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Judson Brown, City of Santa Ana May 24 2017 Tiny Tim Plaza Apartments Financial Feasibility Pace 5 of 6 Interest rate/Amortization Term 4.75%/35yrs Loan Amount $7,829,652 Note that the Effective Gross Rents reflect 2017 CTCAC rents for Orange County. Permanent Loan — Retail: Lender and investor underwriting of the retail space would be atypical for affordable lending and, as CSG has not received substantiation of Lender willingness to underwrite the retail, CSG has eliminated this source. • Low -Income Housing Tax Credit Equity: The LIHTC equity reflects slightly adjusted eligible basis as compared to the Developer Budget. The LIHTC equity calculation is as follows (per the CTCAC application form): Total Eligible Basis $19,750,906 QCT basis boost 100% Total Adjusted Eligible Basis $19,750,906 Applicable Fraction 100.00% Total Qualified Basis $19,750,906 Applicable Percentage 3.25% Annual Federal Credit $641,904 Total Federal Credit $6,419,040 Tax Credit Factor $0.91 LIHTC Equity $5,841,326 Financing Deficit Based on the adjustments• noted above, the Project has a financing deficit of approximately $11.7M. The Developer has proposed to close this financing deficit with permanent financing based on the commercial rents; and with funds from City, the State of California's AHSC program, Section 8 vouchers, and New Market Tax credits. This analysis has not addressed the Project's suitability or likelihood of success for the latter three programs. Operating Expenses and Operating Pro Forma The Developer proposes annual operating expenses per unit of approximately $4,900 per unit not including reserves, based on expenses of its recently completed projects in the region, e.g., Guest House apartments. The Developer's proposed operating pro forma uses standard underwriting requirements for tax -credit and bond financing projects: annual income inflation at 2.5% and annual expense inflation of 3.5%; vacancy of 5% annually. These underwriting assumptions along with calculated debt service on the first Permanent Loan results in an initial year debt service coverage (DCR) of 1.15, with increasing DCR each year there after. The Developer's proposed operating pro forma indicates a healthy project from an operational perspective. CONCLUSION The Project has a financing deficit of approximately $117M. The Developer proposes, in addition to funds requested from the City, to close the financing deficit with permanent financing based on the commercial rents; and with funds from the AHSC, New Market Tax Credits, and the use of Section 8 CSG Iadvisors SAN FRANCISCO •80AA73 LOS ANGELES NEW YORK