Laserfiche WebLink
EXHIBIT 5 <br />Judson Brown, City of Santa Ana November 8, 2018 <br />Cornerstone Apartments Rehabilitation Analysis Page 7 <br />As can be seen in the preceding table, if the rehabilitation costs are funded solely from <br />the cash flow generated by the Project over a 35 -year period, the supportable costs are <br />projected to be limited to $3.45 million. This is approximately $4.7 million less than the <br />estimated direct costs to complete the proposed rehabilitation scope. In other words, <br />only 42% of the proposed rehabilitation scope could be completed under this scenario. <br />The JHC proposal includes an upfront payment of $500,000 to reduce the principal <br />balance of the City Loans. When the net present value of the residual receipts <br />payments are included, the present value of the City Loans repayment is estimated at <br />$542,000. Comparatively, the net present value of the payments under the alternate <br />scenario are projected at $88,000. <br />It should be noted that under both alternatives, the available cash flow is projected to <br />be insufficient to cover the 3% simple interest that currently accrues on the City Loans. <br />At the end of the 55 -year period, the outstanding principal and interest balance is <br />projected at $21.1 million under the structure proposed by JHC, and $18.1 million under <br />the alternate scenario. <br />TRANSACTION STRUCTURING RECOMMENDATIONS <br />Based on the results of the preceding analysis, KMA offers the following <br />recommendations for the financial components of the transaction: <br />1. The 42 City Loans should be consolidated into three loans that are tied to the <br />funding sources that were originally used to fund the loans. <br />2. The City and Authority should agree to subordinate the City Loans to a maximum <br />of $8.7 million in Bonds. <br />3. The City Loans should continue to be repaid from 50% of the residual receipts <br />generated by the Project. <br />4. Residual receipts should be defined as cash flow remaining after payment of <br />approved cash operating expenses, Bond debt service, repayment of the <br />deferred Developer Fee, and payment of approved Limited and General Partner <br />asset management fees. <br />1830020.SNA:KHH <br />19190.017.003 <br />80A-27 <br />