HomeMy WebLinkAboutItem 18 - Approve a Pre-Commitment for HOME Program Funds Community Development Agency
www.santa-ana.org/community-development
Item # 18
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
March 4, 2025
TOPIC: Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for
Humanity of Orange County
AGENDA TITLE
Approve a Pre-Commitment of $9,807,571 in HOME Program Funds for the
Development of 40 New Affordable Ownership Units Located at 621 W. Alton Avenue,
and Approve a Pre-Commitment of up to $920,000 in Inclusionary Housing Funds for
Eligible Homebuyers to Purchase Nine (9) Existing Rental Units that will be Converted
into Affordable Ownership Condominium Units Located at 425 E. Wellington Avenue for
a total of $10,727,571
RECOMMENDED ACTION
1. Authorize the City Manager to execute a pre-commitment letter with Habitat for
Humanity of Orange County for $9,807,571 in HOME Investment Partnerships
Program funds for the development of 40 new affordable ownership units located at
621 W. Alton Avenue, Santa Ana, CA (APN 410-351-02) (Agreement No. A-2025-
XXX).
2. Authorize the City Manager to execute a pre-commitment letter with Habitat for
Humanity of Orange County for up to $920,000 in Inclusionary Housing Funds for
eligible homebuyers to purchase nine (9) existing rental units that will be converted
into affordable ownership condominium units located at 425 E. Wellington Avenue,
Santa Ana, CA (APN 398-028-12) (Agreement No. A-2025-XXX).
GOVERNMENT CODE §84308 APPLIES: Yes
COMMUNITY DEVELOPMENT COMMISSION RECOMMENDATION
At a special meeting on December 13, 2024, the Community Development Commission
recommended the City Council to approve recommended action No. 1 and No. 2 above
by a vote of 5:0. However, recommended action No. 2 was amended by staff following
the Commission meeting to add $20,000 and adjust the language of the award to
comply with California Government Code §§ 7260 or 66300.6 relocation assistance
obligations regarding the conversion of market rate rental units.
EXECUTIVE SUMMARY
In October 2023, City Council directed staff to invest affordable housing funds
exclusively for the development of affordable ownership opportunities. Following the
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity
March 4, 2025
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issuance of a Request for Proposals approved by City Council, staff is now
recommending an award of over $10.7 million to produce 49 new affordable ownership
opportunities for low- and moderate-income families. The homes would be developed
and purchased by Habitat for Humanity of Orange County at two sites. If approved by
City Council, this will be the single largest investment in affordable ownership
opportunities in the history of the City of Santa Ana. This will also double the number of
affordable homes that Habitat for Humanity of Orange County has created in the City
and will be the highest number of affordable homes they have created in any city in
Orange County. If this award is approved, the City of Santa Ana will have invested over
$15.8 million in new funding for affordable homeownership opportunities over the last
three years.
DISCUSSION
On October 17, 2023, the City Council authorized the Community Development Agency
(“CDA”) to release a Fiscal Year 2023-24 Request for Proposals (“RFP # 23-156”) to
develop affordable ownership projects in the City of Santa Ana (“City”) with funding from
the HOME Investment Partnerships (“HOME”) Program (Exhibit 1). The RFP was
prepared in compliance with the City’s Affordable Housing Funds Policies and
Procedures. The RFP was published on the City’s website and Planet Bids; a public
notice was published in the OC Register on October 25, 2023; and an e-mail was sent
out to Orange County’s largest affordable housing membership associations, interested
developers, and nonprofit organizations from CDA’s RFP Process Database.
A Review Panel, composed of City staff from the Community Development Agency and
Planning and Building Agency together with an affordable housing consultant, used the
Scoring and Selection Criteria from the RFP to review all of the proposals. Habitat for
Humanity of Orange County, Jamboree Housing, THRIVE Santa Ana, Mary Erikson,
and Orange County Community Housing Corporation (“OCCHC”) each submitted a
proposal during the period that the RFP was open. Jamboree Housing and THRIVE
Santa Ana ended up withdrawing their proposals. The proposal from OCCHC that was
scored and reviewed did not meet the minimum threshold requirements and the
proposal from Mary Erikson was determined to be infeasible because it was cost
prohibitive. Following this review and scoring process, and substantial due diligence, the
Review Panel is recommending the following awards for two projects for Habitat for
Humanity to create 49 new affordable ownership opportunities:
Developer: Habitat for Humanity of Orange County
•621 W. Alton Avenue: $9,807,571 in HOME Program funds for the
development of 40 new affordable ownership units including 30 homes
for low-income families at 80% Area Median Income (“AMI”) and 10
homes for moderate-income families at 120% AMI.
•425 E. Wellington Avenue: Up to $920,000 in Inclusionary Housing
Funds for eligible homebuyers to purchase nine (9) existing rental units
that will be converted into affordable ownership condominium units
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity
March 4, 2025
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including: (1) an allocation of $720,000 to the City's Down Payment
Assistance Program, and (2) a conditional award up to $200,000 for
eligible relocation costs.
Background on Habitat for Humanity of Orange County
Habitat for Humanity of Orange County (“Habitat for Humanity”) is a nonprofit
organization dedicated to providing affordable housing for qualifying families. Since
1988, the organization has completed and sold 239 homes in Orange County, including
32 affordable homes in the City of Santa Ana. Habitat for Humanity is currently building
an additional six (6) new homes in the City at 1921 W. Washington Ave for low-income
families at 80% of the AMI that was made possible with $2.2 million from the City’s
Inclusionary Housing Fund. Habitat for Humanity also currently administers the City’s
Residential Rehabilitation Grant Program with $500,000 per year in Community
Development Block Grant funds. The organization is the largest provider of affordable
ownership opportunities in Orange County and also advocates for fair housing policies,
addresses substandard housing conditions, and offers families training and resources to
achieve homeownership.
Project Description - 621 W. Alton Avenue
The first pre-commitment letter for 621 W. Alton Avenue, Santa Ana, CA (APN 410-351-
02) between the City and Habitat for Humanity provides an enforceable funding
commitment of $9,807,571 in HOME Program funds for the development of 40 new
affordable ownership units (Exhibit 2). The letter is referred to as a pre-commitment
because the HOME Program has strict commitment requirements under 24 CFR Part
92 that must be met before a full commitment can be issued in the form of a Conditional
Grant Agreement. Specifically, Habitat for Humanity proposes to demolish the existing
structures on the property to build 40 new homes for affordable ownership. The project
will include 30 three-bedroom, one and a half-bath homes for low-income households
earning up to 80% of the AMI ("Low-Income Households") and 10 three-bedroom, one
and a half-bath homes for moderate-income households earning up to 120% AMI
("Moderate-Income Households"). The AMI is currently $129,000 for a four-person
household, as published by the California Department of Housing and Community
Development. Households must also meet the eligibility requirements for Habitat for
Humanity’s Affordable Homeownership Program with a residency preference for local
residents and workers in Santa Ana in accordance with Santa Ana Municipal Code
Section 8-3500.
In a preliminary design drafted by Habitat for Humanity, each unit will have a two-story
in a duplex configuration and will be approximately 1,070 square feet in size. At least
two (2) of the homes will be Americans with Disabilities Act (ADA) compliant. The site
bridges the larger scale of existing multi-family properties to the north and east of the
project site with the existing single-family homes to the west. The proposed units are
arranged along paseos with a modest central courtyard located at the paseo
intersection, complementing the large park (Lillie King Park) across the street. Each unit
features a front porch and private patio. Garages and guest parking are accessed via a
looping alley, allowing efficient movement for trash collection and emergency vehicles.
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity
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There will be two parking spaces adjacent and dedicated to each home (one enclosed
and one surface). There will also be 16 additional surface parking stalls for guests,
including two ADA-accessible stalls.
The overall design and materials of the new construction will be compatible with and
complement the variation of styles within the neighborhood. Overall, the project will
include a design and quality construction materials that will ensure that the project ages
well for the duration of the building’s lifetime. Keyser Marston Associates, Inc. (“KMA”)
estimates the low income affordable sales prices at $300,200 and Habitat for Humanity
is currently estimating the moderate income affordable sales prices at $389,500.
This project is being developed in partnership with Bill Taormina who is the current
owner of the land. Mr. Taormina will be holding title of the land through the entitlement
and building process. As such, he will continue to be responsible for holding costs and
pay for the property taxes and required insurance for the duration of the project and up
until the new homes are sold. Habitat for Humanity and Mr. Taormina have entered into
a Memorandum of Understanding with the agreed upon terms and details of the
partnership and land purchase.
The project will require relocation of the existing religious organizations currently
occupying and renting the existing structures on the property in compliance with the
federal Uniform Relocation Assistance and Real Property Acquisition Policies Act
(“Uniform Relocation Act”), and all state and local relocation requirements. Currently,
three religious organizations rent the existing structures including Faith Community
Church of Santa Ana, Fundamentalist Baptist Church, and Turning Point Fellowship.
These tenants will be provided relocation assistance that complies with the federal
Uniform Relocation Act as required by the HOME Program federal funds. Per Habitat for
Humanity, Federal relocation requirements stipulate that the maximum relocation
assistance for businesses is $53,200 plus three months of rent payments, if required.
As such, Habitat for Humanity estimates the total relocation assistance at $213,000.
Once the three religious organizations vacate the existing structures, Habitat for
Humanity will pay Mr. Taormina the rent paid by the vacating occupants and begin the
process to demolish the buildings.
From an initial review of the project by the City’s Planning and Building Agency, the
timeline for processing the application and obtaining necessary approvals is expected to
take approximately seven (7) to 12 months. The property is currently zoned as LR-7
(Low Density Residential, seven (7) units per acre). To the extent required under state
housing laws, Habitat for Humanity may need to request a General Plan Amendment
and zone change. Habitat for Humanity may also be required to comply with the City’s
Sunshine Ordinance, which includes holding two community meetings. A California
Environmental Quality Act review may be required and a Density Bonus Agreement
may also be necessary, depending on the concessions and waivers needed for the
development of the project.
Pre-Commitments of $10,727,571 of Affordable Housing Funds for Habitat for Humanity
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The pre-commitment letter shall not obligate the City or any department thereof to
approve any application or request for, or take any other action in connection with, any
planning approval, permit, or other action necessary for the construction, rehabilitation,
installation, or operation of the project. The pre-commitment letter will be conditional on
Habitat for Humanity obtaining approval of all required entitlements and discretionary
actions to allow the construction of 40 affordable ownership units to be located at 621
W. Alton Avenue.
In compliance with the City’s Affordable Housing Funds Policies and Procedures, KMA
completed a preliminary financial gap analysis by reviewing the developer’s estimates
and projections of sales prices, expenses, reserves, and development costs; and
confirming the project’s underwriting and other requirements pertinent to the funding
sources (Exhibit 3). Following this analysis and completion of the procurement process,
KMA confirmed the preliminary financial gap and the Review Panel’s recommendation
to award $9,807,571 in HOME Program funds. The project’s economics are described
in detail in KMA’s analysis attached as Exhibit 3 to this report.
Project Description - 425 E. Wellington Avenue
The second pre-commitment letter for 425 E. Wellington Avenue, Santa Ana, CA (APN
398-028-12) between the City and Habitat for Humanity provides an enforceable
funding commitment of up to $920,000 in Inclusionary Housing Funds for eligible
homebuyers to purchase nine (9) existing rental units that will be converted into
affordable ownership condominium units including: (1) an allocation of $720,000 to the
City's Down Payment Assistance Program, and (2) a conditional award up to $200,000
for eligible relocation costs (Exhibit 4). The letter is referred to as a pre-commitment
because, similar to the HOME Program, the City has requirements that must be met
before a full commitment can be issued in the form of a Memorandum of Understanding.
Specifically, this project involves the conversion of an existing nine-unit apartment
building into condominiums, which will be made available for homeownership to Low
and Moderate-Income households earning less than 120% of the AMI. The existing
building on the property was rehabilitated in May 2024 and includes one two-bedroom
unit and eight one-bedroom units, each with a single bathroom. Unit sizes range from
420 to 846 square feet and are move-in ready. The building recently underwent over $1
million in renovations, which included new flooring, electrical upgrades (new outlets and
fixtures), updated kitchen cabinets, and complete bathroom remodels. Doors, windows,
shutters, garage doors, stairways, and railings were restored or replaced as needed to
meet code compliance.
Current residents of the property with household incomes of less than 120% AMI and
that qualify to purchase a unit within the Property will be given the right of first refusal to
purchase a unit at an affordable purchase price (eight of the nine units are currently
occupied). KMA estimates the moderate income affordable sales prices at $310,400 for
the eight (8) one-bedroom units and $350,500 for the one (1) two-bedroom unit. The
allocation of $720,000 to the City’s Down Payment Assistance Program will be available
for down payment assistance to individual households to purchase a unit, structured as
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a silent mortgage based on homebuyer eligibility. Homebuyers must meet the eligibility
requirements for Habitat for Humanity’s Affordable Homeownership Program with a
residency preference for local workers and residents of Santa Ana in accordance with
Santa Ana Municipal Code Section 8-3500. The conditional award of up to $200,000 for
eligible relocation costs will be available upon a determination by the City that the
Project is subject to relocation benefits under California Government Code §§7260 or
66300.6. The specific amounts utilized for relocation benefits will be based on actual
amounts determined immediately prior to the relocation of existing tenants.
