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EXHIBIT 2 <br />Terri Eggers /Judson Brown, City of Santa Ana June 221 2023 <br />Bewley Street —Preliminary Financial Gap Analysis Page 13 <br />CONCLUSIONS /RECOMMENDATIONS <br />The following summarizes the conclusions of the KMA analysis: <br />1. Based on the currently available information, it is the KMA conclusion that that <br />Developer's request for $2.02 million in financial assistance from the City is <br />supported by the Project's economics. <br />2. If the Developer secures additional outside funding sources not envisioned in <br />this analysis, the City's financial assistance amount should be decreased <br />commensurately. <br />3. The Developer did not include case management /social services expenses in <br />their pro forma submittal. As such, KMA assumes that the Developer will <br />provide/pay for these services outside of the Project's operating budget. The City <br />should memorialize this concept as a provision in the City's grant agreement <br />and/or regulatory agreement. <br />4. KMA estimates that the Project's net cash flow may be negative during the first <br />nine years of operations. Per discussions with the Developer, the Developer will <br />cover any operating losses during the City's 55-year affordability period. This <br />concept should be included as a provision in the City's grant agreement and/or <br />regulatory agreement. <br />5. Given that the Developer is proposing to provide a loan to the Project from one <br />of its affiliated legal entities, the City may want to require the Developer to <br />incorporate a standstill provision in the Illumination Foundation Loan documents <br />that prohibits the Illumination Foundation from foreclosing on the Project. <br />6. The Project may generate significant cash flow after the Illumination Foundation <br />Loan is repaid. The Housing Authority may want to review the Project's <br />operating information prior to renewing the PBV contract at the end of the initial <br />PBV term to ensure that eight (8) PBVs are still required by the Project. <br />7. The Developer did not provide an appraisal for review. The City may want to <br />require the Developer to provide an appraisal to ensure that the purchase price <br />is consistent with the appraised value. <br />2306002v3.SA.TRB <br />19090.018.028 <br />