Millegan Creek Apartments- Financial Analysis
THE BORROWER -JP MULTIFAMILY INC.
The Development Expertise
JPI Multifamily Inc.(JPI) was founded in 1989 by John Carpenter and Frank Miller, who had worked together at Southland Financial. JPI, a first class developer, was known as a “merchant builder” meaning that they developed properties with the intention of selling rather than …show more content…
-The Texas Comptroller of Public Accounts projected job growth for the next two years to continue in the 3% to 3.2% range.
I recommend Fleet Bank to approve the loan based on the market analysis outlined above and the attached financial analysis. The highlights of ratios listed in Exhibit 1 as follows;
Cash on cash return 13.70%, IRRe 5YR Hold 26.48%, IRRo 5 YR Hold 16.62% and Cap Rate (in) 10.67%.
In the loan calculations the interest rates is taken as 8%. Considering that institutional buyers in the region were paying cap rates in the 8% to 9% for the new apartments, JPI can achieve its investment strategy of obtaining at least 150 basis point for its investments.
The debt service coverage ratio (DSCR) in commercial real estate finance refers to the primary measure to determine if a property will be able to sustain its debt based on cash flow. Typically most commercial banks require the ratio of 1.15-1.35 times (net operating income or NOI/annual debt service) to ensure cash flow sufficient to cover loan payments is on an ongoing basis. The requested debt coverage ratio by Fleet Bank is 1.25. Based on the calculations the Millegan Creek project has a debt coverage ratio of 1.4495. Therefore, the project meets the minimum debt coverage ratio.
Loan to value ratio