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<br />6.2A <br />Page 16 <br /> <br />IV. VALUE OF THE INTEREST TO BE CONVEYED <br /> <br />Reuse Value & Feasibility Gap <br /> <br />The reuse value of the property is a direct function of the development economics of the specific <br />project required in the Agreement. The project will consist of a 15-unit affordable supportive <br />housing development, seven units of which the Agreement will restrict to Very Low income <br />households for a period of 55 years. However, by virtue of the other government funding <br />sources being utilized, as described below, all 14 of the non-manager units in the project will be <br />affordable to Very Low income households. <br /> <br />Keyser Marston Associates, Inc. (KMA) evaluated the development economics of this project. It <br />is our understanding that the project has already obtained HUD funding through the Section 811 <br />program for supportive housing for persons with disabilities. Further, it is our understanding that <br />through the Section 811 program, HUD will provide an annual operating subsidy in amount <br />reflecting the difference between the rent collected from the Very Low income residents and the <br />costs to operate the project. Since the rental income that is collected from the residents is <br />expected to be less than the costs to operate the project, the HUD operating subsidy will <br />subsidize the difference and there will be no net cash flow generated by the project. As a result, <br />the project does not support the investment of any private debt or equity to cover capital costs, <br />and consequently, all funding for the project is expected to be either from public sources or from <br />charitable donations (with the exception of $250,000 from the land seller related to toxic <br />mitigation required for the site). The following are the Developer's proposed sources of funds for <br />the project: <br /> <br />Source <br />Section 811 Program (HUD) <br />Mental Health Services Act (State of California) <br />City of Redwood City (CDBG & HOME for acquisition) <br />San Mateo County <br />Redevelopment Agency (this Agreement) <br />MHA Private Donations <br />Seller Cash Back for Toxics Mitigation <br />Total <br /> <br />Amount (rounded) <br />$1,793,000 <br />$1,400,000 <br />$748,000 <br />$550,000 <br />$250,000 <br />$242,000 <br />$250.000 <br />$5,233,000 <br /> <br />The Developer has provided the Agency with a development budget. It is our understanding that <br />the estimate of construction costs was provided by a general contractor. The following is a <br />summary: <br /> <br />Keyser Marston Associates, Inc. <br />C:\Documents and Settings\djones-thomas\Local Settings\Ternporary Internet Files\OLK133\OO5-001.doc <br /> <br />121312008 <br />Page 6 <br />