The City and Habitat for Humanity will enter into a Memorandum of Understanding
("MOU") that sets forth the terms under which the City will provide the homebuyer Down
Payment Assistance and conditional relocation award. The MOU will specify that the
project is not undertaken by the City and is not in furtherance of a City program. Rather,
the MOU is a response to Habitat for Humanity’s request for financial assistance to
enhance affordability for qualified homebuyers by providing homebuyer Down Payment
Assistance through an existing City program. The MOU will require that Habitat for
Humanity execute an affordable housing covenant to offer the nine (9) affordable units
to households with income that does not exceed the limits for Low and Moderate-
Income Households for an affordable sales price that complies with the limits for an
"affordable housing cost," as defined in California Health and Safety Code §50052.5.
The affordable housing covenant will run with the land for a period of forty-five (45)
years.
This second pre-commitment letter shall not obligate the City or any department thereof
to approve any application or request for, or take any other action in connection with,
any planning approval, permit, or other action necessary for the construction,
rehabilitation, installation, or operation of the project. The pre-commitment letter will also
be conditional on Habitat for Humanity obtaining approval of all required entitlements
and discretionary actions to allow the construction, improvement, conversion, and/or
development of nine (9) affordable ownership units at 425 E. Wellington Avenue.
In compliance with the City’s Affordable Housing Funds Policies and Procedures, KMA
completed a second preliminary financial gap analysis for this project (Exhibit 5).
Following this analysis and completion of the procurement process, KMA confirmed the
preliminary financial gap and need for the Review Panel’s recommendation to award up
to $920,000 in Inclusionary Housing Funds. This second project’s economics are
described in detail in KMA’s analysis attached as Exhibit 5 to this report.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action because the
recommended actions consist of a pre-commitment of funds that is conditional upon
compliance with the California Environmental Quality Act and the National
Environmental Policy Act.
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FISCAL IMPACT
For 621 W. Alton Avenue, the Grant Agreement is estimated to be finalized for City
Council approval in FY 26-27. Upon future approval of the Grant Agreement, funds will
be budgeted and available as shown below:
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY 26-27 13018780- 69152 HOME Program Loans and Grants $9,807,571
Total $9,807,571
The HOME Program currently requires a matching cash contribution from the City for
$348,717.76 for FY 23 and FY 24. The City has over $26.4 million in carry over cash
contributions eligible to meet this match requirement.
For 425 E. Wellington Avenue, the MOU is estimated to be finalized for City Council
approval in FY 25-26. Upon future approval of the MOU, funds will be budgeted and
available as shown below:
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY 25-26 41718820-69152 Inclusionary
Housing Fund Loans and Grants $920,000
Total $920,000
EXHIBIT(S)
1.Staff Report from October 17, 2023
2. Pre-Commitment Letter for 621 W. Alton Avenue
3. Preliminary Financial Gap Analysis for 621 W. Alton Avenue
4. Pre-Commitment Letter for 425 E. Wellington Avenue
5. Preliminary Financial Gap Analysis for 425 E. Wellington Avenue
Submitted By: Michael L. Garcia, Executive Director of Community Development
Approved By: Alvaro Nuñez, City Manager
SANTA ANA CITY COUNCIL
Valerie Amezcua
Mayor
vamezcua@santa-ana.org
Benjamin Vazquez
Mayor Pro Tem - Ward 2
bvazquez@santa-ana.org
Thai Viet Phan
Ward 1
tphan@santa-ana.org
Jessie Lopez
Ward 3
jessielopez@santa-ana.org
Phil Bacerra
Ward 4
pbacerra@santa-ana.org
Johnathan Ryan Hernandez
Ward 5
jryanhernandez@santa-ana.org
David Penaloza
Ward 6
dpenaloza@santa-ana.org
MAYOR
Valerie Amezcua
MAYOR PRO TEM
Benjamin Vazquez
COUNCILMEMBERS
Phil Bacerra
Johnathan Ryan Hernandez
Jessie Lopez
David Penaloza
Thai Viet Phan CITY OF SANTA ANA
COMMUNITY DEVELOPMENT AGENCY
20 Civic Center Plaza – M25
Santa Ana, California 92702
www.santa-ana.org
CITY MANAGER
Alvaro Nuñez
CITY ATTORNEY
Sonia R. Carvalho
CITY CLERK
Jennifer L. Hall
March 4, 2025
Michael Valentine
President & CEO
Habitat for Humanity of Orange County, Inc.
2200 Ritchey Street
Santa Ana, CA 92705
Re: Pre-Commitment Letter
621 W. Alton Ave.
Santa Ana, CA 92707
Dear Mr. Valentine,
Habitat for Humanity of Orange County, Inc. (referred to as the “Developer”), requested
financial assistance in connection with the proposed development of 40 affordable
ownership units (“Project”). The Property is located at 621 W est Alton Avenue, Santa
Ana, CA, 92707 (APN 410-351-02) (“Property”).
The Developer proposes to demolish the existing structures on the Property to build 40
new homes for affordable ownership. The Project will require relocation of the existing
religious organizations currently occupying and renting the existing structures on the
Property in compliance with the federal Uniform Relocation Assistance and Real Property
Acquisition Policies Act, and all state and local relocation requirements. The Project will
include 30 three-bedroom, one and a half -bath homes for Low-Income households
earning up to 80% of the Orange County Area Median Income (“AMI”) ("Low-Income
Households") and 10 three-bedroom, one and a half-bath homes for Moderate-Income
households earning up to 120% AMI ("Moderate-Income Households"). Each unit will
have a two-story duplex configuration and will be approximately 1,070 square feet. At
least two of the homes will be Americans with Disabilities Act (“ADA”) accessible and
compliant. There will be two parking spaces adjacent and dedicated to each home (one
enclosed and one surface) and 16 additional surface parking stalls, including two ADA -
accessible stalls. Households must also meet the eligibility requirements for the
Developer’s Affordable Homeownership Program with a residency preference for local
EXHIBIT 2
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workers and residents of Santa Ana in accordance with Santa Ana Municipal Code
Section 8-3500. Construction will comply with all City of Santa Ana, County, and State
building codes.
The City of Santa Ana (“City”) has reviewed the Developer's request for financial
assistance, and at the City Council meeting on March 4, 2025, the City Council authorized
and approved the issuance of this pre-commitment letter evidencing the preliminary
award of $9,807,571.00 in HOME Investment Partnerships (“HOME”) Program Funds
consisting of:
- A Conditional Grant in the maximum amount of $9,807,571.00 from the HOME
Program Fund held by the City for the Project (“Conditional HOME Grant”).
This letter shall evidence the City’s pre-commitment of the Conditional HOME Grant to
the Developer for the Project subject to the conditions described below.
Conditional HOME Grant:
The amount of the proposed Conditional HOME Grant has been determined based upon
the City’s review of the Developer's request for the receipt of the Conditional HOME Grant
and the development proforma for the Project submitted by the Developer to the City
(“Proforma”). The City Manager or his/her designee has the authority to approve revised
development proformas for the Project; provided, however, that the Conditional HOME
Grant is not increased or extended.
The Conditional HOME Grant shall be conditioned on and include the following terms:
The Conditional HOME Grant shall be for a maximum principal amount of
$9,807,571.00, or as much thereof, as is disbursed for hard and soft costs in
constructing the Project, provided from the HOME Program Fund. The terms and
conditions of the Conditional HOME Grant shall be incorporated into a written
agreement ("Grant Agreement"), which shall comply with all provisions and
requirements of this Pre-Commitment Letter, and any additional terms or
conditions that City determines are reasonably necessary to implement the Project
and ensure compliance with federal, state and local law.
The disbursement of the Conditional HOME Grant shall be made according to a
schedule of disbursements based on written milestones set forth in the Grant
Agreement.
The Grant Agreement shall require a performance deed of trust in favor of the City
("Performance Deed of Trust") securing the obligations of the Grant Agreement
against the Property; the City may, in its sole and absolute discretion, approve
alternative security, such as a leasehold deed of trust or a security interest in a
construction funding account, subject to terms and conditions agreeable to the City
and compliant with the HOME Program. The Performance Deed of Trust (or
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alternative security) would terminate and, if applicable, be subject to re-
conveyance based upon terms in the Grant Agreement. .
The Grant Agreement shall require that the owner of the Property execute a
regulatory agreement with a declaration of covenants, conditions and restrictions
("Regulatory Agreement") to develop the Property with 40 affordable units, as
described herein, on terms agreeable to the City. The Regulatory Agreement shall
run with the land for the duration of the affordability covenants.
Developer will comply with the attached Schedule of Performance. The Schedule
of Performance is designed to ensure timely progress and adherence to HOME
Program Fund expenditure deadlines, as mandated by federal funding regulations.
Provided the Developer constructs the Project according to the Scope of Work and
Schedule of Performance, the Developer will be subject to no repayment
obligation. Upon the initial sale of all units to eligible households pursuant to the
Regulatory Agreement, the Grant Agreement shall automatically terminate. In the
event the Project is not constructed in compliance with the Scope of Work and
Schedule of Performance, the City may terminate the Grant Agreement and may
seek repayment of Grant monies not expended on development and construction
of the Project pursuant to the default remedy provisions of the Grant Agreement.
The 40 affordable ownership units at the Project shall and will be restricted to an
affordable home purchase price, which will require that 30 homes be sold to
qualified Low-Income Households who earn up to 80% of the Orange County AMI
and 10 homes be sold to qualified Moderate-Income Households who earn up to
120% of the Orange County AMI, as set by the Department of Housing and Urban
Development (“HUD”). Future sales of such single-family homes will be restricted
to income-qualified households for a period of at least forty-five (45) years, unless
City and Developer agree upon an alternative resale model allowing homeowners
to generate additional equity.
City and Developer shall evaluate and negotiate the restrictions on resale of the
individual single-family homes to determine the benefit of generating additional
equity for each household. Any resale restrictions shall comply with requirements
of federal, state or local law.
Developer will have a local preference for families who live or work in the City of
Santa Ana in the selection of Low- and Moderate-Income Households in
compliance with Santa Ana Municipal Code Section 8-3500.
Developer will comply with the federal Uniform Relocation Assistance and Real
Property Acquisition Policies Act (“URA”) and any other applicable federal, state,
or local laws governing relocation or termination of tenancy (collectively,
"Relocation Laws"). Developer shall provide the existing tenants on the Project
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Site with relocation assistance and any other benefits required by Relocation Laws.
This will include the review and approval by the City of a URA Relocation Plan.
Developer shall assume any and all responsibility and be solely responsible for
compliance with all tenant and eviction protections, including but not limited to
protections under the California Tenant Protection Act (Civil Code § 1946.2), the
Ellis Act (Government Code § 7060 et seq.), and Santa Ana's Rent Stabilization
and Just Cause Eviction Ordinance (Article XIX of Chapter 8 of the Santa Ana
Municipal Code) (collectively, "Eviction Protections"). To the extent applicable,
Developer shall comply with and be responsible for all costs of compliance with all
relevant Eviction Protections.
Developer will ensure that each “Program Participant” (used interchangeably with
“Homebuyer”) means the selected eligible person or family who will be purchasing
a house. Each Program Participant will provide sweat equity or any other
administrative work as may be designated by Developer. Each Program
Participant is to be selected by the Developer as more fully set forth in its
Affordable Home Ownership Program. The City shall have the right to review and
approve the sweat equity requirements and all other criteria applied through the
Affordable Home Ownership Program.
Developer’s Project to develop affordable ownership opportunities with financial
support from the City is subject to Chapter 11B of the California Building Code as
public housing. Accordingly, Developer’s Project must comply with California
Building Code section 11B-233.3. Specifically, Developer’s Project must comply
with the requirements for mobility features: “In facilities with residential dwelling
units, at least 5 percent, but no fewer than one unit, of the total number of
residential dwelling units shall provide mobility features.” Developer’s Project must
also comply with the requirements for communication features: “In public housing
facilities with residential dwelling units, at least 2 percent, but no f ewer than one
unit, of the total number of residential dwelling units shall provide communication
features complying with Section 11B-809.5.” Developer’s Project must also
comply with the requirements for adaptable features: “In facilities with residential
dwelling units, adaptable residential dwelling units complying with Sections 11B -
809.6 through 11B-809.12 shall be provided as required by Sections 11B -
233.3.1.2.1 through 11B-233.3.1.2.6. Adaptable residential dwelling units shall be
on an accessible route as required by Section 11B-206.” Developer shall comply
with these public housing requirements for their Project in the California Building
Code by constructing two units in the Project that includes the required mobility,
communication, and adaptable features.
