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Judson Brown, City of Santa Ana <br />Francis Xavier Residence: Preliminary Financial Gap Analysis <br />Financing Costs <br />The financing costs for the Project are estimated as follows: <br />EXHIBIT 3 <br />January 9, 2019 <br />Page 6 <br />1. The construction period and absorption period interest costs are estimated at <br />$13,000. These costs are based on the following assumptions: <br />a. The construction period interest costs are based on a 5.30% interest rate, <br />a 14 -month construction period, and a 60% average outstanding balance. <br />b. The absorption period interest costs are based on a four-month <br />absorption period with a 100% average outstanding balance. <br />2. The Developer estimates the financing fees as follows: <br />a. The financing fees for the construction loan are estimated at $18,000, <br />which equates to 7.75 points; and <br />b. The financing fees for the permanent loan are estimated at $12,000, <br />which equates to 2.75 points. <br />3. The following capitalized reserves will be provided: <br />a. A $67,000 capitalized operating reserve is provided, which equates to six <br />months of operating expenses and debt service payments; and <br />b. The Developer included a $112,000 transition reserve to satisfy the NPLH <br />Program. <br />KMA estimates the total financing costs at $222,000. <br />Total Construction Costs <br />As shown in Table 1, KMA estimates the total construction costs at $4.20 million, which <br />equates to approximately $349,600 per unit. In comparison, the Developer estimates <br />the total construction costs at $4.23 million. This equates to an approximately 1% <br />differential, which can be considered an insignificant difference. <br />1901007:sA:TRB <br />19090.017.010 <br />3-23 <br />