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Judson Brown, City of Santa Ana <br />EXHIBIT 5 <br />November 8, 2018 <br />Cornerstone Apartments Rehabilitation Analysis Page 2 <br />2. The very -low income rents must be calculated using the methodology defined in <br />H&S Section 50053. <br />The Project was structured as a partnership comprised of the developer as the General <br />Partner and the Tax Credit investor as a Limited Partner. It is important to understand <br />that the Limited Partner's role was limited to a passive investment that is tied to the tax <br />benefits provided by the Tax Credits and the related tax losses. As is typical, after the <br />initial 15 -year compliance period imposed by the Internal Revenue Service (IRS), the <br />Limited Partner chose to exit the partnership. <br />In May 2018, the City Council and the Authority Board approved JHC's request to <br />purchase the Limited Partner's interest in the Project. Following the purchase, JHC <br />proposed to form a new partnership for the purposes of obtaining new Bond financing <br />and resyndicating the Tax Credits. These funds are proposed to be used to pay for the <br />acquisition costs and to substantially rehabilitate the Project. <br />ANALYSIS <br />The KMA analysis evaluates the following components of the proposed transaction: <br />1. Does the proposed acquisition price represent the Project's fair market value? <br />2. Is JHC receiving any proceeds from the sale of the Project to the newly formed <br />partnership? <br />3. Is the proposed rehabilitation scope necessary for the continuing operation of <br />the Project in at a decent, safe and sanitary quality level? <br />4. Is the Developer Fee amount that is included in the Project's budget warranted? <br />5. JHC is requesting that the City and the Housing Authority modify the affordability <br />covenants to allow the rents to be based on the Tax Credit rents for households <br />at 50% of the AMI. These rents are published annually by the California Tax <br />Credit Allocation Committee (TCAC). <br />a. What is the average amount of the monthly rent increase per unit? <br />How will the proposed modification to the rent setting methodology <br />impact the rents paid by existing tenants? <br />1830020.8NA:KHH <br />19190.017.003 <br />80A-22 <br />