ACQUISITION COSTS

Policy Statement
Acquisition Costs must be reasonable and may not exceed the fair market value of the property.

The maximum permissible acquisition value which can be included in the Development Budget will be limited to the lesser of:
1. the "as is" appraised market value of the property and improvements, as established by an independent appraisal prior to loan closing; or
2. the purchase price of the property and improvements in the last arm's length transaction plus (1) reasonable and verifiable costs of property improvements made subsequent to the above acquisition value determination and/or (2) reasonable and verifiable carrying costs related to the land and improvements, such as interest, taxes and insurance. Only expenditures that have occurred within the previous 12 months of application to DND will be considered as part of the total acquisition cost.

Furthermore, for projects where there is no arms-length property transaction (including sales to a new limited partnership or corporation where there exists an identity of interest between the original and the new general partner/owner), the general partner/owner shall contribute their share of acquisition proceeds back to the project as equity.

4-4 (11/02)

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