemption under the City’s Multiple-Unit Property Tax Exemption Program for the residential th units to be constructed at 10 Avenue and Charnelton Street, Eugene, Oregon, and more particularly described in the legal description attached as Exhibit A. Section 2. The City Manager, or the Manager’s designee, is requested to forward a copy of this Resolution to the applicant within ten days. Section 3. This Resolution shall become effective immediately upon its adoption. The foregoing Resolution adopted the ____ day of ___________, 2009. ___________________________________ City Recorder 00217953.DOC Resolution – Page 2 of 2 Exhibit A: LEGAL DESCRIPTION th 10 and Charnelton Development Site Parcel 1 Lots 6 and 7, Block 4 of MULLIGAN’S ADDITION TO THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, in Lane County, Oregon. Parcel 2 That certain parcel of land located at the intersection of the alley between Charnelton and Olive th and North of 10 Avenue, being more particularly described as follows: Beginning at the Southeast corner of Lot 7, Block 4, MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence East along the th Northerly line of 10 Street, 14 feet to the Southwest corner of Lot 8, Block 4 in said MULLIGANS’ ADDITION ON THE WEST; thence North 160 feet along the west lines of said lot 8 and lot 5 to the Northwest corner of said Lot 5 in MULLIGAN’S ADDITION ON THE WEST; thence West 14 feet to the Northeast corner of lot 6 in said MULLIGAN’S ADDITION ON THE WEST; thence South along the Easterly line of said lots 6 and 7, 160 feet to the point of beginning, in Eugene, Lane County, Oregon. Parcel 3 Beginning at the Northwest corner of Lot 5, Block 4 MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence South 160 feet along the west line of said Lot 5 and Lot 8, Block 4 to the Southwest corner of said Lot 8 in said MULLIGAN’S ADDITION ON THE WEST; thence East along the South line of said Lot 8 and the South line of Lot 4, Block I of MULLIGAN’S DONATION as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, to the Southeast corner of said Lot 4; thence North 160 feet along the East line of said Lot 4 and Lot 3 to the Northeast corner of said Lot 3, Block I of MULLIGAN’S DONATION; thence West along the North line of said Lot 3 of MULLIGANS’ DONATION and along the North line of said Lot 5 of MULLIGAN’S ADDITION ON THE WEST to the point of beginning, all in Eugene, Lane County, Oregon. (Map No. 17-03-31-13 Tax Lot No. 5100, 5200, 5300, and 6600) Exhibit A: LEGAL DESCRIPTION th 10 and Charnelton Development Site Parcel 1 Lots 6 and 7, Block 4 of MULLIGAN’S ADDITION TO THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, in Lane County, Oregon. Parcel 2 That certain parcel of land located at the intersection of the alley between Charnelton and Olive th and North of 10 Avenue, being more particularly described as follows: Beginning at the Southeast corner of Lot 7, Block 4, MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence East along the th Northerly line of 10 Street, 14 feet to the Southwest corner of Lot 8, Block 4 in said MULLIGANS’ ADDITION ON THE WEST; thence North 160 feet along the west lines of said lot 8 and lot 5 to the Northwest corner of said Lot 5 in MULLIGAN’S ADDITION ON THE WEST; thence West 14 feet to the Northeast corner of lot 6 in said MULLIGAN’S ADDITION ON THE WEST; thence South along the Easterly line of said lots 6 and 7, 160 feet to the point of beginning, in Eugene, Lane County, Oregon. Parcel 3 Beginning at the Northwest corner of Lot 5, Block 4 MULLIGAN’S ADDITION ON THE WEST, as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records; thence South 160 feet along the west line of said Lot 5 and Lot 8, Block 