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D) Development Risks/Guarantees.. I MSP Real Estate is guaranteeing total construction costs, development costs, project lease-up, and all operating deficits and tax credit guarantees. IP If costs or deficits exceed budget, MSP is responsible for funding cost overruns and operating deficits. Conversely, any cost savings and/or cash flow are split between MSP and the investor, subject to cost certified limits previously outlined. 5) Relocation Our first proposal assumed that we would retain most residents, and thus relocation would not be necessary. However, we have since learned that the Federal Uniform Relocation Act would apply to this property, and thus regardless of whether a resident stays or leaves, we would be responsible for making up the difference between new higher rents and existing lower rents for a period of 42 months. If a resident chooses to leave the property because of the rent increases, we would also be responsible for moving costs and utility hook-up charges. As such, we have prepared the following relocation budget assuming 10 residents will move out and 30 residents will stay: Rent difference (40 units @ $100/month x 42 months) $168,000 Moving expenses/hook-up costs (10 units @ $1,500/unit) $15,000 Moving expenses within property (30 units @ $500/unit) $15,000 • Contingency $22,000 Total Budget $220,000 Our intent for this property has always been to build the highest quality property, while minimizing the cost to the City. We believe that our building plans as well as our development budget will accomplish that goal. Hopefully these answers are responsive to the questions you have posed. Please feel free to contact me at 337-5144 should you have further questions. Sincerely, Jeff Huggett Vice President MSP Real Estate, Inc. 0 Jet slccath.ltr