Developer will comply with the requirements of the Davis-Bacon Act, as applicable
due to the use of HOME federal funds, and any other applicable labor requirements
arising from the receipt of the Conditional HOME Grant. This includes ensuring
that all laborers and mechanics employed on the Project are paid wages at rates
EXHIBIT 2
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not less than those prevailing for similar projects in the area, as determined by the
U.S. Department of Labor.
Developer will comply with the Build America, Buy America Act, ensuring that all
iron, steel, manufactured products, and construction materials used in the Project
are produced in the United States, subject to HOME Program and federal
requirements.
Developer will comply with the environmental review requirements of the National
Environmental Policy Act, as mandated for projects utilizing HOME federal funds,
ensuring that the Project is evaluated and mitigated for potential environmental
impacts in accordance with federal regulations.
At the close of escrow for the purchase of each affordable unit, the City will require
each Low- and Moderate-Income Households purchasing such unit to execute the
following documents:
o Affordable Housing Resale Restrictions – The Affordable Housing Resale
Restrictions shall permit sales of a unit affordable to Low- and Moderate-
Income Households to be sold only to a qualified Low- or Moderate-Income
Household, according to the income restrictions for the particular unit, with
a local preference for families who live or work in the City of Santa Ana , in
each case, at an Affordable Housing Cost, subject to an alternative resales
model agreed upon by City and Developer; provided, however, that the
resale restrictions must comply with the HOME Program requirements;
o Notice of Affordability Restrictions on Transfer of Property – The Notice of
Affordability Restrictions on Transfer of Property shall be for a term of at
least forty-five (45) years;
o Promissory Note – The Homebuyer shall sign a promissory note ("City
Promissory Note") for a principal amount equal to the difference between
the affordable sales price of the affordable unit and the fair market value of
such unit as if no restriction were placed thereon, as de termined by an
appraisal, or other amount required by the HOME Program, which is
reasonably acceptable to the City, and repayable upon the affordability term
or earlier sale of the affordable unit for fair market value, subject to City's
approval;
o Deed of Trust – The Homebuyer shall sign a deed of trust ("City Deed of
Trust") that secures the City Promissory Note; and,
o Homebuyer Loan Agreement – The loan agreement shall reflect the
obligations for the City Promissory Note and the City Deed of Trust .
o Pending further negotiation and due diligence with the Developer, these
documents may include an alternative resales model to accommodate
generation of additional equity for each household or equity sharing
agreements with Developer as required by state or local law.
EXHIBIT 2
- 6 -
General Provisions:
The City's obligation to provide the Conditional HOME Grant to the Project is subject to
each of the following conditions:
Developer must provide proof that it has secured all of its remaining financing for
the development of the Project in the form of enforceable funding commitments
before staff will return to the City Council for consideration of the Grant Agreement
for the Conditional HOME Grant. The evidence of financing must be submitted to
the City and is subject to the City completing a final HOME Subsidy Layering
Review.
All provided funding and Project requirements shall conform to the City’s most
recently adopted Affordable Housing Funds Policies and Procedures unless
alternative requirements are expressly provided in the executed Grant Agreement
for the Conditional HOME Grant or any other documents related to the
development of the Project.
Approval of all required entitlements and discretionary actions to allow the
construction of 40 affordable ownership units to be located at 621 W est Alton
Avenue, Santa Ana, CA, 92707 (APN 410-351-02).
The City's obligation to provide the Conditional HOME Grant is and shall remain
subject to all covenants, conditions, and restrictions set forth in this pre-
commitment letter and the Grant Agreement, and in particular, the City's analysis
of the available funding sources and development and operating costs of the
Project and the overall economic feasibility of the Project .
Developer's compliance with the Relocation Laws and Eviction Protections, and
providing documentation to the City evidencing compliance.
Review and approval of the Grant Agreement evidencing the Conditional HOME
Grant by the City Council, including the Grant Agreement and Regulatory
Agreement.
The obligations of the Grant Agreement, including obligations of the HOME
Program, shall be secured by a Performance Deed of Trust, or other form of
security reasonably acceptable to the City and which comply with the HOME
Program.
The owner of the Property shall execute the Regulatory Agreement, which shall
impose covenants that run with the land to provide the affordable units at an
affordable sales price as required by the Grant Agreement upon completion of the
Project.
EXHIBIT 2
-7 -
The Regulatory Agreement and, if applicable, the Performance Deed of Trust, shall
be recorded against the Property prior to any disbursements of the Cond itional
HOME Grant.
Developer shall establish site control of the Property to the reasonable satisfaction
of the City, and City shall have the right to review and approve any conditions of
title, as reflected on a preliminary title report, provided at Developer's sole cost and
expense. City shall also have the right to require a policy of title insurance securing
the Performance Deed of Trust or other security interest in favor of the City for the
principal amount of the Conditional HOME Grant and a condition of title guarantee
regarding the priority of the Regulatory Agreement.
City shall have received and approved an agreement between Developer and the
current owner of the Property regarding transfer and development of the Project.
Developer must comply with all conditions specified in the Grant Agreement for
disbursements of the Conditional HOME Grant.
Subject to compliance with all other requirements of the Conditional HOME Grant,
90% of the City assistance will be disbursed upon issuance of a grading permit,
and 10% (i.e., $980,757.00) of the City’s financial assistance will be retained by
the City until construction of the Project is complete.
Developer shall have provided adequate construction security (such as
performance, labor, and material bonds), as determined by the City; lien releases
ensuring that the Property is lien-free, as required by the City; and evidence of
insurance that City requires as part of the Grant Agreement.
Compliance with applicable federal laws and regulations relating to the HOME
Program, as set forth in Title II of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. § 12701-12839), implementing regulations at 24 C.F.R.
Part 92, and all other federal, state, and local laws and regulations relating to the
Project.
The City Council's review and approval of the Grant Agreement, the Performance
Deed of Trust, and the Regulatory Agreement.
Developer must indemnify, defend, and hold harmless City against loss or damage
suffered by City as a result of any claim by any person or entity arising out of or
relating to this pre-commitment or the transactions contemplated by this pre-
commitment, excluding claims resulting from the City’s gross negligence and/or
willful misconduct.
Any other terms and conditions the City determines are reasonably necessary for
the Grant Agreement to protect the City's interest and comply with applicable law.
EXHIBIT 2
-8 -
Developer, at its sole cost and expense, will be responsible for securing any and all
permits and discretionary approvals that may be required for the Project by the City or
any other federal, state, or local governmental entity having or claiming jurisdiction over
the Property or Project. Notably, this pre-commitment letter shall not obligate the City or
any department thereof to approve any application or request for or take any ot her action
in connection with any planning approval, permit , or other action necessary for the
construction, rehabilitation, installation or operation of the Project.
This pre-commitment letter for the Project will expire on March 4, 2027. The Schedule of
Performance will determine any future requested amendments to this expiration date,
subject to approval by the City Manager. The City will not allow any HOME Program
funds to expire due to federal expenditure deadlines during the pre-development of the
Project. As such, the City will reduce the Conditional HOME Grant as needed in order to
avoid the City forfeiting any HOME Program funds with no adjustment to the unit mix,
economics or structure of the Project. Developer will be responsible for any difference in
cost.
If you have any questions or require any additional information regarding this pre -
commitment letter, please contact Judson Brown, Housing Division Manager, by
telephone at (714) 667-2241 or by e-mail at jbrown@santa-ana.org.
Sincerely,
On behalf of the City of Santa Ana:
_________________________________
Alvaro Nuñez
City Manager
Attest:
_________________________________
Jennifer L. Hall
City Clerk
RECOMMENDED FOR APPROVAL:
_________________________________
Michael L. Garcia
Executive Director
Community Development Agency
Attachment: Schedule of Performance
EXHIBIT 2
-9 -
AGREED TO BY:
HABITAT FOR HUMANITY OF ORANGE COUNTY, INC.
______________________
Michael Valentine, President & CEO
EXHIBIT 2
Schedule of Performance
Standard Development Entitlement Path
621 West Alton Avenue
Santa Ana, CA
DEVELOPMENT & CONSTRUCTION ACTIVITY DURATION START FINISH
CDR + Entitlements 18 months 01/01/25 07/01/26
Conceptual Design Review Prep & Submittal 3 months 01/01/25 03/31/25
Development Project Review (DPR) Package Submittal 12 months 04/01/25 04/01/26
Sunshine Meeting No. 1 1 month 04/15/25
DPR Comments 1 month 04/30/25
Sunshine Meeting No. 2 1 month 05/15/25
DPR Package Re-Submittal 1 month 05/31/25
Planning Department Approval 12 months 03/31/26
Community Development Commission Approval 3 months 05/31/26
Project Financing Secured (Finance & Fundraise) * 05/31/26
City Council Meeting & Approval 2 months 07/01/26
Demolition Permit & Demolition Complete 5 months 04/01/26 09/01/26
Grading Permit Process & Permitting (At Risk) 5 months 04/01/26 09/01/26
Home Grant Disbursement (90%) 1 month 09/01/26 10/01/26
Construction Drawing Development + Permitting 11 months 04/01/26 01/01/27
Prepare & Complete Construction Docs (At-Risk) 5 months 04/01/26 09/01/26
Submit for Permits (At-Risk) 6 months 09/01/26 03/01/27
Receive Building Permit 03/01/27
12 Months from Agreement being signed 07/01/26 07/01/27
Grant M-19-MC-06-0540 Expenditure Deadline 09/30/27
Grant M-20-MC-06-0539 Expenditure Deadline 09/30/28
Construction 23 months 03/01/27 02/01/29
Construction Complete 23 months 03/01/27 02/01/29
Final Inspection 0 month 02/01/29
Home Grant Disbursement (Final 10%) 1 month 02/01/29 03/01/29
Grant M-21-MC-06-0538 Expenditure Deadline 09/30/29
Grant M-22-MC-06-0537 Expenditure Deadline 09/30/30
Grant M-23-MC-06-0536 Expenditure Deadline 09/30/31
Grant M-24-MC-06-0535 Expenditure Deadline 09/30/32
Total estimate timeline from City processing entitlements and permits to house construction completion is
estimated to be 49 months.
Habitat will begin the “at-risk” grading and building permit process upon receiving Planning Department approval.
*This schedule aligns with Habitat OC’s resource development activities and schedule to finance the development
of this project.
EXHIBIT 2
777 SOUTH FIGUEROA STREET, SUITE 2555 LOS ANGELES, CALIFORNIA 90017 PHONE 213.622.8095
2412001v2.SA.TRB
WWW.KEYSERMARSTON.COM 19090.018.038
ADVISORS IN:
Real Estate
Affordable Housing
Economic Development
BERKELEY
Debbie M. Kern
David Doezema
LOS ANGELES
Kathleen H. Head
Kevin E. Engstrom
Julie L. Romey
Tim R. Bretz
SAN DIEGO
Paul C. Marra
Linnie A. Gavino
EMERITUS
A. Jerry Keyser
Timothy C. Kelly
MEMORANDUM
At your request, Keyser Marston Associates, Inc. (KMA) prepared a preliminary financial
gap analysis for the project to be developed at 621 West Alton Avenue (Site) by Habitat
for Humanity of Orange County (Habitat). Habitat is currently in discussions with the
property owner to purchase the Site.
Habitat proposes to demolish the existing structures on the Site, and construct 40 for-
sale units to be sold to low and moderate income households (Project). Habitat is
requesting $9.81 million in financial assistance from the City of Santa Ana (City). The
purpose of the KMA analysis is to evaluate Habitat’s financial assistance request.
EXECUTIVE SUMMARY
The results of the KMA financial gap analysis are compared to Habitat’s financial proposal
in the following table:
To: Judson Brown, Housing Division Manager
City of Santa Ana
From: Tim Bretz
Date: December 10, 2024
Subject: Habitat Alton Avenue – Preliminary Financial Gap Analysis
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 2
2412001v2.SA.TRB
19090.018.038
KMA Habitat Difference
Total Development Costs $27,281,000 $27,247,000 $34,000
(Less) Total Available Revenue (17,438,000) (17,439,000) (1,000)
Estimated Financial Gap $9,843,000 $9,808,000 $35,000
As shown in the preceding table, KMA estimates the Project’s financial gap at $9.84 million.
Comparatively, Habitat is requesting $9.81 million in financial assistance from the City. This
equates to a $35,000 or less than 1% differential. As such, it can be concluded that the
proposed City’s financial assistance is warranted by the Project’s economics.
The City proposes to utilize HOME Program (HOME) funds that are allocated to the City by the
United States Department of Housing and Urban Development (HUD). Based on a preliminary
HOME unit subsidy estimate, the Project will need to designate at least 30 units as HOME units.
PROJECT DESCRIPTION
The proposed scope of development can be described as follows:
1. The Site area totals approximately 87,110 square feet, or approximately 2.0 acres of
land area.
