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EXHIBIT 1 Judson Brown, City of Santa Ana March 1, 2017 Santa Ana Arts Collective: Financial Gap Analysis Page 3 which equates to an approximately $7.6 million increase In development costs. The Developer provided the following reasons for the increase in development costs; 1. The Project Includes the acquisition of an existing office building that was 50% occupied at the time of purchase. Many of these tenants had termination options in their leases, which the Developer did not anticipate. Relocation costs were underestimated by approximately $828,000. 2. The AHSC Program is requiring a $1.29 million bike lane as a part of the funding commitment that was not Included In the original proposal. However, Itis importahtto note that the AHSC Program is providing a $1.29 million grant to off -set these costs. 31 The scope of construction necessary to convert the existing office building Into a residential use was underestimated in the original proposal. 4. Labor and materials costs have Increased slgnlficantly over previous years, Asa result, current cost estimates are substantially higher than the cast estimates obtained for the original proposal. KMAconcurs with statement. Tax Credit Equity Rate Decreases Due to uncertainties related to prospective corporate tax changes, the financial markets are currently experiencing substantiafvolatility, This uncertainty is creating direct impacts on the Tax Credit equity markets, both In terms of demand and pricing. Given this uncertainty, Tax Credit equity rates have dropped significantly. The Project was previously assuming a Tax Credit equity rate of $1.07 per gross Tax Credit dollar. Currently, the Developer is estimating the Tax Credit equity rate at $0.99 per gross Tax Credit dollar. This estimate Is validated by the fact that the majority of the projects that KMAis currently reviewing are estimating Tax Credit equity rates between $0.95 to $1.00 per grass Tax Credit dollar. AMSC Program Requirements Affordability Mix To be more competitive for the AHSC Program, the Developer altered the affordability mix of the original proposal to include a larger number of units restricted to extremely -low and very - low income households. This decreased the Project's not operating Income, which in turn, decreased the conventional permanent loan that could be supported by the Project. 1703001:SNATa6 19090.014,007 80A-27