80A - HABITAT FOR HUMANITY GROUND LEASE

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EXHIBIT 2 Judson Brown, City of Santa Ana January 18, 2019 Lacy Street Project: Preliminary Financial Gap Analysis Page 10 As can be seen in the previous table, KMA estimates the total supportable silent second mortgage revenue for the two homes at $250,000. Given that this amount is greater than the City's proposed financial assistance amount of $231,000, there is sufficient silent second mortgage revenue to fully secure the City's financial assistance. It should be noted that both KMA and Habitat estimate the Project's total financial gap at more than $231,000. Given that Habitat has committed to fill any financial gap incurred above the City's $231,000 contribution, it is important to understand how that additional assistance can be structured. Based on current projections, the vast majority of any contribution made by Habitat will likely need to be structured as a grant to the Project. It is important to note that this calculation will need to be revisited once sales of the units commence. At that point, the appraised market values of the homes and the defined Affordable Sales Prices will be utilized to determine the silent second mortgage amounts. If there is insufficient silent second mortgage revenue to secure all of the City's financial assistance, a portion of the City's assistance may need to be structured as a grant. POLICY CONSIDERATIONS As a result of Habitat's discussions with French Park residents and the Design Committee, the architectural and design elements proposed to be included in the Project are similar to the standards utilized for custom home developments. Per Habitat, these design requirements will increase the residential building costs by approximately 25%. Furthermore, Habitat states that the additional architectural design and working drawings necessary for the custom home -type product will cost approximately $80,000 more than the architectural design work required for more typical Habitat projects. Based in part on these cost premiums, Habitat estimates the total construction costs at approximately $598,000 per unit or $374 per square foot of GBA (based on the assumption that no land costs are incurred). For comparison purposes, the construction costs for the 12 -unit Francis Xavier Project, which was recently approved by the City/Authority, were estimated at $352,800 per unit or $286 per square foot GBA. This represents an approximately 30% differential based on the per square foot of GBA estimates. It is also important to note that the estimated per unit construction costs, 1901009:SA:TRB 80A_22 19090.017.011