2. The Site consists of multiple buildings that are used for religious entities. The buildings
will be demolished in order to undertake the Project.
3. The Project’s unit mix can be summarized as follows:
a. The Project will include 40 for-sale units, in 20 duplex buildings, which equates to
a density of 20 units per acre.
b. Each of the units will include three bedrooms and one and a half bathrooms.
c. The units will consist of approximately 1,070 square feet of gross building area
(GBA).
d. The Project’s total GBA is estimated at 42,800 square feet.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 3
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19090.018.038
4. The Project will include 96 parking spaces consisting of the following:
a. Each unit incorporates an attached garage consisting of one parking space plus
an additional surface parking space adjacent to each unit.
b. Sixteen (16) additional surface parking spaces will be provided, including two
accessible stalls.
5. The Project’s affordability mix will consist of the following:
a. Thirty (30) units will be designated as HOME units and restricted to Low Income
households; and
b. The remaining ten (10) units will be restricted to Moderate Income households.
FINANCIAL GAP ANALYSIS
KMA prepared a pro forma analysis to estimate the Project’s financial gap. The analysis is
located at the end of this memorandum, and is organized as follows:
Table 1: Estimated Development Costs
Table 2: Estimated Available Revenue
Table 3: Estimated Financial Gap
Table 4: Silent Second Mortgage Revenue Calculations
Table 5: Preliminary HOME Cost Allocation
Table 6: Affordable Sales Price Calculation (HOME Units)
ESTIMATED DEVELOPMENT COSTS (TABLE 1)
KMA reviewed Habitat’s December 2024 pro forma, and then independently prepared a pro
forma analysis for the Project. The resulting development costs are estimated as follows:
Property Assemblage Costs
The property assemblage costs are estimated at $4.93 million as follows:
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 4
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19090.018.038
PROPERTY ACQUISITION COSTS
Based on information provided by Habitat, Habitat is proposing to purchase the Site for $4.25
million, or $49 per square foot of land area. Habitat did not provide an appraisal and/or
purchase and sale agreement to confirm the purchase price.
RELOCATION COSTS
The property consists of multiple buildings that are leased to three tenants. Per Habitat, Federal
relocation requirements stipulate that the maximum relocation assistance for businesses is
$53,200 plus three months of rent payments, if required. As such, Habitat estimates the total
relocation assistance at $213,000. However, Habitat did not provide a relocation plan for
review. The City should review the relocation plan prior to disbursement of any financial
assistance.
LOST RENT TO SELLER
The Seller has agreed to hold the property during the development period and complete the
purchase transaction upon completion of construction. As such, the Seller will be holding the
property for the estimated development period of approximately 24 months prior to receiving
the agreed-upon purchase price.
To account for this holding period, Habitat is proposing to compensate the Seller for the loss of
rent payments during the 24-month development period. Habitat estimates the lost rent
payments to be made to the Seller at $386,000.
CLOSING COSTS
Habitat estimates the closing costs at 2% of the purchase price, or $85,000.
Direct Costs
The direct costs assume that the Project will be subject to Federal Davis Bacon prevailing wage
requirements. In addition, the Project is subject to the provisions of the Build America Buy
America Act (BABA). The direct costs can be summarized as follows:
1. Habitat estimates the site improvement costs at $4.0 million, or $46 per square foot of
land area. The site improvement budget includes costs for demolition, grading, sewer
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 5
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19090.018.038
system, utility connections, paving, landscaping, open space areas and street
improvements.
2. The building costs are estimated at $10.70 million, or approximately $267,500 per unit.
3. The general conditions are estimated at 2.5% of construction costs, or $367,000.
4. Habitat will charge for the costs to supervise the construction of the Project. Habitat set
the supervision costs at $320,000, which is based on $12,800 per month for 25 months.
5. A direct cost contingency allowance equal to 10% of other direct costs is provided.
KMA estimates the total direct costs at $16.89 million, which equates to approximately
$422,200 per unit.
Indirect Costs
KMA utilized the following assumptions in estimating the indirect costs:
1. The architecture, engineering and consulting costs are estimated at 6% of direct costs,
or $1.01 million.
2. Habitat estimates the public permits and fees costs at $45,700 per unit, or $1.83 million.
City staff should verify the accuracy of this estimate.
3. The taxes, insurance, legal and accounting costs are estimated at 3% of direct costs, or
$507,000.
4. The Developer Fee is set at $844,000 which is based on the following:
a. Management and Overhead costs are set at $444,000 based on:
i. Project Management: $3,500 per month for 24 months; and
ii. Administration: $10,000 per month for 36 months.
b. Habitat will charge the Project to provide homeownership services to potential
affordable homebuyers. Habitat set this fee at $10,000 per unit.
5. An indirect cost contingency allowance equal to 10% of other indirect costs is provided.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 6
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19090.018.038
KMA estimates the total indirect costs at $4.61 million.
Financing Costs
1. The interest costs to be incurred during the construction period are estimated at
$489,000. This cost estimate is based on the following:
a. KMA assumes that Habitat will obtain a construction loan from a third party
lender for the Project. KMA estimates the construction loan amount at $7.52
million, which is calculated based on the total development costs less the
purchase price, Habitat fundraising assistance, Developer Fee, homebuyer
closing costs, HOA reserves and warranty costs.
b. Habitat assumes the construction loan will carry the following terms:
i. A 6.5% interest rate;
ii. A 24-month construction period; and
iii. A 50% average outstanding balance.
2. The financing fees for the construction loan are estimated at 1.0 point, or $75,000.
3. The closing costs related to the sale of each affordable unit are set at $3,000 per unit, or
$120,000.
4. Habitat proposes to fund a $24,000 reserve for the Homeowners Association.
5. The warranty costs are estimated at $140,000, which equates to $3,500 per unit.
KMA estimates the total financing costs at $848,000.
TOTAL DEVELOPMENT COSTS
As shown in Table 1, KMA estimates the total development costs at $27.28 million. In
comparison, Habitat estimates the total development costs at $27.25 million. This represents a
$34,000 differential, which equates to less than 1% of the total development costs.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 7
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19090.018.038
It is important to note that the site plan and development scope have not been finalized. Given
the preliminary nature of Habitat’s proposal, this analysis will need to be revised if the scope of
development changes materially.
Estimated Available Revenue
KMA estimates the revenue available to the Project as follows:
LOW INCOME SALES PRICES – HOME UNITS
The Project is required to designate at least 30 units as HOME units. The HOME Program does
not define a methodology for setting the affordable sales prices. As such, KMA estimated the
Low Income sales prices for the HOME units as follows:
1. The household income used in the calculations is based on the Low Income limits
published by HUD. KMA assumes the household size is estimated at one plus the
number of bedrooms (four persons for a three-bedroom unit).
2. Since the Project consists of more than four units, the Project is required to have an
HOA. Habitat estimates the annual HOA dues at $400 per unit per month.
3. Habitat estimates the homeowner’s insurance cost at 0.75% of the affordable sales
price, or approximately $2,250 per year.
4. The annual utilities are based on the utility allowances published by the Santa Ana
Housing Authority (SAHA) as of October 1, 2024. KMA assumes the homeowners will pay
for: electric cooking, electric heating, electric water heating, basic electricity, air
conditioning, water, sewer and trash.
5. Habitat estimates the property tax cost based on 1.25% of the estimated affordable
sales price.
6. The mortgage interest rate is set at 7.0%. The mortgage is assumed to be fully
amortizing over 30 years and provided by a conventional lender.
7. The homebuyer downpayment is set at 5% of the affordable sales price.
Based on the assumptions outlined above, KMA estimates the Low Income Affordable Sales
Prices for the HOME units at $300,200.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 8
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19090.018.038
MODERATE INCOME SALES PRICES
The City is only providing HOME funds to the Project. The $9.81 million in proposed HOME
assistance requires at least 30 Low Income units. Habitat proposes to restrict the remaining ten
units to moderate income households. The City is amenable to Habitat establishing the
affordable sales prices for the Moderate Income units. Habitat is currently estimating the
moderate income sales prices at $389,500.
AFFORDABLE SALES PRICE REVENUE
KMA estimates that the 30 Low Income units will generate $9.01 million in affordable sales
revenue. Based on Habitat’s proposed moderate income sales prices, the 10 Moderate Income
units will generate $3.90 million in affordable sales revenue. As such, the total affordable sales
revenue is estimated at $12.90 million.
However, it is important to note that the affordable sales prices will ultimately be determined
immediately prior to the sale of each unit. This analysis may need to be revised if the affordable
sales prices differ from the sales prices utilized in this analysis.
ADDITIONAL REVENUE
Habitat proposes to utilize fundraising contributions to off-set a portion of the construction
costs. As such, Habitat estimates the financial assistance that they can provide to the Project at
$4.54 million, or $113,400 per unit.
ESTIMATED AVAILABLE REVENUE
The Project’s estimated total available revenue is equal to the sum of the Affordable Sales Price
revenue and the Project’s additional revenue. KMA estimates the total available revenue as
follows:
Affordable Sales Price Revenue $12,901,000
Habitat Financial Assistance $4,537,000
Estimated Available Revenue $17,438,000
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 9
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19090.018.038
Financial Gap Calculation
The financial gap is estimated by deducting the Project’s available revenue from the Project’s
total development costs. Based on the preceding analysis, KMA estimates the Project’s financial
gap as follows:
KMA
Total Development Costs $27,281,000
(Less) Total Available Revenue (17,438,000)
Estimated Financial Gap $9,843,000
Per Unit $246,100
As shown in the preceding table, KMA estimates the Project’s financial gap at $9.84 million.
Comparatively, Habitat is requesting $9.81 million in financial assistance from the City. Since
this amount is less that the financial gap identified by KMA, it can be concluded that the
proposed City financial assistance is warranted by the project economics.
The City will need to confirm that Habitat has secured all necessary funding sources before
formally committing HOME funds to the Project.
SILENT SECOND MORTGAGE REVENUE CALCULATION (TABLE 4)
As a basic premise it must be assumed that the total of the liens accepted by a homebuyer
cannot exceed the unrestricted market value of the home. Furthermore, based on previous City
homeownership projects, the City will record a second trust deed equal to the difference
between the Affordable Sales Price and the estimated market value of the home.
KMA assumes that the City’s second trust deed will be structured as a deferred payment loan
which are commonly known as silent second mortgages. These loans typically become due and
payable when the home is resold to a non-affordable homebuyer. KMA assumes that the City’s
silent second trust deed will fall second in the lien hierarchy behind the conventional first trust
deed mortgage.
The calculations used to estimate the supportable silent mortgages are presented in the
following sections of this analysis.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 10
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19090.018.038
Market Rate Sales Prices
Habitat provided sales comparables for the Project’s nearby market area for the purpose of
estimating the current silent second mortgage amount. Based on these comparables, KMA
estimates the market rate sales price for an attached three-bedroom unit at $750,000.
In addition, the HOME Program establishes a maximum sales price for the HOME units.
Ultimately, the market rate sales price will be set at the lesser of the appraised fair market
value of the unit or the maximum HOME sales price in effect at the time of sale.
Available Silent Second Mortgage Revenue
Based on the estimated market rate sales prices, the available silent second mortgage revenue
is estimated at as follows:
Three-Bedroom Units
Low Income
Units
Moderate
Income Units
Market Rate Sales Price $750,000 $750,000
(Less) Affordable Sales Price (300,200) (389,500)
Silent Second Mortgage Amounts (Per Unit) $449,800 $360,500
It is important to note that this calculation will need to be revisited once sales of the units
commence. At that point, the appraised market values of the homes, maximum HOME sales
prices, and the defined Affordable Sales Prices will be utilized to determine the silent second
mortgage amounts.
PRELIMINARY HOME COST ALLOCATION (TABLE 5)
KMA completed a preliminary HOME cost allocation for the Project. The HOME cost allocation
analysis is based in part on the 2024 maximum HOME subsidy limits of $327,293 for three-
bedroom units. The provision of $9.81 million in HOME funds to the Project requires that at
least 30 units be designated as HOME units. All of the HOME units will be restricted to Low
Income households.
EXHIBIT 3
Judson Brown, City of Santa Ana December 10, 2024
Habitat Alton – Preliminary Financial Gap Analysis Page 11
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19090.018.038
CONCLUSIONS / RECOMMENDATIONS
The following summarizes the conclusions of the KMA analysis:
1. Based on currently available information, KMA estimates the Project’s financial gap at
$9.84 million. In comparison, the Developer is requesting $9.81 million in financial
assistance from the City. As such, the Developer’s request is supported by the Project
economics.
2. Based on the preliminary HOME Cost Allocation Analysis, the City must designate at
least 30 units in the Project as HOME units.
3. It is important to note that the City cannot formally commit HOME funds to the Project
until after all of the other financing sources have received formal commitments. At that
time, the City must prepare a HOME Subsidy Layering Review in order to formally
commit HOME funds to the Project.
