%EHLERS
<br />PUBLIC FINANCE ADVISORS
<br />• Developer Fee: The developer fee of $3,432,156 is 3.9% of total development costs. This is
<br />within the typical industry range of 3-5% for rental projects. The proposed fee is within the
<br />typical range.
<br />• Return on Investment - The project's average yield on cost return on investment (net
<br />operating income / total development costs) with 20 years of TIF assistance is 7%.
<br />Developers typically need a yield on cost of between 6.5% to 7% for feasibility. Since the
<br />project reaches this level within 20 years, we conclude TIF payments can stop at this point.
<br />Phase 2 TIF Request
<br />The Developer requested $4.68 million in tax increment financing (TIF) to make Phase 2 financially
<br />feasible. Based on the results of the pro forma analysis, we conclude the project would require
<br />$3.631 million in TIF assistance to achieve financial feasibility, which is a projected 20 years of TIF
<br />payments. The Developer determined they can proceed with the recommended level of
<br />assistance. The table below depicts the proposed sources and uses for the project.
<br />SOURCES
<br />First Mortgage
<br />TIF Mortgage (Note)
<br />Equity
<br />Fundraising
<br />TOTAL SOURCES
<br />Amount Pct. Per Unit
<br />40,297,092 58.8% 223,873
<br />3,631,000 5.3% 20,172
<br />20,705,611 30.2% 115,031
<br />3,905,000 5.7% 21,694
<br />68,538,703 100% 380,771
<br />USES
<br />Acquisition Costs
<br />Construction Costs
<br />Professional Services
<br />Financing Costs
<br />Developer Fee
<br />Cash Accounts/Escrows/Reserves
<br />TOTAL USES
<br />Phase 2 Project and Pro Forma Analysis:
<br />Amount Pct. Per Unit
<br />2,070,000 3.0% 11,500
<br />51,214,567 74.7% 284,525
<br />9,236,520 13.5% 51,314
<br />2,424,672 3.5% 13,470
<br />2,332,227 3.4% 12,957
<br />1,260,717 1.8% 7,004
<br />68,538,703 100% 380,771
<br />• Project Financing: The Developer proposes to finance Phase 2 with a combination of debt
<br />and equity. The project assumes 64% debt financing (including the TIF portion) and 30%
<br />equity. The remining portion will come through fundraising efforts. The proposed financing
<br />is acceptable for the project.
<br />• Total Development Costs (TDC): The TDC of the project is nearly $68.5 million or $380,771
<br />per unit. Projects like this one are generally ranging between $250,000 and $325,000 per
<br />unit. The cost of the 20 park homes brings up this cost, however. The Phase 2 buildings
<br />are within the market range.
<br />• Land Acquisition Costs: The proposed land acquisition cost is $2.07 million or
<br />approximately $11,500 per unit. We would expect the cost of land to be between $7,000
<br />and 15,000 per unit, so this land purchase price is acceptable for the project.
<br />BUILDING COMMUNITIES. IT'S WHAT WE DO.
<br />info@ehlers-inc.com yL) 1 (800) 552-1171
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