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EXHIBIT 1 <br />Judson Brown, City of Santa Ana <br />May 9, 2017 <br />Santa Ana Arts Collective Financial Feasibility <br />Facie 5 of 5 <br />1• Total Developer Fee $2,000,000 <br />> leas GP CapitaIContribution 910-0.1mc <br />> Equais Fee to be Paid in Cash (both current and deferred) $1,000,000 <br />> Less allowable deferred fee" AMQM <br />> Equals currant Developer Fat (.a, paid during development $749,474 <br />Process) <br />The deferred Fee Is calculated as the net present value (NPV) of the amounts available to pay deferred developer fee <br />payments over 14 years, discounted ata 4% estimated cap rate for Class A multifamily properties in Santa Ana (Source; <br />Marcus & Mllllchap Multifamlly Research Market Report, Fourth Quarter 2016) <br />Financing Deflclt <br />Based on the Sources and Uses as adjusted by CSG, the Project financing demonstrates a ($1,481,215) <br />financing shortfall. The Developer must identify other financing sources— either the City or other sources, <br />such as Federal Home Loan Banks Affordable Housing Program (AHP) — to alleviate the Financing <br />shortfall. <br />Expenses and Operating Pro Forma <br />The Developer proposes annual operating expenses per unit of approximately $6,725 per unit not <br />including reserves, and approximately $7,325 per unit including reserves. CSG has not examined specific <br />support for these estimates, but they appear reasonable based on our recent experience with other <br />projects. <br />The Developer's proposed operating pro forma uses standard underwriting requirements for tax -credit <br />and bond financing projects: annual Income inflation at 2.5aA and annual expense Inflation of 3,5%; <br />vacancy of 5% annually. These underwriting assumptions along with calculated debt service on the CCRC <br />senior permanent mortgages results in an Initial year debt service coverage (DCR) of 1.15, with increasing <br />DCR each yearthere after. The Developer's proposed operating pro forma indicates a healthy project <br />from an operational perspective. <br />CONCLUSION <br />The Project, as analyzed using most recent C7CAC rents and certain budget modifications as proposed <br />by CSG, demonstrates a financial shortfall of ($1,481,215). The City may choose to fill this financing deficit <br />on behalf of the Developer, or require the Developer to pursue other sources. <br />CSGJadvisors SAN FRANCI8CO LOS ANGELES <br />80A-47 <br />NEW YORK <br />