14.16 Syndicator and Investor Fees from Operations

A. Tax Credit projects often involve annual asset management-related fees paid to the syndicator or an investor representative. HUD’s Office of Asset Management and Portfolio Oversight allows usual and customary fees and expenses for operating a Tax Credit project, including payment of a syndicator’s and/or investor’s asset management fee, state allocation agency compliance and asset monitoring fees, and mandatory interest payments of up to one percent on subordinate debt provided by a government Lender to be paid from the operating revenues. If the expenses described above are included in the operating budget, however, the loan must be sized accordingly by the Lender, and the chosen treatment of the expenses must be documented in the closing documents. Fees paid with surplus cash should not be included in the operating budget. HUD generally requires that at least 25% of surplus cash remains available as an owner incentive, though the remaining 75% may be obligated to payment of secondary debt.