THE NHP FOUNDATION AND ITS AFFILIATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED YEARS ENDED DECEMBER 31, 2017 and 2016
(1) Operating deficit guarantee - Hollybush GP guaranteed to pay all operating deficits, not to exceed a specified amount and time period, after the property achieves a debt service ratio as defined in Hollybush Preservation’s partnership agreement. (2) Tax credit recapture guarantee - Under certain circumstances, Hollybush GP may be required to repurchase the equity investor’s interest if the property does not generate the promised amount of housing tax credits on schedule. Plaza B II’s acquisition and renovation work was financed with mortgage notes financed by tax- exempt bonds, federal tax LIHTC issued by the New York City Housing Preservation Development, federal and state investment tax credits, and a purchase money loan from Plaza B, the seller of the property. NHPF and/or Plaza B GP provided certain guarantees to facilitate this transaction. The most significant guarantees are: (1) Operating deficit guarantee - Plaza B GP guaranteed to pay all operating deficits, not to exceed a specified amount and time period, after the property achieves a debt service ratio, as defined in Plaza B II‘s partnership agreement. (2) Tax credit recapture guarantee - Under certain circumstances, Plaza B GP may be required to repurchase the equity investor’s interest if the property does not generate the promised amount of housing tax credits on schedule. Harvest Homes acquisition and construction was financed with a loan provided by J.P. Morgan Chase, proceeds from the sale of federal tax credits, loans funded from the proceeds of Illinois donation tax credits and tax increment financing, and deferred developer fee. Harvest Homes GP LLC has certain obligations under the limited partnership agreement. The NHP Foundation agreed to guarantee certain obligations of Harvest Homes GP LLC to facilitate the transaction. The most significant obligations guaranteed by The NHP Foundation are: (1) Completion guarantee - Harvest Homes GP is responsible for any cost overruns relating to development cost, bills, expenses, charges, cost and fees relating to the construction of Harvest Homes. (2) Operating deficit guarantee - Harvest Homes GP guaranteed to pay all operating deficits, not to exceed a specified amount and time period, after the later of the Stabilization Date or Loan Conversion, as defined in partnership agreement. (3) Tax credit recapture guarantee - If the property does not generate the promised amount of housing tax credits or does not generate them in the timeframe agreed to, then then the amount then the final pay-in by the equity investor will be adjusted per the terms of the partnership agreement.
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