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EXHIBIT 1 Judson Brown, City of Santa Ana March 1, 2017 Santa Ana Arts Collective: Financial Gap Analysis Page 12 KMA estimates the Project's gross residential income at $639,100, which Includes laundry and miscellaneous Income averaging $10 per unit per month. After applying a 5% vacancy and collection allowance, KMA estimates the resulting effective gross income at $607,100. The residentlal operating expenses are estimated as follows: 1. Based on the Developer's estimates, the general operating expenses are estimated at $5,990 per unit per year. 2. KMA assumes the Developer will apply for the property tax abatement that is accorded to non-profit housing organizations that own and operate low Income apartments. The Developer estimates the property tax assessment overrides at $2,500 per year. 3, The Developer estimates the social services costs at $40,000 peryear. 4. The AHSC Program requires mandatory annual debt service payments equal to .42%of the Affordable Housing Capital Loan amount. The annual debt service payment is estimated at $20,800 based on a $4.94 million loan amount. 51 The annual capital replacement reserve deposit is estimated at $600 per unit peryear, which is assumed to be a requirement of the AHSC Program. As shown In Table 2, the residential operating expenses are estimated to total $445,500, or approxlmateiy$7,680 per unit. When the Project's effective gross Income Is reduced by the residential operating expenses, KMA estimates the stabilized net operating income at $161,600. Available Funding Sources The avallable funding sources committed to the Project can he described as follows: Conventional Permanent Loan To estimate the maximum permanent loan that can be supported by the Project's stabilized net operating Income, KMA assumed that the loan would be underwritten at a 117% debt service coverage ratio, a 5,6596 interest rate, and a 35 -year amortization period. Based on these assumptions, KMA estimates that the $161,100 In stabilized net operating Income can support a $2,10 million permanent loan. Tax Credit Proceeds in November 2016, the Project was awarded gross Tax Credits with a value of $17.90 million paid out over a 10 -year period. These Tax Credits are sold on the secondary market, and the net 1703001:5NAINIS 19099,014407