Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017 Page: 5,929
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(C) In the case of a transaction requesting acquisition
Housing Tax Credits:
(i) the allocation of eligible Developer fee in cal-
culating Rehabilitation/New Construction Housing Tax Credits will
not exceed 15 percent of the Rehabilitation/New Construction eligible
costs less Developer fees for Developments proposing fifty (50) Units
or more and 20 percent of the Rehabilitation/New Construction eligible
costs less Developer fees for Developments proposing forty-nine (49)
Units or less; and
(ii) no Developer fee attributable to an identity of
interest acquisition of the Development will be included.
(D) Eligible Developer fee is multiplied by the appro-
priate Applicable Percentage depending whether it is attributable to ac-
quisition or rehabilitation basis.
(E) For non-Housing Tax Credit developments, the per-
centage can be up to 15 percent, but is based upon Total Housing Devel-
opment Cost less the sum of the fee itself, land costs, the costs of per-
manent financing, excessive construction period financing described in
paragraph (8) of this subsection, reserves, and any identity of interest
acquisition cost.
(8) Financing Costs. All fees required by the construction
lender, permanent lender and equity partner must be indicated in the
term sheets. Eligible construction period interest is limited to the lesser
of actual eligible construction period interest, or the interest on one (1)
year's fully drawn construction period loan funds at the construction
period interest rate indicated in the term sheet(s). For tax-exempt bond
transactions up to twenty four (24) months of interest may be included.
Any excess over this amount will not be included in Eligible Basis.
Construction period interest on Related Party construction loans is only
included in Eligible Basis with documentation satisfactory to the Un-
derwriter that the loan will be at a market interest rate, fees and loan
terms and the Related Party lender can demonstrate that it is routinely
engaged in construction financing to unrelated parties.
(9) Reserves. Except for the underwriting of a Housing
Tax Credit Development at cost certification, the Underwriter will uti-
lize the amount described in the Applicant's project cost schedule if
it is within the range of two (2) to six (6) months of stabilized oper-
ating expenses plus debt service. Alternatively, the Underwriter may
consider a greater amount proposed by the first lien lender or syndi-
cator if the detail for such greater amount is found by the Underwriter
to be both reasonable and well documented. Reserves do not include
capitalized asset management fees, guaranty reserves, tenant services
reserves or other similar costs. Lease up reserves, exclusive of ini-
tial start-up costs, funding of other reserves and interim interest, may
be considered with documentation showing sizing assumptions accept-
able to the Underwriter. In no instance at initial underwriting will total
reserves exceed twelve (12) months of stabilized operating expenses
plus debt service (and only for USDA or HUD financed rehabilitation
transactions the initial deposits to replacement reserves and transferred
replacement reserves for USDA or HUD financed rehabilitation trans-
actions). Pursuant to 10.404(c) and for the underwriting of a Hous-
ing Tax Credit Development at cost certification, operating reserves
that will be maintained for a minimum period of five years and doc-
umented in the Owner's partnership agreement and/or the permanent
lender's loan documents will be included as a development cost.
(10) Soft Costs. Eligible soft costs are generally costs that
can be capitalized in the basis of the Development for tax purposes. The
Underwriter will evaluate and apply the allocation of these soft costs in
accordance with the Department's prevailing interpretation of the Code.
Generally the Applicant's costs are used however the Underwriter will
use comparative data to determine the reasonableness of all soft costs.(11) Additional Tenant Amenities. For Housing Tax Credit
Developments and after submission of the cost certification package,
the Underwriter may consider costs of additional building and site
amenities (suitable for the tenant population being served) proposed
by the Owner in an amount not to exceed 1.5% of the originally
underwritten Hard Costs. The additional amenities may be included in
the LURA.
(12) Special Reserve Account. For Housing Tax Credit
Developments at cost certification, the Underwriter may include a de-
posit of up to $2,500 per Unit into a Special Reserve Account as a
Development Cost.
(f) Development Team Capacity and Development Plan.
(1) The Underwriter will evaluate and report on the overall
capacity of the Development Team by reviewing aspects, including but
not limited to those identified in subparagraphs (A) - (D) of this para-
graph:
(A) personal credit reports for development sponsors,
Developer fee recipients and those individuals anticipated to provide
guarantee(s) in cases when warranted. The Underwriter may evaluate
the credit report and identify any bankruptcy, state or federal tax liens
or other relevant credit risks for compliance with eligibility and debar-
ment requirements in this chapter;
(B) quality of construction, Rehabilitation, and ongoing
maintenance of previously awarded housing developments by review
of construction inspection reports, compliance on-site visits, findings
of UPCS violations and other information available to the Underwriter;
(C) for Housing Tax Credit Developments, repeated or
ongoing failure to timely submit cost certifications, requests for and
clearance of final inspections, and timely response to deficiencies in
the cost certification process;
(D) adherence to obligations on existing or prior De-
partment funded developments with respect to program rules and doc-
umentation.
(2) While all components of the development plan may
technically meet the other individual requirements of this section,
a confluence of serious concerns and unmitigated risks identified
during the underwriting process may result in an Application being
referred to the Committee by the Director of Real Estate Analysis.
The Committee will review any recommendation made under this
subsection to deny an Application for a Grant, Direct Loan and/or
Housing Credit Allocation prior to completion of the Report and
posting to the Department's website.
(g) Other Underwriting Considerations. The Underwriter will
evaluate additional feasibility elements as described in paragraphs (1)
- (3) of this subsection.
(1) Floodplains. The Underwriter evaluates the site plan,
floodplain map, survey and other information provided to determine if
any of the buildings, drives, or parking areas reside within the 100-year
floodplain. If such a determination is made by the Underwriter, the
Report will include a condition that:
(A) the Applicant must pursue and receive a Letter of
Map Amendment ("LOMA") or Letter of Map Revision ("LOMR-F");
or
(B) the Applicant must identify the cost of flood insur-
ance for the buildings and for the tenant's contents for buildings within
the 100-year floodplain and certify that the flood insurance will be ob-
tained; andPROPOSED RULES October 27, 2017 42 TexReg 5929
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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/m1/17/?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.