Autumn on Lake Audobon

Autumn on Lake Audobon
Autumn on Lake Audubon, Photo by Alison Kamat

Monday, March 2, 2015

The Long Term Cost of an RA Tetra Properties Acquisition: The Impact on your RA HOA Fee

In its "fact sheet," RA offers a five-year look at the revenues and costs associated with the acquisition of the Tetra Properties across Baron Cameron Avenue from the Lake Anne Village Center.  Of course, the consequences of the purchase are only beginning to kick in at the five-year point presented in its pro forma financial analysis.

We have taken RA's cost/revenue information and assumptions and tried to extrapolate the projected added costs to Reston Association members through the next 20 years.  Here are the few assumptions we have added to fill out the 20-year forecast.
  • RA can make a "balloon payment" of the $1.55MM balance on the mortgage at the end of 10 years or it can refinance for 10 years at either 5% or 7% per annum.
  • The number of RA members paying this increases by 120 billable households per year throughout the next two decades, rising from its current 21,618 to 24,018 in 2035. 
  • The 10-year mortgage interest rates available a decade from now will range between 5% and 7% per annum.
  • RA will need to make an additional $100,000 in capital improvements in the second decade of ownership.
Our results are presented in the table below. 

Here are a few findings we think are significant, but you may find others by looking at the table:
  • On operating costs alone, the acquisition will add more than two dollars per year ($20-plus over the decade) to RA homeowner fees.
  • If RA chooses to pay off the balance at the end of the tenth year, it will have to add an average of $9 per year to HOA fees each year for the decade.  While this is the most expensive way to handle the financing of a Tetra purchase over the first decade, the positive net operating income in the second decade and the absence of a need to pay a mortgage makes it the least expensive way to purchase Tetra in the long term, costing each homeowner roughly $372 in additional HOA fees over 20 years.
  • If RA pursues a 10-year mortgage for the second decade, that will add a total if $3-$4 per year to HOA fees depending on the mortgage interest rate.
  • Overall, the acquisition will add a little more than $2 per year to their annual fees in the first decade and $3-$4 per year to their HOA fees per year in the second decade.  
  • On average, Restonians will be paying about an extra $3 per year or a total addition of about $60 in addtional HOA fees in the 20th year if this RA referendum matter is approved.
  • The addition of $3 per year to RA HOA fees means that Restonian households will pay a total of roughly $600 in additional HOA fees to cover the expenses of the Tetra property over the next 20 years.
 

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