Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017 Page: 5,927
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(II or a decrease in the amortization period but
not less than thirty (30) years [For Direct Loans];
(III) an assumed increase in the permanent loan
amount for non-Department funded loans based upon the rates and
terms in the permanent loan term sheet as long as they are within the
ranges in subparagraphs (A) and (B) of this paragraph.
(iii) For Housing Tax Credit Developments, a reduc-
tion in the recommended Housing Credit Allocation Amount may be
made based on the Gap Method described in subsection (c)(2) of this
section as a result of an increased debt assumption, if any.
(iv) For Developments financed with a Direct Loan
subordinate to FHA financing, DCR on the Direct Loan will be calcu-
lated using 75% of the Surplus Cash (as defined by the applicable FHA
program).
Ov [(-v)] The Underwriter may limit total debt ser-
vice that is senior to a Direct Loan to produce an acceptable DCR on
the Direct Loan.
(5) Long Term Pro forma. The Underwriter will create a
30-year operating pro forma using the following:
(A) The Underwriter's or Applicant's first year stabi-
lized pro forma as determined by paragraph (3) of this subsection.
(B) A 2 percent annual growth factor is utilized for in-
come and a 3 percent annual growth factor is utilized for operating
expenses except for management fees that are calculated based on a
percentage of each year's EGI.
(C) Adjustments may be made to the long term pro
forma if satisfactory support documentation is provided by the Appli-
cant or as independently determined by the Underwriter.
(e) Total Housing Development Costs. The Department's es-
timate of the Total Housing Development Cost will be based on the
Applicant's development cost schedule to the extent that costs can be
verified to a reasonable degree of certainty with documentation from
the Applicant and tools available to the Underwriter. For New Con-
struction Developments, the Underwriter's total cost estimate will be
used unless the Applicant's Total Housing Development Cost is within
5 percent of the Underwriter's estimate. The Department's estimate of
the Total Housing Development Cost for Rehabilitation Developments
will be based in accordance with the estimated cost provided in the PCA
for the scope of work as defined by the Applicant and 10.306(a)(5) of
this chapter (relating to PCA Guidelines). If the Applicant's cost es-
timate is utilized and the Applicant's line item costs are inconsistent
with documentation provided in the Application or program rules, the
Underwriter may make adjustments to the Applicant's Total Housing
Development Cost.
(1) Acquisition Costs. The underwritten acquisition cost is
verified with Site Control document(s) for the Property. At Cost Cer-
tification, the underwritten acquisition cost will be the amount verified
by the settlement statement. For Identity of Interest acquisitions, the
cost will be limited to the underwritten acquisition cost at initial Un-
derwriting.
(A) Excess Land Acquisition. In cases where more land
is to be acquired (by the Applicant or a Related Party) than will be
utilized as the Development Site and the remainder acreage is not ac-
cessible for use by tenants or dedicated as permanent and maintained
green space, the value ascribed to the proposed Development Site will
be prorated based on acreage from the total cost reflected in the Site
Control document(s). An appraisal containing segregated values for
the total acreage, the acreage for the Development Site and the remain-
der acreage, or tax assessment value may be used by the Underwriterin making a proration determination based on relative value; however,
the Underwriter will not utilize a prorated value greater than the total
amount in the Site Control document(s).
(B) Identity of Interest Acquisitions.
(i) An acquisition will be considered an identity of
interest transaction when an Affiliate of the seller is an Affiliate of, a
Related Party to, any owner at any level of the Development Team or
a Related Party lender; and
(I) is the current owner in whole or in part of the
Property; or
(If) has or had within the prior 36 months, legal
or beneficial ownership of the property or any portion thereof or interest
therein prior to the first day of the Application Acceptance Period.
(ii) In all identity of interest transactions the Appli-
cant is required to provide:
(I) the original acquisition cost in the most recent
non-identity of interest transaction evidenced by an executed settle-
ment statement or, if a settlement statement is not available, the orig-
inal asset value listed in the most current financial statement for the
identity of interest owner; and
(II) if the original acquisition cost evidenced by
subclause (I) of this clause is less than the acquisition cost stated in the
application:
(-a-) an appraisal that meets the requirements
of 10.304 of this chapter (relating to Appraisal Rules and Guidelines);
and
(-b-) any other verifiable costs of owning,
holding, or improving the Property, excluding seller financing, that
when added to the value from subclause (I) of this clause justifies the
Applicant's proposed acquisition amount.
(-1-) For land-only transactions,
documentation of owning, holding or improving costs since the
original acquisition date may include property taxes, interest expense
to unrelated Third Party lender(s), capitalized costs of any physical
improvements, the cost of zoning, platting, and any off-site costs to
provide utilities or improve access to the Property. All allowable
holding and improvement costs must directly benefit the proposed
Development by a reduction to hard or soft costs. Additionally, an
annual return of 10 percent may be applied to the original capital
investment and documented holding and improvement costs; this
return will be applied from the date the applicable cost is incurred
until the date of the Department's Board meeting at which the Grant,
Direct Loan and/or Housing Credit Allocation will be considered.
(-2-) For transactions which in-
clude existing residential or non-residential buildings that will be
rehabilitated or otherwise retained as part of the Development, doc-
umentation of owning, holding, or improving costs since the original
acquisition date may include capitalized costs of improvements to the
Property, and in the case of USDA financed Developments the cost of
exit taxes not to exceed an amount necessary to allow the sellers to be
made whole in the original and subsequent investment in the Property
and avoid foreclosure. Additionally, an annual return of 10 percent
may be applied to the original capital investment and documented
holding and improvement costs; this return will be applied from the
date the applicable cost was incurred until the date of the Department's
Board meeting at which the Grant, Direct Loan and/or Housing Credit
Allocation will be considered. For any period of time during which
the existing residential or non-residential buildings are occupied or
otherwise producing revenue, holding and improvement costs will
[may] not include capitalized costs, operating expenses, [incudingPROPOSED RULES October 27, 2017 42 TexReg 5927
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Texas. Secretary of State. Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017, periodical, October 27, 2017; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth897027/m1/15/?q=%22%22~1: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.