14.14 Definition of “Net Equity”

A. The term “Net Equity” is equal to Total Equity less the initial 20% installment less “Delayed” Developer Fees for amounts due after the completion of repairs or construction and predetermined reserve amounts to be held by the investor for project uses after the time of the final pay-in noted in the schedule above. Reserves allowed for this calculation may include only amounts that are required in the project’s Partnership Agreement or LLC Operating Agreement but excludes those specifically required by HUD. Allowable items include Lease Up Fees and Escrows, Operating and Debt Service Reserves, Section 8 HAP Contract Transition Reserves, Replacement Reserves, and State Agency Administrative Fees or Escrows, not otherwise required by HUD. The total deductions used to determine Net Equity may not exceed 25% of Total Equity. When calculating the pay-in amounts due at the benchmarks listed on the chart above, owners must first reduce the total amount of equity committed to the project by the initial installment and the allowable deductions, and apply the payment percentages above (37.5% and 62.5% respectively) to the remaining or “Net” Equity. This calculation, specifying each applicable use, must be provided to HUD on the form HUD-92013-C, LIHTC Summary Report included in the FHA insurance application.

B. An example of the calculation of the Net Equity amount, and the resultant pay-in schedule, is provided below: