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Judson Brown, City of Santa Ana <br />1126-46 E. Washington Ave: Preliminary Financial Gap Analysis <br />EXHIBIT 2 <br />May 22, 2019 <br />Page 10 <br />Developer estimates that the Project will incur $2,000 per year in property tax <br />assessment override costs. <br />3. The Developer is proposing to provide social services at an estimated cost of <br />$170,000 per year. <br />4. The Project will be subject to a County monitoring fee estimated at $2,400 per <br />year. <br />5. The Developer provided an allowance for replacement reserve deposits at $300 <br />per unit per year. This exceeds the minimum amount required by TCAC. <br />Stabilized Net Operating Income <br />The Project's effective gross income is estimated at $1.05 million, and the operating <br />expenses are estimated at $705,900. This results in an estimated stabilized net <br />operating income of $341,700. <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 analysis. <br />Available 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 be underwritten based on the following <br />requirements: <br />1. A 120% debt service coverage ratio; <br />2. A 5.50% interest rate; and <br />3. A 15-year amortization period. <br />Based on these assumptions, KMA estimates that the $341,700 NOI can support a $2.90 <br />million permanent loan. <br />1905019:SA:TRB <br />19090.017.019 <br />FO • <br />