Current through Register Vol. 56, No. 18, September 16, 2024
(a)
For each eligible loan made by the Agency for a housing project, the Agency
shall determine, at the time of initial mortgage closing, the investment made
by the housing sponsor. Investment shall include:
1. Actual cash or cash equivalent as
determined by the Agency;
2.
Professional fees pledged toward approved project cost; and
3. Any grants and/or loans procured by the
Sponsor to the extent they are applied to Agency approved project costs and to
the extent they are not repayable from project funds.
(b) Any additional cash contributions made by
the housing sponsor subsequent to initial closing shall also be considered
investment, if such contributions were used for project costs approved by the
Agency.
(c) Increases in project
value, as determined by an Agency approved appraisal, may also be recognized as
part of the housing sponsor's investment; however, no request for a
determination of increase in project value or rate of return shall be made or
recognized for a HUD Section 8 project with a valid Housing Assistance Payment
contract or if another superseding program or restriction is in effect that
prohibits such an increase.
1. The following
conditions must be met before an increase in project value may be recognized by
the Agency, and the sponsor must satisfy the conditions required for
distribution of return on investment as described in
5:80-3.4:
i. The housing sponsor shall submit to the
Agency a written request for a determination of increased project value, and
shall submit with its request payment for the new appraisal; and
ii. The project must not be in default in any
of its obligations under the Agency's mortgage loan documents, must have fully
funded escrows, and an operating reserve of three months of operating expenses
(for senior citizen projects) or six months of operating expenses (for family
projects), as applicable, which includes debt service and reserve payments, and
shall post the reserve prior to taking any increased return on equity. The
operating expenses shall be calculated based on the most recent Agency-approved
annual budget. The reserve shall remain at the Agency until the expiration of
the original mortgage term. If the operating reserve is used, the value of the
equity base prior to the recognized increase in value shall be reinstituted
until the operating reserve is again fully funded. The determination of a
fully-funded operating account after its initial establishment shall be based
on the Agency-approved budget in effect at the then-current time.
2. Upon satisfaction of (c)1i and
ii above, the Agency will order the appraisal. Upon receipt and approval of the
new appraisal, the Agency may recognize an increase in project value and
determine the new equity base as the new appraised value minus all existing
debt on the project.
3. Any
determination of an increase in investment shall be prospective only, which
includes the year in which the housing sponsor applies.
(d) The housing sponsor shall be entitled to
return on its investment at rates established in accordance with (e) or (f)
below. It shall earn a return on any cash portion of its investment from the
date it is actually contributed and on the non-cash portion of its investment
from the date it is used toward approved project costs.
(e) For housing projects that receive a loan
from the Agency under the New Jersey Urban Multi-family Production Program, the
rate of return on investment may not exceed 12 percent.
(f) The Agency shall fix, at the time of the
closing of the loan, the rate of return that may be earned or received by the
housing sponsor on its investment on a cumulative but not compounded annual
basis from the development, operation, sale, assignment or lease of the housing
project according to the following schedule:
1. The Base Rate to be used in calculating
the return on investment pursuant to (c)2 through 6 below shall be equal to the
rate being paid on 30-year treasury bonds at the time of the mortgage closing.
This Base Rate will be determined by the Agency in its sole discretion using
any reasonable source of information;
2. For units occupied by individuals or
families who at the time of occupancy have a household income that is less than
50 percent of the median income for the area in which the project is located,
the annual rate of return on investment may not exceed the then applicable Base
Rate plus six percent;
3. For units
occupied by families or individuals who at the time of occupancy had a total
household income of less than 80 percent of the median income for the area, the
annual rate of return on investment may not exceed the Base Rate plus four
percent;
4. For all other units
financed by the Agency, the annual rate of return on investment may not exceed
the Base Rate plus two percent;
5.
For developments that have a mix of units serving populations with an
assortment of income ranges, the Agency shall determine the limit on the rate
of return that may be earned by the housing sponsor by pro-rating the rate of
return based upon the number of units devoted to the various income
levels;
6. If the Agency determines
that as a result of restrictions on development costs, rents or other factors,
that the actual amount of return on equity which can be paid in any year will
be significantly below that allowed by the Agency pursuant to 2 through 5
above, the Agency may set a return on equity limit which may be paid or earned
on an annual, cumulative but not compounded basis, not to exceed the base rate
plus 10 percent.
(g) For
assisted living residences (ALRs) that receive a loan from the Agency, the
housing sponsor may receive a return on investment annually as follows:
1. The first 20 percent annual return on
investment;
2. When an ALR realizes
a greater than 20 percent annual return on investment in any given year, a
special service subsidy fund shall be established and held by the Agency in
which the next 10 percent or any part thereof above the first 20 percent return
on investment shall be placed for the sole purpose of subsidizing rent and
services to the low and/or moderate income residents of the ALR who may need
assistance;
3. The housing sponsor
may receive any and all annual return on investment that is greater than 30
percent for that calendar year in which it is earned.
