| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #7453 | Closed | public | Multifamily | Les Sparks |
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I need general information about a 10% maximum cash flow clause in a PBV HAP contract. The project has not closed so the HAP contract is not finalized – just HUD approval and commitment. During the HUD approval the projections had to meet a 10% maximum cash flow test and owner believes it stated that during the 20 year HAP contract the project could not exceed the 10% maximum. However, only 3 units are PBV committed and the remaining units are tax credit units. Not sure how many units in total, sorry, but I believe it is 40. I do not recall seeing this requirement in any HAP contract and was hoping you had some knowledge of this clause or could point us in the right direction. I appreciate any assistance you can provide. |
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From Les Sparks: Since there is no 10 percent minimum cash flow test in the RAD PBV HAP contract. (see attached contract) I was wondering if you had a different contract. I am going to need a little more information. Send me you contract or at least the form number. I will go from there. From client: They do not have the contract yet unfortunately, which I believe has caused the confusion. I apologize for the lack of information. The project passed HUD certification but is not placed in service. The client sent me the Subsidy Layering Reviews HUD Administrative Guidelines from the Federal Register which explains the maximum 10% cash flow per the operating proforma but does not specify if it will be an ongoing requirement – see page 7 of attachment. I reviewed the contract templates available on the HUD website and did not see this requirement in any of them. From what I can tell from research, this requirement is for initial approval only; possibly due to HUD’s control of rent on PBV units for the life of the contract. It is my understanding that HUD cannot dictate rent on LIHTC units, correct? I will let you know when the client provides us with the HAP contract and hopefully the question will finally be resolved. From Les: If the PBV contract was entered into in conjunction with LIHTC financing a subsidy-layering review is required to ensure that there is no “double-dipping” or more into federal funds. All that is is required is for the project to pass the layering test once at approval. Once it is in service the reviews are never done again. The entire subsidy layering issue is a fairly complicated process. It is not very well understood outside of development circles for good reason, as they never get around to doing after the initial approval. |