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EXHIBIT 3 <br />Judson Brown, City of Santa Ana January 3, 2019 <br />Santa Ana United Methodist Church: Financial Gap Analysis Page 5 <br />Ground Lease Discussion <br />The Site is owned by the Santa Ana United Methodist Church (Church). The Developer <br />will ground lease the Site from the Church for a term of 65 years. The annual ground <br />lease payment is set at an initial amount of $96,000 and is to be escalated at the lesser <br />of the following: <br />1. The Consumer Price Index for the Los Angeles -Long Beach -Anaheim region for All <br />Urban Consumers (CPI) as published by the United States Department of Labor; <br />or <br />2. Five percent (5%) per year. <br />The Developer provided an appraisal prepared by Curtis -Rosenthal, Inc on August 23, <br />2018, which estimated the Fee Simple Market Value of the Site (as vacant) at $4.70 <br />million, or approximately $63 per square foot of land. The annual ground rent payment <br />is set at $96,000 in the first year, which equates to approximately 2% of the appraised <br />value. Typically, ground lease payments are set between 6%-10% of fair market value, <br />and as such, the ground lease payment can be considered below market. However, it is <br />important to note that the ground lease payments will be paid before the Project's <br />residual receipts are calculated. As a result, it is unlikely that the City's loan will be fully <br />repaid by Year 55. <br />Direct Costs <br />The direct costs assume that the Project will not be subject to State of California and/or <br />Federal Davis Bacon prevailing wage requirements. The direct costs applied in this <br />analysis can be summarized as follows: <br />1. The Project will include a number of improvements to increase the <br />competitiveness of the AHSC application. The Developer and the City are <br />currently negotiating the necessary AHSC improvements; however, it will likely <br />include a combination of sidewalk improvements, crosswalks/safety measures, <br />bikeway improvements, transit improvements, and bus shelter improvements. <br />The Developer estimates the costs of the AHSC Elements and Transit <br />Improvements at $4.35 million. If this estimate changes, the KMA analysis will <br />need to be updated accordingly. <br />1812009:SA:TRB <br />19090.017.008 <br />