4. Given the preliminary nature of the proposal, if the scope of development or financing
assumptions change, the KMA analysis may need to be updated accordingly.
5. The affordable sales prices cannot be finalized until the Project commences sales
activities. It is likely that the actual affordable sales prices will differ from the amounts
estimated in this analysis.
6. KMA recommends that the City retain 10% of the City’s financial assistance amount (or
$981,800) until after the completion of construction. If the assumptions utilized in this
analysis change materially, the financial gap analysis should be re-evaluated prior to the
release of that amount to ensure that the $981,800 is still warranted by the Project.
7. The City’s HOME funds have various expenditure deadlines. KMA recommends that the
City include a schedule of performance in the preliminary commitment documentation
to ensure that the Project moves forward in time to meet the HOME fund expenditure
deadlines.
EXHIBIT 3
TABLE 1
ESTIMATED DEVELOPMENT COSTS
FOR-SALE: 30 LOW INCOME UNITS & 10 MODERATE INCOME UNITS
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
I.Property Assemblage Costs
Property Acquisition Costs 1 87,110 Sf Land $49 /Sf Land $4,250,000
Relocation Costs 213,000
Lost Rent Paid to Seller 386,000
Closing Costs 2.0%Property Acquisition Costs 85,000
Total Property Assemblage Costs $4,934,000
II.Direct Costs 2
On-Site Improvements 87,110 Sf Land $46 /Sf Land $3,995,000
Building Costs 40 Units $267,500 /Unit 10,700,000
General Conditions 3 2.5%Construction Costs 367,000
Habitat Supervision 3 320,000
Contingency Allowance 10%Other Direct Costs 1,506,000
Total Direct Costs 40 Units $422,200 /Unit $16,888,000
III.Indirect Costs
Architecture, Engineering & Consulting 6%Direct Costs $1,013,000
Public Permits & Fees 4 40 Units $45,700 /Unit 1,828,000
Taxes, Ins., Legal & Accounting 3%Direct Costs 507,000
Developer Fee 3 3%Net Development Cost (Excl. Dev Fee)844,000
Contingency Allowance 10%Other Indirect Costs 419,000
Total Indirect Costs $4,611,000
IV.Financing Costs
Interest During Construction 5 $7,523,000 Loan 6.50%Interest $489,000
Loan Origination Fee $7,523,000 Loan 1.0 Point 75,000
Closing Costs 40 Units $3,000 /Unit 120,000
HOA Reserves 40 Units $600 /Unit 24,000
Warranties 40 Units $3,500 /Unit 140,000
Total Financing Costs $848,000
V.Total Development Costs 40 Units $682,000 /Unit $27,281,000
1
2
3
4
5
Based on Habitat estimate. An appraisal was not provided for review.
Based on Habitat estimates. Assumes that Federal Davis Badon wage requirements will be imposed on the Project. The Project will also be subject
to the provisions of the Build America Buy America Act.
The loan interest is based on an 24-month loan term and a 50% average outstanding balance.
Based on Habitat estimates. City staff should verify the accuracy of this estimate.
Based on estimate provided by Habitat.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; Pf
EXHIBIT 3
TABLE 2
ESTIMATED AVAILABLE REVENUE
FOR-SALE: 30 LOW INCOME UNITS & 10 MODERATE INCOME UNITS
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
I.Affordable Sales Revenue
HOME Low Income - Three-Bedroom Units 1 30 Units $300,200 /Unit $9,006,000
Moderate Income - Three-Bedroom Units 2 10 Units $389,500 /Unit 3,895,000
Total Affordable Sales Revenue $12,901,000
II.Habitat Financial Assistance 40 Units $113,400 /Unit $4,537,000
III.Estimated Available Revenue 40 Units $435,950 /Unit $17,438,000
1 See TABLE 6 for the KMA affordable sales price calculations.
2 Per Habitat.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; Pf
EXHIBIT 3
TABLE 3
ESTIMATED FINANCIAL GAP
FOR-SALE: 30 LOW INCOME UNITS & 10 MODERATE INCOME UNITS
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
I.Total Development Costs See TABLE 1 $27,281,000
II.(Less) Estimated Available Revenue See TABLE 2 ($17,438,000)
III.Estimated Financial Gap 40 Units $246,100 /Unit $9,843,000
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; Pf
EXHIBIT 3
TABLE 4
SILENT MORTGAGE REVENUE SAMPLE CALCULATIONS
FOR-SALE: 30 LOW INCOME UNITS & 10 MODERATE INCOME UNITS
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
Silent Mortgage Capacity After City Downpayment Assistance
I.HOME Low Income: Three-Bedroom Units
Estimated Market Rate Sales Price 1 $750,000
(Less) HOME Low Income Affordable Sales Price 2 (300,200)
Available Silent Mortgage Capacity Per Low Income Unit $449,800
II.Moderate Income: Three Bedroom Units
Estimated Market Rate Sales Price 1 $750,000
(Less) Moderate Income Affordable Sales Price 2 (389,500)
Available Silent Mortgage Capacity Per Moderate Income Unit $360,500
1
2 The final Affordable Sales Prices will be set prior to the sale of each unit.
Based on sales comparables provided by Habitat. The 2024 HOME sales limit is $789,000. At the time of sale for each unit, the prevailing market
rate sale price will be determined based on the lesser of: (1) the fair market appraised value that assumes no income restrictions or the maximum
HOME sales price limits.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; Pf
EXHIBIT 3
TABLE 5
PRELIMINARY HOME COST ALLOCATION WORKSHEET - STANDARD MODEL
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
Step 1: Determine Comparability, Select Method of Cost Allocation Net Residential SF 42,800
Step 2: Proposed HOME Investment 1 $9,807,571
Step 3: Calculate Actual Cost of HOME Units
Total Development Costs 1 $27,246,338
Ineligible Development Costs 2 (24,000)
Unit-Specific Upgrades 0
Relocation Costs 0
Assign Relocation Exclusively to HOME Units?NA
Base Project Cost $636 /Sf Gross Residential SF $27,222,338
Number of Units # of Bdrms Unit Size Cost/Unit Total Cost
30 3 1,070 $680,558 $20,416,754
Subtotal HOME Unit Costs $20,416,754
Add: Relocation Costs Allocated Exclusively to HOME Units (if applicable)$0
Actual Cost of HOME Units $20,416,754
Step 4: Calculate Maximum Project Subsidy
Unit Size # of Units 2024 Max Subsidy/Unit Maximum Subsidy
0 Bedroom 0 $181,488 $0
1 Bedroom 0 $208,049 0
2 Bedroom 0 $252,994 0
3 Bedroom 30 $327,293 9,818,790
4 Bedroom 0 $359,263 0
Maximum Project Subsidy 30 $9,818,790
Step 5: Maximum HOME Investment, Lesser of
Proposed Investment (Step 2)$9,807,571
Actual Cost of HOME Units (Step 3)$20,416,754
Maximum Project Subsidy (Step 4)$9,818,790
Maximum HOME Investment 30 HOME Units $9,807,571
1
2
Includes $0 in Santa Ana Project Delivery costs.
The ineligibe costs include: capitalized reserves.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; HOME
EXHIBIT 3
TABLE 6
HOME LOW INCOME SALES PRICES
HABITAT FOR HUMANITY - ALTON
SANTA ANA, CALIFORNIA
Low Income
I.HOME Program 80% HUD Median
1 Person $88,400
2 Person $101,000
3 Person $113,650
4 Person $126,250
5 Person $136,350
6 Person $146,450
7 Person $156,550
8 Person $166,650
II.Affordable Sales Price Calculation
One-Bedroom
Unit
Two-Bedroom
Unit
Three-Bedroom
Unit
Four-Bedroom
Unit
A.Income Available for Housing Expenses
Benchmark Household Size 2 3 4 5
Household Income Limit $101,000 $113,650 $126,250 $136,350
% Income Allotted to Housing Costs 30%30%30%30%
Total Income Available for Housing Expenses $30,300 $34,095 $37,875 $40,905
B.Ongoing Expenses
HOA Fees ($400/Unit/Month)$4,800 $4,800 $4,800 $4,800
Insurance @ 0.75% of Affordable Sales Price 1,793 2,027 2,252 2,414
Annual Utilities Allowance 2 2,592 3,396 4,296 5,268
Property Taxes @ 1.25% of Affordable Sales Price 2,989 3,378 3,754 4,023
Total Ongoing Expenses $12,174 $13,601 $15,102 $16,505
C.Income Available for Mortgage Debt Service $18,126 $20,494 $22,773 $24,400
D.Affordable Sales Prices
Supportable Mortgage @ 7.00% Interest Rate 3 $227,000 $256,700 $285,200 $305,600
Home Buyer Down Payment @ 5% of Affordable Sales Price 12,000 13,500 15,000 16,100
III.Affordable Sales Prices $239,000 $270,200 $300,200 $321,700
1
2
3
Based on the utility allowances published by the Santa Ana Housing Authority on October 1, 2024.
Based on Habitat estimate which is approximately equal to the Freddie Mac monthly average between November 2023 and October 2024, for a fixed-
interest rate loan with a 30-year amortization period.
Based on 80% HUD Median. The affordable sales prices will ultimately be determined immediately prior to the sale of the units.
Low Income Sales Price
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Alton_12 6 24; HUD Afford
EXHIBIT 3
SANTA ANA CITY COUNCIL
Valerie Amezcua
Mayor
vamezcua@santa-ana.org
Benjamin Vazquez
Mayor Pro Tem - Ward 2
bvazquez@santa-ana.org
Thai Viet Phan
Ward 1
tphan@santa-ana.org
Jessie Lopez
Ward 3
jessielopez@santa-ana.org
Phil Bacerra
Ward 4
pbacerra@santa-ana.org
Johnathan Ryan Hernandez
Ward 5
jryanhernandez@santa-ana.org
David Penaloza
Ward 6
dpenaloza@santa-ana.org
MAYOR
Valerie Amezcua
MAYOR PRO TEM
Benjamin Vazquez
COUNCILMEMBERS
Phil Bacerra
Johnathan Ryan Hernandez
Jessie Lopez
David Penaloza
Thai Viet Phan CITY OF SANTA ANA
COMMUNITY DEVELOPMENT AGENCY
20 Civic Center Plaza – M25
Santa Ana, California 92702
www.santa-ana.org
CITY MANAGER
Alvaro Nuñez
CITY ATTORNEY
Sonia R. Carvalho
CITY CLERK
Jennifer L. Hall
March 4, 2025
Michael Valentine
President & CEO
Habitat for Humanity of Orange County, Inc.
2200 Ritchey Street
Santa Ana, CA 92705
Re: Pre-Commitment Letter
425 E. Wellington Ave.
Santa Ana, CA 92701
Dear Mr. Valentine,
Habitat for Humanity of Orange County, Inc. (referred to as the “Developer”), requested
financial assistance for eligible homebuyers to purchase nine (9) existing rental units
that will be converted into affordable ownership condominium units (“Project”). The
Project would be located at 425 East Wellington Avenue, Santa Ana, CA, 92701 (APN
398-028-12) (“Property”).
The Project involves the conversion of an existing nine -unit apartment building into
condominiums, which will be made available for homeownership to Low and Moderate-
Income households earning less than 120% of the Area Median Income (“AMI”) ("Low
and Moderate-Income Households"). The existing building on the Property was
rehabilitated in May 2024 and includes one two-bedroom unit and eight one-bedroom
units, each with a single bathroom. All units are equipped with essential appliances:
stoves, refrigerators and stacked washer/dryer units in the laundry space. Unit sizes
range from 420 to 846 square feet. The building recently underwent over $1 million in
renovations, which included new flooring, electrical upgrades (new outlets and fixtures),
updated kitchen cabinets, and complete bathroom remodels. Doors, windows, shutters,
garage doors, stairways, and railings were restored or replaced as needed to meet code
compliance.
EXHIBIT 4
The City of Santa Ana (“City”) has reviewed the Developer's request for financial
assistance, and at the City Council meeting on March 4, 2025, the City Council
authorized and approved the issuance of this pre-commitment letter evidencing a
commitment to reserve $920,000.00 (the "City Assistance") in Inclusionary Housing
Funds as follows: (1) an allocation of $720,000 to the City's Down Payment Assistance
Program (the "Down Payment Assistance Program Allocation"), and (2) a conditional
award up to $200,000 for eligible relocation costs (the "Conditional Relocation
Allocation"). The City Assistance will be available to Low and Moderate -Income
households. Current residents of the Property with household incomes of less than
120% AMI and that qualify to purchase a unit within the Property will be given the right
of first refusal to purchase a unit. The Down Payment Assistance Allocation shall be
available for down payment assistance to individual households, structured as a silent
mortgage based on homebuyer eligibility (the "Homebuyer Down Payment Assistance").
