Laserfiche WebLink
When a developer does one of these housing projects, it must commit to an initia115- <br /> year period of affordability and compliance and then additionally commit to another <br /> 15-year period, also. This second period is referred to as an "Extended Use" period <br /> and legal documents are signed regarding these two periods binding the developer to <br /> them. Thus, because of these extended �nancial and operating guarantees that must <br /> be made to entice both lenders and an investor to put funds in and to also entice the <br /> developer to develop these projects, the IRS allows for roughly a maximum 15% <br /> Developer Fee. This fee, then, is usually paid out over a two to three year timeframe <br /> based on certain threshold events such as the initial construction closing, the <br /> completion of the construction, the completion of the rent-up to and certification of <br /> eligible tenants and, finally, to the achievement of certain cash flows in the project's <br /> operation. So, first of all, the developer does not get the whole fee right away and, <br /> secondly, that fee doesn't only represent the developer's "profit", but their overhead <br /> (work to get the project to the closing) and up to 30 year's of financial and operating <br /> guarantees. The other good news with a developer like CommonBond, as a long- <br /> term and successful non-profit developer of affordable housing, is that you know <br /> some of the developer fee is also going to further their mission and nothing else. <br /> Detailed observations and suggestions: <br /> 1. The project numbers, overall, look good and their request to sell the land to <br /> them for$1.00 fits with the proforma. Based on my experience, the amounts <br /> estimated for other subsidies are already at the high end, and adding up to <br /> several hundred thousand dollars in additional costs will de�nitely damage <br /> the odds of the project getting funded and done. Additionally, this assistance <br /> would help the project rate higher with those funding agencies that <br /> CommonBond will be submitting funding applications to, as will any other <br /> contributions from the City of Orono such as possibly waiving any City fees, <br /> etc. <br /> One other option on the land disposition, besides the long-term lease that's <br /> been discussed, is that you could appraise the land and then deed it to <br /> CommonBond with a mortgage for that appraised value at, say, 0% or 1% <br /> accruing for 30 years. I'd be glad to discuss these options with you in more <br /> detail if you'd like. <br /> 2. CommonBond's suggested Developer Fee is only 11.5%, so they've already <br /> lowered it from the maximum 15% they could get by over 20%. <br /> 3. The project's mix of units will also help raise this project up in its competition <br /> with others for funds. <br /> 4. The reserves appear adequate. <br /> 5. The tax credit computation of what equity can be raised is predicated on <br /> Minnesota Housing declaring this project in a "Difficult Development Area", <br /> since the project is not in a distressed or what is normally referred to as a <br /> "Qualified Census Tract" by the IRS. Minnesota Housing has some flexibility <br /> 2 <br />