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Housing Policy --- Section 5-2

DEVELOPER FEE AND OVERHEAD POLICY  (effective November 2, 2009)

Projects that involve the creation or preservation of affordable housing may include a Developer Fee and Overhead as an eligible cost to the project.  The maximum amount of this Fee and Overhead allocation is reflected in a DND approved development budget at the time of initial award of subsidy funds.  The amount of the Fee and Overhead that may be drawn from capital resources or paid from the projects operations shall be subject to DND’s formula.

Maximum Fee and Overhead Formula:

The maximum fee and overhead allowed is determined by deducting the following from the approved development budget:  acquisition, fee, overhead, and capitalized reserves. From this “Basis”, a maximum fee, overhead and development consultant fee calculation is applied by utilizing the following formula:

15% of Basis up to $3,000,000 or less, plus
12.5% of any Basis between $3,000,001 and $5,000,000, plus
10% of any Basis over $5,000,000, plus
5% of Acquisition cost

The sum of the developer fee, overhead and development consultant line items in the approved development budget may never exceed the maximum allowable fee and overhead as determined at the time of the initial award of funds.  While the approved development budget may change in the course of pre-development planning, design and permitting, the maximum fee and overhead will adhere to this maximum allowance regardless of future changes to the budget including subsequent sources provided to the project by other lenders.

Payable Fee and Overhead

Generally, Fifty Percent (50%) of the total allowed fee and overhead will be allocated to Developer Fee and Fifty Percent (50%) will be allocated to Overhead (including development consultant). DND may consider variations of the distribution between Fee, OH and Consultants on a case by case basis.   For all project types, up to 50% of Overhead may be released at construction loan closing with the balance paid out proportionately during the course of construction. Any Developer that may be drawn from capital resources may be drawn as follows:  for rental projects, up to 50% of the Developer Fee may be drawn at construction completion with the balance released at the time of permanent loan closing; for homeownership development projects, the Developer Fee shall be paid upon the sale of all units.  Release of any fee and overhead for any project is subject to the approval of all lenders, the Loan Hold Back Policy, the individual project Loan Documents, and submission of all requisite completion and compliance reports.

Deferred Fee and Overhead

Projects that involve the re-capitalization, refinancing or restructuring of existing debt must contribute the entire Developer Fee back to the project as a source.  Overhead may be drawn over the course of the project’s refinancing and rehabilitation activity as outlined above. 

For any project that involves the deferment of a portion of approved Developer Fee, DND shall defer all cash flow payments until such deferred fee is paid in full.

5-2 (11/09)

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