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Judson Brown, City of Santa Ana October 6, 2021 <br />Francis Xavier Residence: Financial Gap Analysis Page 12 <br /> <br /> 2108022:SA:TRB <br /> 19090.017.010 <br /> <br />It is important to note that the additional financial gap can be primarily attributed to a <br />higher than typical direct cost contingency allowance. However, given the extreme <br />volatility in construction costs and the small size of the Project, KMA concurs that the <br />Developer’s contingency allowance is reasonable under the current conditions. <br />CONCLUSIONS / ISSUES FOR CONSIDERATION <br />The following summarizes the conclusions of the KMA analysis: <br />1. Based on the currently available information, it is KMA’s conclusion that the <br />Developer’s request for $588,000 in additional financial assistance is warranted <br />by the Project’s economics. <br />2. The construction industry is currently experiencing substantial volatility with <br />regards to material and labor prices. While the construction costs appear <br />reasonable, it is uncertain how construction costs will change over the next year. <br />As such, KMA recommends that the City require the Developer to obtain three <br />general contractor bids prior to selecting a general contractor. The three bids <br />should be provided to the City for review and approval. <br />3. It is important to note that once the COSR funds are fully disbursed, the Project’s <br />NOI will become negative. This will likely occur between Years 15 – 20. At that <br />time, the Project’s affordability requirements may need to be re-evaluated to <br />ensure operational feasibility. <br /> <br />EXHIBIT 3