Homebuyers must meet the eligibility requirements for the Developer’s Affordable
Homeownership Program with a residency preference for local workers and residents of
Santa Ana in accordance with Santa Ana Municipal Code Section 8-3500. Conversion
and construction will comply with all City of Santa Ana, County, and State building
codes. The Conditional Relocation Allocation will be available upon a determination by
the City that the Project is subject to relocation benefits under California Government
Code §§ 7260 or 66300.6.
This letter shall evidence the City’s pre-commitment of the City Assistance to the
Developer for the Project subject to the conditions described below.
City Assistance:
The amount of the proposed City Assistance has been determined based upon the
City’s review of the Developer's request for the receipt of the City Assistance targeting
Low and Moderate Income Households.
The City Assistance shall be conditioned on and include the following terms:
City and Developer shall enter into a Memorandum of Understanding ("MOU")
that sets forth terms under which the City shall provide the Homebuyer Down
Payment Assistance and Conditional Relocation Allocation.
The Homebuyer Down Payment Assistance shall be available for Low and
Moderate Income Households with income that does not exceed 120% of the
Orange County AMI as set by the Department of Housing and Urban
Development (“HUD”).
The MOU may, but is not required to, include provisions that govern if and how
the City Assistance may be used in the event the total authorized Homebuyer
Down Payment Assistance loans are less than the amount of the award in this
pre-commitment ($720,000.00). The MOU may make these provisions subject to
approval from the City Manager of an amended MOU.
EXHIBIT 4
The MOU shall specify that the Project is not undertaken by the City and is not in
furtherance of a City program. Rather, the MOU is a response to Developer's
request for financial assistance to enhance affordability for qualified homebuyers
by providing Homebuyer Down Payment Assistance through an existing City
program.
The MOU shall require that Developer execute an affordable housing covenant
("Affordable Housing Covenant") to offer the nine (9) affordable units to
households with income that does not exceed the limits for Low and Moderate -
Income Households for an affordable sales price that complies with the limits for
an "affordable housing cost," as defined in California Health and Safety Code §
50052.5. In addition to the available Homebuyer Down Payment Assistance, the
existing residents shall have a right of first refusal, which shall provide those
households with the right to purchase an affordable unit. The Affordable Housing
Covenant shall run with the land for a period of forty-five (45) years.
Developer shall assume any and all responsibility and be solely responsible for
determining whether the project must comply with the relocation requirements
under California Government Code § 7260 et seq. and implementing regulations
and any other applicable federal, state, or local laws governing relocation of
residential tenants, including but not limited to Division 2 of Article IX of Chapter
34 of the Santa Ana Municipal Code (§ 34-331 et seq.) (collectively, "Relocation
Laws"). To the extent applicable, Developer shall comply with and be responsible
for all costs of compliance with relevant Relocation Laws.
Developer shall assume any and all responsibility and be solely responsible for
compliance with all tenant and eviction protections, including but not limited to
protections under the California Tenant Protection Act (Civil Code § 1946.2), the
Ellis Act (Government Code § 7060 et seq.), Santa Ana's Rent Stabilization and
Just Cause Eviction Ordinance (Article XIX of Chapter 8 of the Santa Ana
Municipal Code) (collectively, "Eviction Protections"). To the extent applicable,
Developer shall comply with and be responsible for all costs of compliance with
all relevant Eviction Protections.
Because the MOU will provide City Assistance as part of Homebuyer Down
Payment Assistance for qualified homebuyers, the repayment obligation is based
on the City's existing Down Payment Assistance Program. City shall not be
obligated to make any payments to qualified homebuyers under the MOU unless
and until Developer meets all conditions provided for in the MOU and qualified
Low and Moderate-Income Households comply with all requirements to receive
the Homebuyer Down Payment Assistance.
The nine (9) affordable ownership units at the Project shall be restricted by an
Affordable Housing Covenant to an affordable home purchase price, which will
require that the nine (9) homes be sold to qualified Low and Moderate-Income
Households. Future sales of such single-family homes will be restricted to
qualified Low and Moderate-Income Households for a period of at least forty-five
(45) years.
EXHIBIT 4
Developer will have a local preference for families who live or work in the City of
Santa Ana in the selection of qualified Low and Moderate-Income Households in
compliance with Santa Ana Municipal Code Section 8-3500. The local
preference will be applied after all existing residents have the opportunity to
exercise the right of first refusal.
Developer will ensure that each “Program Participant” (used interchangeably
with “Homebuyer”) means the selected eligible person or family who will be
purchasing a house. Each Program Participant will provide voluntary work as
sweat equity or any other administrative work as may be designated by the
Developer. Each Program Participant is to be selected by the Developer as more
fully set forth in its Affordable Homeownership Program. The City shall have the
right to review and approve the sweat equity requirements and related criteria
(including a residency preference for Santa Ana residents or workers) applied
through the Affordable Homeownership Program.
Developer will comply with the City’s Community Workforce Agreement and
union labor will be used for all necessary upgrades when volunteer labo r is not
used.
Developer will provide existing tenants with the right of first refusal to purchase a
unit, provided they meet the eligibility requirements for Habitat for Humanity’s
Affordable Homeownership Program and the City of Santa Ana’s Down Payment
Assistance Program; provided, however, Developer shall at all times comply with
the Relocation Laws. If an eligible and qualified household exercises the right of
first refusal, Developer shall sell the Affordable Unit to that household.
Developer shall comply with all requirements of the California Building Code. If
the Project requires a building permit that is subject to Chapter 11B of the
California Building Code, including but not limited to any requirements for "public
housing" under Section 11B-233.3, then Developer shall comply with applicable
requirements of the California Building Code.
At the close of escrow for the purchase of each affordable unit, the City will
require each household purchasing such unit to execute all documents and
instruments required by the City's Down Payment Assistance Program.
The MOU shall set forth the terms and conditions for disbursement of the
Conditional Relocation Allocation. All disbursements of the Conditional
Relocation Allocation shall be subject to compliance with the Relocation Laws,
and disbursed only on a reimbursement basis after the City has been provided
reasonable documentation of compliance with the Relocation Laws.
General Provisions:
The City's obligation to provide the City Assistance to the Project is subject to each of
the following conditions:
EXHIBIT 4
Developer must provide proof that it has secured all of its remaining financing for
the conversion of the Project in the form of enforceable funding commitments
and agrees that Developer shall be solely and exclusively responsible for any
and all Project costs in the event all or some of the City Assistance is not
approved or authorized.
Developer and City shall enter into the MOU setting forth the terms and
conditions for the Homebuyer Down Paym ent Assistance loans for individual
homeowners and any other uses of the City Assistance, and the disbursements
of the Conditional Relocation Allocation, if any.
Execution of an Affordable Housing Covenant and recording the same against
the Property.
Developer shall assume any and all responsibility and be solely responsible for
determining whether laborers employed relative to the construction or installation
of the Project must be paid the prevailing per diem wage rate for their labor
classification, as determined by the state, pursuant to labor code sections 1720,
et seq. If applicable, Developer shall comply with the City’s Community
Workforce Agreement.
All provided funding and Project requirements shall conform to the City’s most
recently adopted Affordable Housing Funds Policies and Procedures and the
City’s Down Payment Assistance Program, unless alternative requirements (e.g.,
reduction of 3% down payment requirement to 1%) are expressly provided in the
executed MOU or any other documents related to the conversion of the Project.
Approval of all required entitlements and discretionary actions to allow the
construction, improvement, conversion, and/or development of nine (9)
affordable ownership units to be located at 425 East Wellington Avenue , Santa
Ana, CA, 92701 (APN 398-028-12).
The City's obligation to provide the City Assistance is and shall remain subject to
all covenants, conditions, and restrictions set forth in this pre-commitment letter
and the MOU, and in particular, the City's analysis of the available funding
sources and development and operating costs of the Project and the overall
economic feasibility of the Project.
Developer's compliance with any applicable Relocation Laws.
For any disbursement of the Homebuyer Down Payment Assistance, each
Homebuyer shall comply with the City's Down Payment Assistance Program.
Developer must comply with all other conditions specified in the MOU for
disbursement of funds, including execution and recordation of the Affordable
Housing Covenant.
EXHIBIT 4
City shall have the right to review and approve any conditions of title, as reflected
on a preliminary title report, and a condition of title guarantee, at Developer's
expense, regarding the priority of the Affordable Housing Covenant, subject to
City's review and approval.
Developer must indemnify, defend, and hold harmless, City against loss or
damage suffered by City as a result of any claim by any person or entity arising
out of or relating to this pre-commitment or the transactions contemplated by this
pre-commitment, excluding claims resulting from the City’s gross negligence
and/or willful misconduct.
Any other terms and conditions the City determines are reasonably necessary for
the MOU to protect the City's interest and comply with applicable law.
Developer, at its sole cost and expense, will be responsible for securing any and all
permits and discretionary approvals that may be required for the Project by the City or
any other federal, state, or local governmental entity having or claiming jurisdiction over
the Property or Project. Notably, this pre-commitment letter shall not obligate the City or
any department thereof to approve any application or request for or take any other
action in connection with any planning approval, permit, or o ther action necessary for
the construction, rehabilitation, installation or operation of the Project.
This pre-commitment letter for the Project will expire on March 4, 2027.
If you have any questions or require any additional information regarding this pre-
commitment letter, please contact Judson Brown, Housing Division Manager, by
telephone at (714) 667-2241 or by e-mail at jbrown@santa-ana.org.
Sincerely,
On behalf of the City of Santa Ana:
_________________________________
Alvaro Nuñez
City Manager
Attest:
_________________________________
Jennifer L. Hall
City Clerk
RECOMMENDED FOR APPROVAL:
___________________________
Michael L. Garcia
Executive Director
Community Development Agency
EXHIBIT 4
AGREED TO BY:
HABITAT FOR HUMANITY OF ORANGE COUNTY, INC.
______________________
Michael Valentine, President & CEO
EXHIBIT 4
777 SOUTH FIGUEROA STREET, SUITE 2555 LOS ANGELES, CALIFORNIA 90017 PHONE 213.622.8095
2412002v3.SA.TRB
WWW.KEYSERMARSTON.COM 19090.018.035
ADVISORS IN:
Real Estate
Affordable Housing
Economic Development
BERKELEY
Debbie M. Kern
David Doezema
LOS ANGELES
Kathleen H. Head
Kevin E. Engstrom
Julie L. Romey
Tim R. Bretz
SAN DIEGO
Paul C. Marra
Linnie A. Gavino
EMERITUS
A. Jerry Keyser
Timothy C. Kelly
MEMORANDUM
At your request, Keyser Marston Associates, Inc. (KMA) prepared a preliminary financial
gap analysis for the project proposed to be developed at 425 East Wellington Avenue
(Site) by Habitat for Humanity of Orange County (Habitat). Habitat purchased the Site in
November 2024.
The Site includes an existing 9-unit apartment building. Habitat proposes to convert the
existing rental units into for-sale condominium units which will be sold to Low or
Moderate Income households (Project). Habitat is requesting up to $920,000 in financial
assistance from the City of Santa Ana (City). The City’s financial assistance package is
proposed to be structured as follows:
1.The City proposes to utilize up to $720,000 in Inclusionary Housing (Inclusionary)
Funds to provide down payment assistance to eligible homebuyers (Down Payment
Assistance Program Allocation).
2.The City may provide up to $200,000 in Inclusionary Funds to provide relocation
assistance to existing apartment tenants that do not purchase an affordable unit at the
property (Conditional Relocation Allocation).
To: Judson Brown, Housing Division Manager
City of Santa Ana
From: Tim Bretz
Date: February 10, 2025
Subject: Habitat Wellington Avenue – Preliminary Financial Gap Analysis
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 2
2412002v3.SA.TRB
19090.018.035
The purpose of the KMA analysis is to evaluate Habitat’s financial assistance request.
EXECUTIVE SUMMARY
As noted previously, the City’s financial assistance package is proposed to be structured in two
components:
Down Payment Assistance Program Allocation
KMA completed a financial gap analysis to evaluate Habitat’s request for $720,000 in Down
Payment Assistance Program funds. The results of the KMA financial gap analysis are compared
to Habitat’s financial proposal in the following table:
KMA Habitat Difference
Total Development Costs $4,402,000 $4,374,200 $27,800
(Less) Total Available Revenue (3,654,200) (3,654,200) (-0-)
Estimated Financial Gap $747,800 $720,000 $27,800
As shown in the preceding table, KMA estimates the Project’s financial gap at $747,800.
Comparatively, Habitat is requesting $720,000 in Down Payment Assistance Program funds
from the City. This represents a $27,800, or approximately 4% differential. Habitat will be
responsible for any unfunded financial gap above the $7200,000 in financial assistance
proposed to be provided by the City. As such, it can be concluded that the City’s proposed
Down Payment Assistance Program funding is warranted by the Project’s economics.
The City proposes to utilize $720,000 in Inclusionary Funds to provide Down Payment
Assistance Program funds to eligible homebuyers. The City Down Payment Assistance Program
Allocation is based on providing up to $80,000 per unit in down payment assistance to each
eligible Moderate or Low Income homebuyer.
