25C - AGMT - INCREASE PERM LOAD DEPOT AT SANTIAGO

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Judson Brown, City of Santa Ana EXHIBIT 2 September 7, 2018 Depot at Santiago: Permanent Loan Analysis Page 2 1. Increases in construction costs which have affected the construction industry throughout Southern California; Increases in indirect costs such as architecture, engineering, and permits and fees costs; and 3. Increases in financing costs due to extending the construction loan for six additional months due to extensive rain and flooding in Orange County during the Winter months between December 2016 and February 2017. However, the Project's current net operating income (NO]) is able to support a $6.42 million permanent loan, which is $993,000 higher than previously estimated. This increased permanent loan amount is due to increases in the Orange County Area Median Income, which allowed for the 2018 affordable rents to be higher than the affordable rents used to estimate the initial permanent loan amount. The additional permanent loan proceeds will be used to cover the increase in construction costs and/or pay down the deferred Developer Fee amount. As such, the Developer is requesting that the City approve a permanent loan amount of up to $6.42 million. CASH FLOW ANALYSES To evaluate the Developer's request, KMA analyzed two cash flow scenarios. The first cash flow scenario utilizes the assumptions from the Developer's 2016 pro forma (2016 Financing Assumptions). The second cash flow scenario utilizes current assumptions from the Developer's 2018 pro forma (2018 Financing Assumptions). The following summarizes the pertinent conclusions of the KMA cash flow analyses: 2016 Financing Assumptions The cash flow analysis based on the 2016 financing assumptions can be summarized as follows: 1. The Deferred Developer Fee is set at $693,000 and is estimated to be repaid by Year 10. 1809002:SA:TRB 19090.017.006 25C-8