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EXHIBIT 5 <br />Judson Brown, City of Santa Ana November 8, 2018 <br />Cornerstone Apartments Rehabilitation Analysis Page 5 <br />Affordable Rent Calculation Methodology Issues <br />Average Rent Increase <br />Prior to the JHC submission of a resyndication proposal, the City had informed JHC that <br />the rents being charged at the Project did not comply with the rent calculation <br />methodology imposed by H&SC Section 50053. As part of the resyndication proposal, <br />JHC is requesting that the affordability covenants be modified to allow the use of TCAC <br />rents at 50% of AMI. If this modification is approved, the average rent paid by the <br />tenants is estimated to increase by an average of $25 per month over the amounts <br />currently being paid. <br />Impact of the Proposed Rent Increase on the Tenants <br />The proposed rehabilitation scope includes the installation of a solar photovoltaic <br />system. It is anticipated that that this system will result in decreased electricity costs for <br />the tenants, and will protect the tenants from potential increases over time. Utilities <br />cost reductions would reduce the impact of the rent increases being proposed by JHC. <br />Financial Feasibility <br />The rent increase being proposed by JHC is projected to increase the supportable.Bond <br />amount by approximately $800,000. The increased Bond funds would be used to make <br />an upfront payment of $500,000 on the City Loans, with the balance dedicated to <br />rehabilitation costs. Without the rent increase it would not be possible to provide any <br />upfront payment of the City Loans, and the rehabilitation scope would need to be <br />reduced. <br />Subordination Issues <br />JHC is proposing that the City and Authority allow the City Loans to be subordinated to a <br />maximum of $8.7 million in Bonds.' This is $4.75 million more than the $3.95 million in <br />existing Bond debt. To evaluate this issue, KMA undertook the following analyses: <br />1. A 55 -year cash flow projection for the transaction being proposed by JHC; and <br />'The Bond amount is currently estimated at $8.63 million. <br />1810020.SNA:KHH <br />19190.017.003 <br />