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City of Roseville, Minnesota TIF District No. 17: Twin Lakes Apartment LLC Proposed Project October 16, 2012 Page 7 Conclusion The developer has indicated that the assistance is necessary for the project to proceed and would use a City TIF Note to provide the project with sufficient annual cash flow to meet the minimum debt service coverage requirements. The developer provided terms in the revised information showing a debt service coverage ratio of 1.10 assuming a stabilized project and a project return on equity of 2.11 %. As we had indicated earlier in this memo, based on current assumptions it would take the full remaining term of the district to meet the request. In some cases, there may be opportunities to fill a portion of the gap by other means — thereby reducing the required TIF assistance and/or term. For example, a developer fee may be reduced and/or partially deferred to be paid from future cashflows, if supported. However in this case the stated developer fee is modest. Rental rates might also be able to be increased by more than a proposed inflation rate if the project proves successful, which could have a fairly significant impact on the projected rates of return. However the market will ultimately dictate what the rental rates will be for this project. A decrease in project costs and/or operating costs may also have a positive impact on the projected returns. Lastly, a reduction in the TIF note interest rate (from 4.5%) may also be considered. Although we calculated the projected revenues for the remaining term of the district, the City could consider providing assistance for a sho�ter term and/or smaller overall amount, based on identified TIF-eligible project costs that meet the City's public purpose and objectives. In addition, the developer has indicated it is in the process of receiving a letter of commitment from its lender that will provide additional details on the project financing. We recommend the city consider this letter when reviewing the request and determining the need for financial assistance. Thank you for the opportunity to be of assistance to the City of Roseville. Please contact me at (651) 223-3036 or mhuot a(�.springsted.com with any questions or comments.