Pre-development Loans
Policy Statement
DND will provide predevelopment loans to assist non- and for-profit developers with up-front development costs on housing projects. Developers are required to seek predevelopment funding from other financing sources (i.e., CEDAC, LISC, etc.) prior to requesting a predevelopment loan from DND.

Types:
(1) Feasibility predevelopment loans will be made to determine the project's viability as a potential housing development project.
(2) Early Release predevelopment loans will be made to move a project that is feasible to a critical juncture such as receipt of building permits, construction loan closing, or acquisition. Early Release predevelopment loans will be funded through early releases of existing DND fund commitments.

Amount: The amount of each request should be limited to the minimum amount necessary to determine the project's feasibility or to move a project to a critical juncture.

Match: For-profit developers will be required to match a portion, or all, of the predevelopment funds received from DND. All professionals whose services are included in the predevelopment budget will be expected to defer a portion, or all, of their fees.

Term: The term of predevelopment loans will be for the shortest period of time. The term shall not exceed the earlier of the construction loan closing date for the project or the date of any sale, assignment, conveyance, or other transfer of the property under consideration.

Interest Rate: The interest rate for predevelopment loans will be 0%.

Repayment Terms: Payments during the term of the loan will be deferred. Predevelopment loans will either be due and payable in full at construction loan closing or incorporated in DND's overall project subsidy. If incorporated into DND's overall project subsidy, predevelopment loan security documents should be discharged at construction loan closing.

Collateral: Loans will be evidenced by a Promissory Note, Business Credit Agreement, and, if the developer owns the site, a Mortgage.

Uses: Predevelopment budgets may include, but are not limited to, costs related to consultant fees; site assessments, environmental, architectural, and engineering reports; preparation of plans and specifications; and directly related staff salaries and benefits. Predevelopment budgets may NOT include costs related to the (unless it is an early release predevelopment loan); direct construction costs; organizational operating expenses; development fees; and any costs deemed to be unnecessary or unreasonable.

1 (11/02)

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