VARIOUS TYPES OF RESERVE

1
VARIOUS TYPES OF RESERVE

• Operating Reserve - Used to fund project
  operating deficits
• Replacement Reserve - Used to fund major repairs
  and/or replacements of capital assets (items)
• Social Service Reserve Used to provide social
  services to the Residents of the Project
• Sponsor Reserve - Used to fund a special purpose
  based on agreement established

2
PROJECT PRIORITIES FOR UTILIZATION OF
OPERATING INCOME

• Operating Expenses other than the Partnership
  Management Fee, and payment of interest on Loan
• Replacement Reserve Contributions.
• Payment of Partnership Management Fee.
• Payment of interest on loan
• Operating Reserve contributions
• Payment of Social Services Fee.

3
ESTABLISHMENT OF RESERVE

• Prior to or at the time of the first deposit into
  each account (operating, sponsor, replacement,
  social services)
• The administrative agent, on behalf of borrower
  and HPD, shall establish the reserve account.
  This account shall be administered by
  administrative agent on behalf of borrower and
  HPD in accordance with the terms of the
  administrative agreement and the FDA

4
RESERVE CONTRIBUTIONS

• Deposits from equity contributions (as per the
  schedule of equity contribution FDA)
• Deposits from operating income (Borrower shall
  make annual payments to the administrative agent
  in an amount of the operating account surplus
  above one and one quarter months gross rent
  roll
• Investment Income

5
WITHDRAWALS FROM RESERVE

• Anticipated project operating account deficit.
  For the purpose of funding the current and or
  future project operating account deficits
• Actual project operating account deficit.
  Withdrawal may be requested for the purpose of
  funding preceding year project operating account
  deficits
• Emergency withdrawals. In the event that the
  project will incur or has incurred unanticipated
  expenses which are necessary and reasonable,
  which will likely cause a project operating
  account deficit at the end of the current year

6
REVIEW AND APPROVAL OF DRAW REQUESTS

• Administrative agent shall notify HPD of its
  receipt of a draw request. The administrative
  agent shall not withdraw funds from the reserve
  account prior to receipt of HPD approval.
• All reserve requests must be accompanied by
  supporting documentation including current
  financial statement, current budget,
  architectural drawings, construction plans and
  specifications and contractors bids (minimum of
  three bids)