4 to the Southwest corner of said Lot 8 in said MULLIGAN’S ADDITION ON THE WEST; thence East along the South line of said Lot 8 and the South line of Lot 4, Block I of MULLIGAN’S DONATION as platted and recorded in Book A, Page 122, Lane County Oregon Plat Records, to the Southeast corner of said Lot 4; thence North 160 feet along the East line of said Lot 4 and Lot 3 to the Northeast corner of said Lot 3, Block I of MULLIGAN’S DONATION; thence West along the North line of said Lot 3 of MULLIGANS’ DONATION and along the North line of said Lot 5 of MULLIGAN’S ADDITION ON THE WEST to the point of beginning, all in Eugene, Lane County, Oregon. (Map No. 17-03-31-13 Tax Lot No. 5100, 5200, 5300, and 6600) ATTACHMENT C WG Development MUPTE Application Staff Pro Forma Analysis Applicant WG Development th 10 & Charnelton Project 541 Willamette St., Ste. 106 Eugene, OR 97401 Sources Total Cost EQ $ 9,579,68127% Permanent Debt$ 25,900,61973% Total project $ 35,480,300 Pro-Forma Without MUPTEYear 1Year 2Year 10 Rent Income$ 3,095,179$ 3,157,083$ 3,699,025 - Vacancy (5%)$ 154,759$ 157,854$ 184,951 = Effective Gross Rent$ 2,940,420$ 2,999,228$ 3,514,074 - Operating Exp (25%)$ 773,795$ 789,271$ 924,756 = NOI $ 2,166,625$ 2,209,958$ 2,589,318 - Debt Service$ 2,050,301$ 2,050,301$ 2,050,301 = CF $ 116,324$ 159,656$ 539,016 Cash on Cash Return 1%2%6% Value $ 32,098,000$ 32,740,000$ 38,360,000 Debt Coverage Ratio 1.06 The pro-forma uses conservative assumptions about property value growth and market assumptions about vacancy and operating expenses. The model assumes that assessed property values increase by 2% per year. The vacancy rate is assumed at 5% of rental income and operating expenses are estimated at 25% of rental income, both standard assumptions in financial underwriting. The above listed financial information is based on projections prior to financing, tenanting, and construction. The cap rate was estimated at 6.75%. Conclusion The above Pro-Forma for WG shows three key reasons that the project would not be built without MUPTE. First, the debt coverage ratio is low at 1.06 instead of the common bank 1 preference for 1.25 or higher. Second, the perceived risk is high demonstrated by the Cash on 1 Debt Coverage Ratio = Net Operating Income (NOI) divided by debt service Cash return well below the market-expected 10% to 15% level. The Cash on Cash only reaches 2 six percent by year 10. Third, the project valuation is well below the amount needed to qualify 3 for conventional financing. At project stabilization, the projected value of the property is $32 million. The total cost of the project is $35.5 million and requires $25.9 million in bank debt. At 70% loan to value, the project needs to be valued at $37 million to qualify, a valuation gap of $5 million. The Pro-Forma below shows that the project improves with the MUPTE. The debt service is 1.15. The Cash on Cash reaches 8% by year ten, only slightly below the market expectation. The project valuation is 74% loan to value, which is closer to loan to value ratios currently in the market. Year 1Year 2Year 10 With MUPTE Rent Income$ 3,095,179$ 3,157,083$ 3,699,025 - Vacancy$ 154,759$ 157,854$ 184,951 = Effective Gross Rent$ 2,940,420$ 2,999,228$ 3,514,074 - Operating Exp$ 773,795$ 789,271$ 924,756 - Property Tax $ (187,680)$ (191,434)$ (224,295) (saved by MUPTE) = NOI $ 2,354,305$ 2,401,391$ 2,813,613 - Debt Service$ 2,050,301$ 2,050,301$ 2,050,301 = CF $ 304,004$ 351,090$ 763,311 Cash on Cash Return 3%4%8% Value $ 34,878,597$ 35,576,169$ 41,683,152 Debt Coverage Ratio 1.15 2 Cash Flow divided by the equity that is invested by the developer 3 The value is determined by NOI divided by the capitalization rate. 2