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Judson Brown, City of Santa Ana
<br />May 12, 2017
<br />First Street Apartments Financial Feasibility
<br />Pace 4 of 7
<br />Total Other Costs
<br />$2,781,280
<br />$2,781,280
<br />$0
<br />Subtota l Project Costs
<br />$27,999,913
<br />$27,529,742
<br />($470,171)
<br />Developer Fee
<br />$2,199,087
<br />$2,205,612
<br />$6,525
<br />Total Development Costs
<br />$30,199,000
<br />$29,735,354
<br />($463,646)
<br />PFRMANFNT SOURCES
<br />JPMorgan Chase -Perm Loan $5,109,022 $5,413,350 $304,328 See Discussion, below
<br />JPMorgan Chase -Section 8 Loan $1,451,023 $1,537,459 $86,436 See Discussion, below _.
<br />_._... __.._. _.__. _._ -.._
<br />-- Reduction to balance budget while
<br />maintaining same approximate CTCAC tie -
<br />City of Santa Ana -Inclusionary Funds ,. $2,600,000 $2,327,740 _„($272,260) breaker _
<br />City of Santa Ana -Housing Funds $6,195,000 $6,195000 $0
<br />Deferred Developer Fee $0 $0 $0 _
<br />Low Income Housing Tax Credit
<br />Equity $14,843,955 $14,261,805 ($582150) Reduced equity necessary for feasibility
<br />TOTALSOURCES $30,199,000 $29,735,354 .($463,646)
<br />SURPLUS / (DEFICIT) $0 $0 $0
<br />Discussion of Table 3
<br />The "Uses” portion of Table 3 shows the Developer's budget, contrasted with modifications proposed by
<br />CSG.
<br />• Predevelopment Interest/Holding Costs: The Developer's sources for acquiring the site include an
<br />unsecured note from a developer -related entity (AMCAL 1440 Santa Ana Fund) in the amount of
<br />$1,151,000 at an interest rate of 10%. The interest rate would appear high given the relationship of
<br />the parties: because the transaction is extant, the City may want to provide consideration of this cost
<br />in other aspects of the transaction.
<br />• Total New Construction Costs. CSG has not received information from the developer concerning its
<br />estimates of construction costs. The Developer proposes to use a related entity, AMCAL General
<br />Contractors, to serve as the general contractor for the project. While such an arrangement may
<br />provide for cost savings, it also can result in abuses. The City may want to consider requiring
<br />competitive bidding not only for the sub -contractors, but also for the general contractor.
<br />• Relocation Costs: The Developer has provided a relocation plan prepared by Overland, Pacific &
<br />Cutler indication total relocation costs of only $865,000. The City should require the Developer to
<br />provide justification for their budgeted amount.
<br />• Construction Loan Interest. Per the Chase commitment letter, the base rate today would be 0.99%
<br />plus indicated spread of 2%. The total rate would be 2.99%. We have added 0.25% "cushion" to
<br />total 3.24% annual interest. Considering the Developer's construction loan amount of $17,385,665
<br />and a total construction period (i.e., to conversion), the Developer's construction loan interest of
<br />$1,017,061 would represent an average outstanding balance of 90%, which is unlikely, given the other
<br />sources. A more typical underwriting would be 60% average outstanding balance. So underwritten,
<br />the outstanding construction interest is reduced to approximately $676,000.
<br />• Origination Fee. The Chase commitment letter indicates a 0.75% construction loan origination fee.
<br />0.75% of the construction loan amount equals the indicated origination fee.
<br />CSG Iadvisors SAN FRANCISCO65 ATLANTA LOS ANGELES NEW YORK
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