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EXHIBIT 2 Gross Revenues do not include the proceeds of any loans or capital contributions made to Owner, or proceeds from a sale or re-finance of the Property. (b) "Operating Expenses" shall mean: (i)respect to the ,Senior Loan(s); payments of principal and interest on or with payments of any other amounts on or with respect to the Senior Loan(s) beyond principal and interest(i.e. optional payments) as approved by the City; (iii) a property management fee no greater than sixty-five dollars ($65)/per unit/per month, increased annually by the lesser of: (A)three percent (3%); or(B)prior Year CPI, beginning the year following the issuance of the first certificate of occupancy for the Project; j (iv) all other actual, reasonable cash operating j costs and expenses, calculated on an annual basis, that are directly attributable to managing and operating the Project and the Owner, including, without limiting the generality of the foregoing, the following: costs and expenses for real and personal property taxes, special assessments or similar charges; water, fuel, electricity and other utilities; heating, ventilation and air conditioning expenses; 3 labor; supplies; tools; equipment; insurance; advertising and marketing; accounting and legal fees; brokerage commissions and other leasing expenses; reasonable reserves for all anticipated expenses as approved by the City; and other such items constituting operation, maintenance and repair costs actually paid by the Owner, subject to the following conditions: I (1) Depreciation, amortization, and accrued principal and interest expenses on deferred payment debt and capital improvement expenditures shall not be considered Operating Expenses, except as otherwise provided herein. (2) Any expenses, compensation or fees paid to any affiliate of Owner shall only be included as Operating Expenses to the extent they are not in excess of the reasonable expenses, compensation or fees which would be payable to unrelated third parties in arms-length transactions for similar services in the Santa Ana, California area; and, (v) The cost of social services and other housing supportive services provided at the Project for the prior year in compliance with this Agreement. i' (c) The City reserves the right to at any time review and approve each or any annual budget during the Term hereof, and any changes to any said annual budget reasonably requested by the City shall be promptly implemented by Owner. Notwithstanding the foregoing, in no event shall Operating Expenses I City Council 16 — 68 5/19/2026