Guidance for 4% Tax Credit Projects using Private Third-Party Ground Lessors
Purchase and Sale Agreements and Lease Agreements must meet the requirements of CTCAC Regulations Section10327(c)(6). Letters of Intent to demonstrate acquisition value, funding sources, or lease payments, or site control will not be accepted.
The purchase price from the applicant to the private third-party ground lessor shall not exceed the acquisition price from the last arms-length transaction to the applicant plus closing costs, reasonable land carrying and financing costs, demolition, and any costs applicable to the original land acquisition. No new broker commissions or other new acquisition fees shall be allowed. The cost of land acquired through a third-party transaction with an unrelated party shall be evidenced by a sales agreement, purchase contract, or escrow closing statement pursuant to CTCAC Regulations Section 10327(c)(6)(A). The land cost shall not be included in the Sources and Uses Budget, as the land cost is being reimbursed by the private third-party ground lessor.
No costs should be shown in the “Land Cost or Value” line of the Sources and Uses Budget for projects utilizing a ground lease structure. The “Land Lease Rent Prepayment” line may be used for any upfront payments. Alternatively, annual ground lease payments must be included in the 15 Year Pro Forma. Lease payments and financing amounts shall be detailed in the commitment from the private third-party ground lessor. If the lease payment is not stated numerically in the commitment, the applicant shall provide a calculation demonstrating how the estimated Ground Lease Payment in the 15 Year Pro Forma is derived.
Demonstrated site control shall meet the requirements of CTCAC Regulations Sections 10325(f)(2) and 10326(g)(2).