Conditional Relocation Allocation
The City may utilize up to $200,000 in Inclusionary Funds to provide relocation assistance to
existing apartment tenants that do not purchase an affordable unit at the property (City
Relocation Assistance). The specific amounts utilized for the Conditional Relocation Allocation
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 3
2412002v3.SA.TRB
19090.018.035
will based on actual amounts determined immediately prior to the relocation of existing
tenants.
PROJECT DESCRIPTION
The proposed scope of development can be described as follows:
1. The Site area totals approximately 9,150 square feet, or approximately 0.21 acres of
land area.
2. The Site consists of one existing apartment building. The apartment units will be
converted to condominium units.
3. The Project’s unit mix can be summarized as follows:
a. The Project will include 9 for-sale units, which equates to a density of 43 units
per acre.
b. The unit mix consists of the following:
i. Eight (8) one-bedroom units consisting of approximately 550 square feet
of living area; and
ii. One (1) two bedroom unit consisting of approximately 850 square feet of
living area.
c. The Project’s total gross building area (GBA) is estimated at 5,266 square feet.
4. Each unit has an existing one-car garage for a total of 9 parking spaces for the Project.
5. The Project’s affordability mix will consist of the following:
a. All nine units will be sold to Low or Moderate Income households. For the
purposes of this financial gap analysis, KMA assumed that all units will be sold to
Moderate Income households.
b. To limit displacement, existing apartment tenants with household incomes of
less than 120% of the Area Median Income (AMI) and that qualify to purchase a
unit will be given the first right to purchase a unit at an affordable sales price.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 4
2412002v3.SA.TRB
19090.018.035
FINANCIAL GAP ANALYSIS
KMA prepared a pro forma analysis to estimate the Project’s financial gap. The analysis is
located at the end of this memorandum, and is organized as follows:
Table 1: Estimated Development Costs
Table 2: Estimated Available Revenue
Table 3: Estimated Financial Gap
Table 4: Silent Second Mortgage Revenue Calculations
Table 5: Affordable Sales Price Calculation
ESTIMATED DEVELOPMENT COSTS (TABLE 1)
KMA reviewed Habitat’s December 2024 pro forma, and then independently prepared a pro
forma analysis for the Project. The resulting development costs are estimated as follows:
Property Assemblage Costs
The property assemblage costs are estimated at $3.23 million as follows:
PROPERTY ACQUISITION COSTS
Based on information provided by Habitat, Habitat purchased the Site for $3.11 million, or
$345,000 per unit. Habitat provided an appraisal prepared by AEI Consultants on July 26, 2024
that estimated the as-is market value of the property at $2.78 million, or $309,000 per unit.
As such, Habitat purchased the property for $325,000, or approximately 12% more than the
appraised value of the Property.
RELOCATION COSTS
The property is currently utilized as an apartment building that contains existing apartment
tenants. The funding source proposed to be provided by the City does not trigger the Federal
Uniform Relocation Act. To that end, Habitat estimates the relocation costs at $60,000, which is
based on three months of current rent payments.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 5
2412002v3.SA.TRB
19090.018.035
However, Habitat will provide current tenants that earn 120% AMI or less and qualify to
purchase an affordable unit with a Right of First Refusal to purchase a unit at an affordable
sales price.
CLOSING COSTS
Habitat estimates the closing costs at $69,000 or approximately 2% of the purchase price.
Direct Costs
The direct costs assume that the Project will be subject to the City’s Community Workforce
Agreement. The direct costs can be summarized as follows:
1. Habitat estimates the site improvement costs at $30,000, or $3 per square foot of land
area. The site improvement costs include asphalt repaving and trash enclosure
improvements.
2. The building renovation costs are estimated at $76,000, or approximately $8,500 per
unit. The scope of rehabilitation includes new water meters, garage doors, windows,
and additional repairs required by the insurance company.
3. The prevailing wage premium is estimated at 30% of construction costs, or $32,000.
4. The general conditions are estimated at 20% of construction costs, or $28,000.
5. Habitat will not charge for the costs to supervise the construction of the Project.
6. A direct cost contingency allowance equal to 15% of other direct costs is provided.
KMA estimates the total direct costs at $191,000, which equates to approximately $21,200 per
unit.
Indirect Costs
KMA utilized the following assumptions in estimating the indirect costs:
1. The architecture, engineering and consulting costs are estimated at 3% of the property
assemblage and direct costs, or $103,000.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 6
2412002v3.SA.TRB
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2. Habitat estimates the public permits and fees costs at $3,800 per unit, or $34,000. City
staff should verify the accuracy of this estimate.
3. The taxes, legal and accounting costs are estimated at 3% of direct costs, or $103,000.
4. Habitat estimates the insurance costs at $27,000 or $3,000 per unit.
5. The Developer Fee is set at $207,000 which is based on the following:
a. Management and Overhead costs are set at $4,000 per month for an 18-month
development period.
b. Habitat will charge the Project to provide homeownership services to potential
affordable homebuyers. Habitat set this fee at $15,000 per unit.
6. An indirect cost contingency allowance equal to 7% of other indirect costs is provided.
KMA estimates the total indirect costs at $507,000.
Financing Costs
1. The interest costs to be incurred during the development period are estimated at
$340,000. This cost estimate is based on the following:
a. Habitat states that a $3.0 million predevelopment/construction loan will be
obtained from a third party lender for the Project.
b. KMA assumes the predevelopment/construction loan will carry the following
terms:
i. A 7.56% interest rate;
ii. An 18-month development period; and
iii. A 100% average outstanding balance.
2. The financing fees for the predevelopment/construction loan are estimated at 1.0 point,
or $30,000.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 7
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3. The closing costs related to the sale of each affordable unit are estimated at $3,000 per
unit, or $27,000.
4. Habitat proposes to fund an $8,000 reserve for the Homeowners Association.
5. The warranty costs are estimated at $65,000, which equates to approximately $7,200
per unit.
KMA estimates the total financing costs at $470,000.
TOTAL DEVELOPMENT COSTS
As shown in Table 1, KMA estimates the total development costs at $4.40 million. In
comparison, Habitat estimates the total development costs at $4.37 million. This represents an
approximately $28,000 differential, which equates to less than 1% of the total development
costs.
Estimated Available Revenue
KMA estimates the revenue available to the Project as follows:
MODERATE INCOME SALES PRICES – INCLUSIONARY HOUSING FUNDS
The City will provide Inclusionary Funds to the Project. As such, KMA estimated the affordable
sales as follows:
1. The household income used in the calculations is based on the area median income
published by the California Department of Housing and Community Development (HCD)
and adjusted for the number of persons per household (Area Median Income (AMI)).
KMA assumes the household size is estimated at one plus the number of bedrooms
(four persons for a three-bedroom unit).
2. KMA assumes that the qualifying Moderate Income limits are set at 120% of AMI.
3. Since the Project consists of more than four units, the Project is required to have an
HOA. Habitat estimates the annual HOA dues at $400 per unit per month.
4. Habitat estimates the homeowner’s insurance cost at 0.75% of the affordable sales
price.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 8
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5. The annual utilities are based on the utility allowances published by the Santa Ana
Housing Authority (SAHA) as of October 1, 2024. KMA assumes the homeowners will pay
for: electric cooking, electric heating, electric water heating, basic electricity, air
conditioning, water, sewer and trash.
6. Habitat estimates the property tax cost based on 1.25% of the estimated affordable
sales price.
7. The mortgage interest rate is set at 7.0%. The mortgage is assumed to be fully
amortizing over 30 years and provided by a conventional lender.
8. The homebuyer down payment is set at 5% of the affordable sales price.
Based on the assumptions outlined above, KMA estimates the Moderate Income affordable
sales prices at $310,400 for the eight (8) one-bedroom units and $350,500 for the one (1) two-
bedroom unit.
AFFORDABLE SALES PRICE REVENUE
KMA estimates that nine Moderate Income units will generate $2.83 million in affordable sales
revenue.
However, it is important to note that the affordable sales prices will ultimately be determined
immediately prior to the sale of each unit. This analysis may need to be revised if the affordable
sales prices differ from the sales prices utilized in this analysis.
ADDITIONAL REVENUE
Rental Income
The property is currently operating as an apartment building and is collecting rents from
existing tenants. Habitat estimates that the Project will generate $229,700 in rental income
during the condominium conversion process. Habitat will utilize this rental income as a funding
source for the Project.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 9
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19090.018.035
Habitat Financial Assistance
Habitat proposes to utilize fundraising contributions to off-set a portion of the development
costs. As such, Habitat estimates the financial assistance that they will provide to the Project at
$590,800, or $65,600 per unit.
ESTIMATED AVAILABLE REVENUE
The Project’s estimated total available revenue is equal to the sum of the Affordable Sales Price
revenue and the Project’s additional revenue. KMA estimates the total available revenue as
follows:
Affordable Sales Price Revenue $2,833,700
Rental Income 229,700
Habitat Financial Assistance 590,800
Estimated Available Revenue $3,654,200
Financial Gap Calculation
The financial gap is estimated by deducting the Project’s available revenue from the Project’s
total development costs. Based on the preceding analysis, KMA estimates the Project’s financial
gap as follows:
KMA
Total Development Costs $4,402,000
(Less) Total Available Revenue (3,654,200)
Estimated Financial Gap $747,800
Per Unit $83,100
As shown in the preceding table, KMA estimates the Project’s financial gap at $747,800.
Comparatively, Habitat is requesting $720,000 in Down Payment Assistance Program funding
from the City. Since this amount is less than the financial gap identified by KMA, it can be
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 10
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concluded that the proposed Down Payment Assistance Program Allocation is warranted by the
project economics.
However, KMA estimates that the Project exhibits an unfunded financial gap of $27,800.
Habitat will need to secure funding sources for any unfunded financial gap in order for the
Project to be financially feasible. The City should confirm that Habitat has secured all necessary
funding sources before formally disbursing any City funds.
SILENT SECOND MORTGAGE REVENUE CALCULATION (TABLE 4)
As a basic premise, it must be assumed that the total of the liens accepted by a homebuyer
cannot exceed the unrestricted market value of the home. Furthermore, based on previous City
homeownership projects, the City will record a second trust deed equal to the difference
between the Affordable Sales Price and the estimated market value of the home.
KMA assumes that the City’s second trust deed will be structured as deferred payment loans
which are commonly known as silent second mortgages. These loans typically become due and
payable when the home is resold to a non-affordable home buyer. KMA assumes that the City’s
silent second trust deed will fall second in the lien hierarchy behind the conventional first trust
deed mortgage.
The calculations used to estimate the supportable silent mortgages are presented in the
following sections of this analysis.
Market Rate Sales Prices
KMA researched sales comparables for similar units in the market area for the purpose of
estimating the current silent second mortgage amount. The appraisal provided by Habitat
included additional sales comparable data. Based on this information, KMA estimates the
market rate sales price for the units as follows:
1. One-Bedroom Units: $345,600
2. Two-Bedroom Unit: $389,700
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 11
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Available Silent Second Mortgage Revenue
Based on the estimated market rate sales prices, the available silent second mortgage revenue
is estimated at as follows:
Moderate Income Units
One-Bedroom
Units
Two-Bedroom
Unit
Market Rate Sales Price $345,600 $389,700
(Less) Affordable Sales Price (310,400) (350,500)
Silent Second Mortgage Amounts (Per Unit) $35,200 $39,200
Number of Units 8 1
Available Silent Second Mortgage Capacity $281,600 $39,200
Total Amount of City Down Payment
Assistance Secured as Silent Mortgages
$320,800
Thus, it is important to note that based on the estimated market rate prices, the City will not be
able to secure the full $80,000 in City Down Payment Assistance Program funding per unit. The
City will only be able to secure the amount of mortgage capacity between the appraised market
value and the first mortgage amount.
Based on current estimates, the City will be able to secure $320,800 of the $720,000 in City
Down Payment Assistance Program funding as silent mortgages.
Proposed City Down Payment Assistance $720,000
(Less) Amount Secured by Silent Mortgages (320,800)
Estimated Amount Unable to be Secured Against
Affordable Units
$399,200
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 12
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19090.018.035
However, this calculation is provided for illustrative purposes only at this time. The calculation
will need to be conducted at the time of sale of each unit and must be based on the actual
appraised value and affordable sales prices at the time of sale.
Affordable Sales Price Differential
Furthermore, it is important to note that there typically needs to be a sales price differential
between the market rate sales price and the affordable sales price in order to entice
homebuyers to accept an affordability covenant.
The following illustrates the price differential based on the currently estimated market rate
sales affordable sales prices:
Moderate Income Units
One-Bedroom
Units
Two-Bedroom
Unit
Market Rate Sales Price $345,600 $389,700
(Less) Affordable Sales Price (310,400) (350,500)
Price Differential $35,200 $39,200
% of Market Rate Sales Price 10% 10%
Ultimately, the silent second mortgage and sales price differential calculations will occur once
sales of the units commence. At that point, the appraised market values of the homes and the
defined Affordable Sales Prices will be utilized to determine the silent second mortgage
amounts and any possible affordable sales price reductions that are necessary to entice
affordable homebuyers.
