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EXHIBIT 2 <br />Terri Eggers / Judson Brown, City of Santa Ana June 22, 2023 <br />Bewley Street — Preliminary Financial Gap Analysis Page 12 <br />CASH FLOW ANALSYIS <br />KMA also conducted a cash flow analysis to evaluate the Project's operating feasibility <br />during the City's 55-year affordability period. <br />The following describes the basic cash flow assumptions: <br />1. Year 1 is based on the pro forma rent and expense assumptions presented in the <br />stabilized NOI analysis (Table 2). <br />2. Additional revenue and expense assumptions are as follows: <br />a. The affordable rental income and PBV subsidy income are escalated at <br />2.5% per year. <br />b. The general operating expenses and replacement reserve deposits are <br />escalated at 3.5% per year. <br />C. The property taxes are escalated at 2.0% per year. <br />d. The preschool lease revenue is escalated at 3.0% per year. <br />3. KMA set the interest -only payments on the Illumination Foundation Loan at <br />$228,500 per year. <br />As shown in Table 4, the Project's cash flow after debt service is negative in Years 1 - 9. <br />KMA estimates that the operating deficits during this initial 9-year period total <br />approximately $180,000. In comparison, the Developer's cash flow assumes that the <br />Project's net cash flow remains positive after the Project reaches stabilization in Year 2. <br />Per discussions with the Developer, the Developer will cover any cash flow losses. This <br />should be included as a provision in the City's grant agreement and/or regulatory <br />agreement. <br />2306002v3.SA.TRB <br />19090.018.028 <br />