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EXHIBIT 2 <br />Judson Brown, City of Santa Ana August 26, 2019 <br />Cornerstone Apartments: Updated Resyndication Proposal Page 4 <br />2. The deferred Developer Fee amount will be reduced by $806,543. <br />Affordable Rent Standards <br />In November 2018 the City and Authority agreed to modify the affordability covenants <br />to allow for the use of Tax Credit rents. During the intervening period, the Bond interest <br />rate has been reduced, the amortization period has been extended by five years, and <br />the 2019 Orange County incomes have gone into effect. The combination of these <br />factors increases the supportable Bond funding to $11.1 million. <br />The estimated impact created by reverting to the H&SC Section 50053 rents along with <br />the current underwriting standards is presented in the following table: <br />Income <br />Gross Rent $1,451,200 <br />Miscellaneous Income 18,100 <br />Vacancy & Collection Allowance @ 5% (73,500) <br />Effective Gross Income (EGI) $1,395,900 <br />Operating Expenses ($898,500) <br />Stabilized Net Operating Income $497,400 <br />Debt Service Coverage Ratio 1.15 <br />Income Available for Debt Service $432,500 <br />Supportable Mortgage @ 4% Interest $8,623,000 <br />Using the current underwriting standards and the H&SC Section 50053 rents generates a <br />supportable Bond issue of approximately $8.7 million. This is approximately $2.48 <br />million less than the Bond supported using Tax Credit rents. In other words, the use of <br />H&SC Section 50053 rents wipes out the increase in the supportable Bond issue that <br />was generated by the current underwriting standards. <br />If the City and Authority choose to revert to the H&SC Section 50053 rents, the <br />prepayment of the City Loan will need to remain at the previously agreed upon amount <br />of $500,000. In addition, the deferred portion of the Developer Fee will need to <br />1908006.SNA:KHH <br />19190.017.003 <br />