N.J. Admin. Code § 5:80-3.3

Current through Register Vol. 56, No. 21, November 4, 2024

Section 5:80-3.3 - Investment calculation for housing projects

(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.

N.J. Admin. Code § 5:80-3.3

Amended by R.1989 d.259, effective 5/15/1989.
See: 21 New Jersey Register 94(a), 21 New Jersey Register 1331(b).
Redesignated old (b) as (c) with no change in text and added new (b) regarding loans made under the New Jersey Urban Multi-Family Production Program.
Amended by R.1998 d.80, effective 2/2/1998.
See: 29 New Jersey Register 3214(a), 30 New Jersey Register 539(b).
Added (d). Amended by R.2005 d.219, effective 7/5/2005.
See: 37 New Jersey Register 970(a), 37 New Jersey Register 2476(a).
Amended by R.2005 d.408, effective 11/21/2005.
See: 37 New Jersey Register 2596(a), 37 New Jersey Register 4400(b).
Section was "Housing projects on or after January 17, 1984"; rewrote the section.