7.15.3.1 Acceptable Form of Ground Rent Computation

A. For all Leasehold projects, the Ground Rent must meet the underwriting standards of this MAP Guide. Ground Rents may be computed using one of the following three methods:

1. A fixed percentage of Gross Collections (or Effective Gross Income). The percentage must remain the same throughout the term of the Lease.

2. A fixed percentage of net cash flow to equity (after Debt Service Payments but before Lease payments). The percentage must remain the same throughout the term of the Lease.

3. A stated dollar amount per year which must remain fixed for at least ten years beyond the term of the insured mortgage. If monthly or quarterly payments are required, these will be converted to annual amounts by the appraiser. When the Lease contains more than one method of computing the Ground Rent, it must also indicate whether the amount to be paid is to be the greatest or the least, or the sum of, these amounts. The stated annual dollar amount may be described as a minimum payment.

B. The MAP appraiser must evaluate the payment based upon the acceptable Ground Rent computations and incorporate the payment into their conclusion of net operating income.