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Judson Brown, City of Santa Ana February 21, 2019 <br />Budget Inn: Preliminary Financial Gap Analysis Page 9 <br />Financial Gap Calculation <br />The financial gap is estimated by deducting the available outside funding sources from <br />the Project's total development costs. The outside funding sources anticipated to be <br />received by the Project are described in the following sections of this memorandum. <br />Available Outside Funding Sources <br />Permanent Loan <br />To estimate the maximum permanent loan that can be supported by the Project's NO], <br />KMA assumed that the loan would underwritten be based on the following <br />requirements: <br />1. A 115% debt service coverage ratio; <br />2. A 5.75% interest rate; and <br />3. A 35 -year amortization period. <br />KMA estimates that the Project's stabilized NOI can support a $6.40 million permanent <br />loan. <br />Tax Credit Proceeds <br />KMA estimates the net Federal Tax Credit proceeds at $15.59 million. This estimate is <br />calculated based on the following assumptions: <br />1. The Project's eligible Tax Credit basis is equal to the lesser of the depreciable <br />costs for the 91 Tax Credit units, or the threshold basis limits established by <br />TCAC. In this case, the depreciable costs are less than the threshold basis limits <br />as follows: <br />a. The Project's acquisition basis is estimated at $12.10 million; and <br />The Project's construction cost basis is estimated at $12.82 million. <br />2. To increase the competitiveness of the Project's Tax Credit application in the <br />TCAC tiebreaker process, the Developer is proposing to voluntarily exclude $2.49 <br />million from the Project's eligible construction cost Tax Credit basis. <br />TRB <br />80B_27 199090.0 7.009 <br />19090.017.009 <br />