CONCLUSIONS / RECOMMENDATIONS
The following summarizes the conclusions of the KMA analysis:
1. City Financial Assistance:
a. Down Payment Assistance Program Allocation:
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 13
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19090.018.035
i. Based on currently available information, KMA estimates the Project’s
financial gap at $747,800. In comparison, Habitat is requesting $720,000
in Down Payment Assistance Program funding from the City. As such,
Habitat’s request is supported by the Project economics.
ii. KMA estimates that the Project exhibits a $27,800 unfunded financial
gap. Habitat will need to secure funding sources for any unfunded
financial gap in order for the Project to be financially feasible. The City
should confirm that Habitat has secured all necessary funding sources
before disbursing any funds.
b. Conditional Relocation Allocation: The City may utilize up to $200,000 in
Inclusionary Funds to provide relocation assistance to existing apartment tenants
that do not purchase an affordable unit at the property. The specific amounts
utilized for the Conditional Relocation Allocation will based on actual amounts
determined immediately prior to the relocation of existing tenants.
2. Habitat purchased the property for $325,000, or approximately 12%, more than the
appraised value. However, the City established the maximum amount of City Down
Payment Assistance Program Allocation based on the funding limits established by the
City’s Down Payment Assistance Program (DPAP). Habitat is required to fund any
remaining financial gap amount after the affordable sales price revenue and City’s
financial assistance amount is taken into consideration. Therefore, Habitat is responsible
for the purchase price that exceeds the appraised value of the property.
3. Given the preliminary nature of the proposal, if the scope of development or financing
assumptions change, the KMA analysis may need to be updated accordingly.
4. The affordable sales prices cannot be finalized until the Project commences sales
activities. It is likely that the actual affordable sales prices will differ from the amounts
estimated in this analysis.
5. The silent second mortgage and sales price differential calculations will occur once sales
of the units commence. At that point, the appraised market values of the homes and the
defined affordable sales prices will be utilized to determine the silent second mortgage
amounts and any possible affordable sales price reductions that are necessary to entice
affordable homebuyers.
EXHIBIT 5
Judson Brown, City of Santa Ana February 10, 2025
Habitat Wellington – Preliminary Financial Gap Analysis Page 14
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19090.018.035
a. Based on current estimates of market rate sales prices, the City will not be able
to secure the full $80,000 per unit in City Down Payment Assistance with silent
second mortgages. KMA estimates that approximately $399,200 of the City’s
$720,000 in City Down Payment Assistance Program funds will not be able to be
secured by the affordable units.
b. The affordable sales prices may need to be reduced further in order to entice
homebuyers to accept an affordable covenant.
6. KMA typically recommends that the City retain 10% of the City’s financial assistance
amount (or $92,000) until after the completion of the construction. However, in this
instance, the City will provide the Down Payment Assistance Program funds directly to
eligible homebuyers and any relocation assistance will be based on actual relocation
costs at the time of the relocation of tenants. As such, there is no need to impose a 10%
retention requirement on the Project.
EXHIBIT 5
TABLE 1
ESTIMATED DEVELOPMENT COSTS
9 FOR-SALE MODERATE INCOME UNITS
HABITAT FOR HUMANITY - WELLINGTON
SANTA ANA, CALIFORNIA
I.Property Assemblage Costs
Property Acquisition Costs 1 9 Units $345,000 /Unit $3,105,000
Relocation Costs 2 60,000
Closing Costs 2%Property Acquisition Costs 69,000
Total Property Assemblage Costs $3,234,000
II.Direct Costs 3
On-Site Improvements 9,148 Sf Land $3 /Sf Land $30,000
Rehabilitation Costs 9 Units $8,461 /Unit 76,000
Prevailing Wage Premium 30%Construction Costs 32,000
General Conditions 4 20%Construction Costs 28,000
Habitat Supervision 0%Construction Costs 0
Contingency Allowance 15%Other Direct Costs 25,000
Total Direct Costs 9 Units $21,200 /Unit $191,000
III.Indirect Costs
Architecture, Engineering & Consulting 3%Assemblage + Direct Costs $103,000
Public Permits & Fees 5 9 Units $3,773 /Unit 34,000
Taxes, Legal & Accounting 3%Assemblage + Direct Costs 103,000
Insurance 9 Units $3,000 /Unit 27,000
Developer Fee 4 5%Net Development Cost (Excl. Dev Fee)207,000
Contingency Allowance 7%Other Indirect Costs 33,000
Total Indirect Costs $507,000
IV.Financing Costs
Interest During Construction 6 $3,000,000 Loan 7.6%Interest $340,000
Loan Origination Fee $3,000,000 Loan 1.0 Point 30,000
Closing Costs 9 Units $3,000 /Unit 27,000
HOA Reserves 9 Units $889 /Unit 8,000
Warranties 9 Units $7,183 /Unit 65,000
Total Financing Costs $470,000
V.Total Development Costs 9 Units $489,100 /Unit $4,402,000
1
2
3
4
5
6
Based on Habitat estimate. An appraisal prepared by AEI Consultants estimated the market value of the property at $2.78 million on 7/26/2024.
Habitat's purchase price is $325,000 or approximately 12% higher than the appraised value of the property.
Based on Habitat estimates. Assumes that the City's Community Workforce Agreement wage requirements will be imposed on the Project.
Per Habitat, the Project will obtain a $3.0 million predevelopment/construction loan. The loan interest is based on an 18-month loan term and a
100% average outstanding balance.
Based on Habitat estimates. City staff should verify the accuracy of this estimate.
Based on estimate provided by Habitat.
Assumes existing tenants that do not purchase a unit are provided relocation assistance equal to up to 3 months of rent payments.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Wellington_2 10 25; Pf
EXHIBIT 5
TABLE 2
ESTIMATED AVAILABLE REVENUE
9 FOR-SALE MODERATE INCOME UNITS
HABITAT FOR HUMANITY - WELLINGTON
SANTA ANA, CALIFORNIA
I.Affordable Sales Revenue 1
Moderate Income: One-Bedroom Units 8 Units $310,400 /Unit $2,483,200
Moderate Income: Two-Bedroom Unit 1 Unit $350,500 /Unit 350,500
Total Affordable Sales Revenue $2,833,700
II.Rental Income 2 $229,700
III.Habitat Financial Assistance 9 Units $65,600 $590,800
IV.Estimated Available Revenue 9 Units $406,020 /Unit $3,654,200
1 See TABLE 5 for the KMA affordable sales price calculations.
2 Per Habitat.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Wellington_2 10 25; Pf
EXHIBIT 5
TABLE 3
ESTIMATED HABITAT FINANCIAL GAP
9 FOR-SALE MODERATE INCOME UNITS
HABITAT FOR HUMANITY - WELLINGTON
SANTA ANA, CALIFORNIA
I.Total Development Costs See TABLE 1 $4,402,000
II.(Less) Estimated Available Revenue See TABLE 2 ($3,654,200)
III.Estimated Financial Gap 9 Units $83,100 /Unit $747,800
IV.Distribution of Proposed City Financial Assistance
Proposed City Development Assistance 9 Low Inc. Units $80,000 /Mod Inc. Unit (720,000)
Proposed City Relocation Assistance (200,000)
Total Proposed City Financial Assistance 9 Units ($102,200)/Unit ($920,000)
V.Estimated Additional Habitat Financial Gap
Estimated Financial Gap $747,800
Proposed City Development Assistance 9 Low Inc. Units $80,000 /Mod Inc. Unit (720,000)
Estimated Additional Habitat Financial Gap $27,800
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Wellington_2 10 25; Pf
EXHIBIT 5
TABLE 4
SILENT MORTGAGE REVENUE SAMPLE CALCULATIONS
9 FOR-SALE MODERATE INCOME UNITS
HABITAT FOR HUMANITY - WELLINGTON
SANTA ANA, CALIFORNIA
I.Silent Mortgage Capacity for City Financial Assistance
A.Moderate Income: One-Bedroom Units
Estimated Market Rate Sales Price 1 $345,600
(Less) Moderate Income Affordable Sales Price 2 (310,400)
Available Silent Mortgage Capacity Per One-Bedroom Unit $35,200
Number of Units 8
Maximum Amount Secured as Silent Mortgage $281,600
B.Moderate Income: Two Bedroom Unit
Estimated Market Rate Sales Price 1 $389,700
(Less) Moderate Income Affordable Sales Price 2 (350,500)
Available Silent Mortgage Capacity Per Two-Bedroom Unit $39,200
Number of Units 1
Maximum Amount Secured as Silent Mortgage $39,200
II.Total Amount of City Development Assistance Secured as Silent Mortgages $320,800
III.Estimated City Development Assistance Provided as Grant to Habitat 3
Proposed City Development Assistance $720,000
(Less) Total Amount of City Development Assistance Secured as Silent Mortgages ($320,800)
Estimated City Development Assistance Provided as Grant to Habitat $399,200
1
2 The final Affordable Sales Prices will be set prior to the sale of each unit.
3 For illustration purposes only. This calculation will need to be conducted at the time of sale of the units to reflect the current appraised values and
current affordable sales prices for each unit.
Based on KMA survey of sales comparables. The market rate sales price will be determined by a fair market value appraisal that assumes no
income restrictions prior to the sale of each unit.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Wellington_2 10 25; Pf
EXHIBIT 5
TABLE 5
AHOCO CALCULATIONS: 2024 INCOME STANDARDS
SANTA ANA, CALIFORNIA
Median 80% Median 120% Median
1 Person $90,300 $72,240 $108,360
2 Person $103,200 $82,560 $123,840
3 Person $116,100 $92,880 $139,320
4 Person $129,000 $103,200 $154,800
5 Person $139,300 $111,440 $167,160
6 Person $149,650 $119,720 $179,580
7 Person $159,950 $127,960 $191,940
8 Person $170,300 $136,240 $204,360
I.Low Income: 80% Median Income - 30% of Income Allotted to Housing Expenses
1-Bdrm 2-Bdrm 3-Bdrm 4-Bdrm
A.Income
Benchmark Household Size 2 3 4 5
Household Income $82,560 $92,880 $103,200 $111,440
% of Income Allocated to Housing 30%30%30%30%
Income Allotted to Housing $24,770 $27,860 $30,960 $33,430
B.Ongoing Expenses
HOA/Maintenance $4,800 $4,800 $4,800 $4,800
Insurance @ 0.75% Affordable Sales Price 1,360 1,539 1,711 1,828
Utility Allowances 1 2,592 3,396 4,296 5,268
Property Taxes @ 1.25% of Affordable Price 2,266 2,565 2,851 3,046
Total Expenses $11,018 $12,300 $13,658 $14,942
C.Income Available for Mortgage $13,752 $15,560 $17,302 $18,488
D.Affordable Housing Price
Supportable Mtg @ 7.00% Interest 2 $172,200 $194,900 $216,700 $231,500
Home Buyer Down Pymt @ 5% Affordable Price 9,100 10,300 11,400 12,200
Maximum Purchase Price $181,300 $205,200 $228,100 $243,700
II.Moderate Income: 120% Median Income - 30% of Income Allotted to Housing Expenses
1-Bdrm 2-Bdrm 3-Bdrm 4-Bdrm
A.Income
Benchmark Household Size 2 3 4 5
Household Income $123,840 $139,320 $154,800 $167,160
% of Income Allocated to Housing 30%30%30%30%
Income Allotted to Housing $37,150 $41,800 $46,440 $50,150
B.Ongoing Expenses
Utility Allowances 1 $2,592 $3,396 $4,296 $5,268
HOA/Maintenance 4,800 4,800 4,800 4,800
Insurance @ 0.75% Affordable Sales Price 2,328 2,629 2,922 3,137
Property Taxes @ 1.25% of Affordable Price 3,880 4,381 4,870 5,228
Total Expenses $13,600 $15,206 $16,888 $18,433
C.Income Available for Mortgage $23,550 $26,594 $29,552 $31,718
D.Affordable Housing Price
Supportable Mtg @ 7.00% Interest 2 $294,900 $333,000 $370,100 $397,200
Home Buyer Down Pymt @ 5% Affordable Price 15,500 17,500 19,500 20,900
Maximum Purchase Price $310,400 $350,500 $389,600 $418,100
1
2
Based on the Santa Ana Housing Authority utilities allowances effective as of 10/1/24. Assumes: Electric Cooking; Electric Heating; Electric Water
Heater; Basic Electric; Air Conditioning; Water; Sewer; and Trash.
Based on Habitat estimate.
Prepared by: Keyser Marston Associates, Inc.
File name: Habitat Wellington_2 10 25; DPA Wellington
EXHIBIT 5