Texas Register, Volume 42, Number 43, Pages 5913-6056, October 27, 2017 Page: 5,926
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(K) Tenant Services. Tenant services are not included
as an operating expense or included in the DCR calculation unless:
(i) There is a documented financial obligation on be-
half of the Owner with a unit of state or local government to provide
tenant supportive services at a specified dollar amount. The financial
obligation must be identified by the permanent lender in their term sheet
and the dollar amount of the financial obligation must be included in the
DCR calculation on the permanent lender's 15-year pro forma at Appli-
cation. At cost certification and as a minimum, the estimated expenses
underwritten at Application will be included in the DCR calculation
regardless if actually incurred; or,
(ii) The Applicant demonstrates a history of provid-
ing comparable supportive services and expenses at existing affiliated
properties within the local area. Except for Supportive Housing Devel-
opments, the estimated expense of supportive services must be identi-
fied by the permanent lender in their term sheet and included in the
DCR calculation on the 15-year pro forma. At cost certification and as
a minimum, the estimated expenses underwritten at Application will
be included in the DCR calculation regardless if actually incurred;
(iii) On-site staffing or pro ration of staffing for co-
ordination of services only, not provision of services, can be included
as a supportive services expense without permanent lender documen-
tation.
(L) Total Operating Expenses. The total of expense
items described above. If the Applicant's total expense estimate is
within 5 percent of the final total expense figure calculated by the Un-
derwriter, the Applicant's figure is characterized as reasonable in the
Report; however, for purposes of calculating DCR, the Underwriter's
independent calculation will be used unless the Applicant's first year
stabilized pro forma meets the requirements of paragraph (3) of this
subsection.
(3) Net Operating Income ("NOI"). The difference be-
tween the EGI and total operating expenses. If the Applicant's first year
stabilized NOI figure is within 5 percent of the NOI calculated by the
Underwriter, the Applicant's NOI is characterized as reasonable in the
Report; however, for purposes of calculating the first year stabilized
pro forma DCR, the Underwriter's calculation of NOI will be used un-
less the Applicant's first year stabilized EGI, total operating expenses,
and NOI are each within 5 percent of the Underwriter's estimates. For
Housing Tax Credit Developments at cost certification, actual NOI
will be used as adjusted for stabilization of rents and extraordinary
lease-up expenses. Permanent lender and equity partner stabilization
requirements documented in the loan and partnership agreements will
be considered in determining the appropriate adjustments and the NOI
used by the Underwriter.
(4) Debt Coverage Ratio. DCR is calculated by dividing
NOI by the sum of scheduled loan principal and interest payments for
all permanent debt sources of funds. If executed loan documents do not
exist, loan terms including principal and/or interest payments are cal-
culated based on the terms indicated in the most current term sheet(s).
Otherwise, actual terms indicated in the executed loan documents will
be used. Term sheet(s) must indicate the DCR required by the lender
for initial underwriting as well as for stabilization purposes. Unusual
or non-traditional financing structures may also be considered.
(A) Interest Rate. The rate documented in the term
sheet(s) or loan document(s) will be used for debt service calculations.
Term sheets indicating a variable interest rate must provide a break-
down of the rate index and any component rates comprising an all-in
interest rate. The term sheet(s) must state the lender's underwriting
interest rate assumption, or the Applicant must submit a separate
statement from the lender with an estimate of the interest rate as of thedate of such statement. At initial underwriting, the Underwriter may
adjust the underwritten interest rate assumption based on market data
collected on similarly structured transactions or rate index history. Pri-
vate Mortgage Insurance premiums and similar fees are not included
in the interest rate but calculated on outstanding principal balance and
added to the total debt service payment.
(B) Amortization Period. For purposes of calculating
DCR, the permanent lender's amortization period will be used if not
less than thirty (30) years and not more than forty (40) years. Up to
fifty (50) years may be used for federally sourced or insured loans For
permanent lender debt with amortization periods less than thirty (30)
years, thirty (30) years will be used. For permanent lender debt with
amortization periods greater than forty (40) years, forty (40) years will
be used. For non-Housing Tax Credit transactions a lesser amortization
period may be used if the Department's funds are fully amortized over
the same period as the primary senior debt.
(C) Repayment Period. For purposes of projecting the
DCR over a thirty (30) year period for developments with permanent fi-
nancing structures with balloon payments in less than thirty (30) years,
the Underwriter will carry forward debt service based on a full amorti-
zation at the interest rate stated in the term sheet(s).
(D) Acceptable Debt Coverage Ratio Range. Except as
set forth in clauses (i) or (ii) of this subparagraph, the acceptable first
year stabilized pro forma DCR for all priority or foreclosable lien fi-
nancing plus the Department's proposed financing must be between a
minimum of 1.15 and a maximum of 1.35 (maximum of 1.50 for Hous-
ing Tax Credit Developments at cost certification).
(i) If the DCR is less than the minimum, the rec-
ommendations of the Report may be based on a [an -sumed] reduc-
tion to debt service and the Underwriter will make adjustments to the
[assumed] financing structure in the order presented in subclauses (I) -
(III) of this clause subject to a Direct Loan NOFA and program rules:
(I) a reduction to the principal amount of a Direct
Loan; [, -or]
II) in the case where [no repayable D-ve-oper
Fee remains available for deferral and] the amount of the Direct Loan
determined in subclause (I) is insufficient [is necessary] to balance the
sources and uses; [,]
(-a-) a reduction to the interest rate; [or]
(-b-) an increase in the amortization period
[for Direcct boans];
I(II) arecassiic-ation of D4reet Loans t refleet
grants,
(III) an assumed [a] reduction in the permanent
loan amount for non-Department funded loans based upon the rates and
terms in the permanent loan term sheet(s) as long as they are within the
ranges in subparagraphs (A) and (B) of this paragraph.
(ii) If the DCR is greater than the maximum, the rec-
ommendations of the Report may be based on an [-ssumed] increase to
debt service and the Underwriter will make adjustments to the assumed
financing structure in the order presented in subclauses (I) - (III) of this
clause subject to a Direct Loan NOFA and program rules:
f) recassifiationfDepa entfundegr-ants
to rcfleet 4oans;]
(j) [-T)] an increase to [-in] the interest rate up to
the highest interest rate on any senior debt or if no senior debt a market
rate determined by the Underwriter based on current market interest
rates;42 TexReg 5926 October 27, 2017 Texas Register
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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/m1/14/?q=%22%22~1&rotate=270: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.