DEVELOPER FEE & OVERHEAD

Projects that involve the creation or preservation of affordable housing may include Developer Fee and Overhead as eligible costs in the project development budget.  The amount of the Fee and Overhead that may be drawn from the projects capital resources shall be subject to DND's Formula ("Payable Fee & Overhead").

Maximum Fee & Overhead Formula:
The basis upon which DND shall apply the Maximum Fee & Overhead Formula is determined by deducting acquisition, fee, overhead and capitalized reserves from the approved project development budget (the "Basis").  The Formula is meant to determine the maximum amount of the Fee, Overhead and Development Consulting fees that are eligible to be paid from a housing development project. 

Formula:         20% of Basis of $500,000 or less, plus;

                      15% of any Basis between $500,001 and $2,000,000 plus;

                      10% of any Basis over $2,000,000.

The Maximum Fee and Overhead will be calculated at the time of initial award of funds based on the approved budget at the time of the award.  Regardless of the changes in the scope of the project or increases in the cost of the project, the sum of the Developer Fee, Overhead and Development Consulting line items may never exceed the Maximum Allowable Fee and Overhead determined at the initial award.
Payable Fee and Overhead:

The Developer may request less than the Maximum Fee and Overhead allowed by the above formula.  The approved budget will include the amount requested by the Developer in each of the appropriate lines of the budget.  Generally, Fifty percent (50%) of the total will be allocated to Developer Fee and 50% allocated to Overhead, less amounts allocated to Development Consultants.    As sources and uses for the project are finalized, the amount of Payable Fee and Overhead (including development consultant fee) included in the approved budget may change, although it may never go above the Maximum as determined at the initial award of funds. 

DND will not allow fee and overhead to exceed the project’s Maximum Allowable Fee and Overhead amount even if it is allowed, and paid for, by another project lender and/or another project source.  Funds from another lender can be used to increase the project’s fee and overhead to DND’s Maximum Allowable Fee and Overhead if all other project gaps have been addressed.

Once DND has issued a commitment letter, changes in the Payable Fee and Overhead will not be allowed. 

Projects that involve the re-capitalization, refinance or restructuring of existing debt must contribute the entire Developer Fee back to the project as a source.

Any Fee or Overhead contributed back to the project must be in the form of a grant or a loan with a subordinate security and payment position to DND's subsidy.

Timing of Payment:
Overhead may be drawn down proportionately during the projects' development beginning with the Construction Loan closing through the substantial construction completion.
                                                             
Rental Projects, the Developer Fee shall be paid at the projects completion, i.e. when the permanent loan closes and the developer has submitted all required documentation (i.e. HOME completion Report, Direct Benefits Statement, Cost Certification, and/or other items as required in the Loan Documents).   Provided all lenders agree and the project is in compliance with DND's Hold Back Policy, up to 50% of the Fee may be released at Construction Completion. 

Ownership projects, The Developer Fee shall be paid at the projects completion, i.e. when all units are sold and the developer has submitted all required documentation (i.e. HOME completion Report, Direct Benefits Statement, Cost Certification, and/or other items as required in the Loan Documents).  Provided however, a portion of the Developer Fee may be paid after the construction loan has been paid in full provided the project is in compliance with DND’s Hold Back Policy and all subordinate lenders agree.

 

5-2 (4/07)

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