Underwritten NCF
Requirements
You must use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. for Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
REQUIRED UNDERWRITTEN NCF |
||
---|---|---|
Item |
Function |
Description |
CALCULATION OF NET RENTAL INCOME | ||
1 |
|
GROSS RENTAL INCOME – actual rents in place for occupied units, plus market rents for vacant units based on a current rent roll (multiplied by 12). |
2 |
PLUS |
Medicaid income (does not include Medicare, which is included in Skilled NursingSkilled NursingSeniors Housing Property with units that are highly regulated and provide 24-hour resident supervision and registered nursing care services. income). |
3 |
PLUS |
Skilled NursingSkilled NursingSeniors Housing Property with units that are highly regulated and provide 24-hour resident supervision and registered nursing care services. income – actual trailing 12-month collections for Skilled NursingSkilled NursingSeniors Housing Property with units that are highly regulated and provide 24-hour resident supervision and registered nursing care services. units (if 12-month collections are not available, then actual trailing 6-month collections (annualized)).1 |
4 |
PLUS |
To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category). |
|
EQUALS |
GROSS POTENTIAL RENT (GPR) |
5 |
MINUS |
Physical vacancy – market rents for vacant units based on a current rent roll (multiplied by 12).2 |
6 |
MINUS |
Concessions – the aggregate amount of forgone residential rental income resulting from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.2 |
7 |
MINUS |
Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable: include any adjustments to other income for bad debt.2 |
|
EQUALS |
NET RENTAL INCOME (NRI)1 |
1 Skilled Nursing income must not be grossed up to 100% before the 20% deduction is applied. An additional 20% is taken off the Skilled Nursing income.
2 The total of Items 5, 6, and 7 must equal the greater of:
You must determine if NRI declined per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and adjust Underwritten NRI as required. |
||
CALCULATION OF ASSISTED LIVING SERVICE INCOME AND OTHER INCOME |
||
8 |
PLUS |
Trailing 12-month nursing/medical income (includes Assisted LivingAssisted LivingSeniors Housing Property offering services limited to non-medical personal care, including ADL assistance, which are typically licensed and regulated by a state or local governmental authority. service income). |
9 |
PLUS |
Trailing 12-month ancillary income attributable to Skilled NursingSkilled NursingSeniors Housing Property with units that are highly regulated and provide 24-hour resident supervision and registered nursing care services. units, if applicable. |
10 |
PLUS |
Trailing 12-month other income for second resident fees, meals, tray service, laundry, special transportation, community fees, parking revenue, and any other income. |
CALCULATION OF NET ENTRANCE FEE INCOME |
||
11 |
PLUS |
Net entrance fee income associated with CCRCsCCRCsSeniors Housing Property that provides a continuum of care on a single campus, including any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. – resident entrance fee collections minus entrance fee refunds, but not more than the annualized average of the trailing 60-months of net entrance fee income. |
CALCULATION OF COMMERCIAL INCOME |
||
12 |
PLUS |
Actual income from occupied commercial space (and parking revenue for commercial spaces, if applicable). |
13 |
MINUS |
10% of the actual commercial income.3 |
|
EQUALS |
EFFECTIVE GROSS INCOME (EGI) |
3 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI. |
||
CALCULATION OF OPERATING EXPENSES |
||
14 |
MINUS |
Line-by-line stabilized operating expenses.
Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a lease-up, rehabilitation, or other short-term positive or negative factors. Non-recurring, extraordinary operating expenses must not be included.
You must assess:
You must analyze historical operations at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and apply an appropriate increase over the prior year’s operations in determining an estimate. |
15 |
MINUS |
PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management fee equal to the greatest of:
|
16 |
MINUS |
Real estate taxes based on the greatest of:
You must consider any automatic tax reassessment upon acquisition in the next 12-month period.
If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has real estate tax abatements, exemptions, or deferrals, they must:
|
16 continued |
MINUS |
If the timeframe for the real estate tax abatement, exemption, or deferral is shorter than the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. term, you must consider
If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is located in New York City and subject to the J-51 Tax Incentive Program where the BorrowerBorrowerPerson who is the obligor per the Note. has decontrolled rent-stabilized units (a Decontrol EventDecontrol EventFor Properties located in New York City, an event that causes a property or unit to be removed from rent control but subject to rent-stabilization pursuant to New York City rent stabilization laws. ), you must adjust the current rents to reflect no rent decontrol benefits:
|
17 |
MINUS |
Insurance equal to:
|
18 |
MINUS |
Room expense – housekeeping, if applicable. |
19 |
MINUS |
Meals expense, if applicable. |
20 |
MINUS |
Utilities, water and sewer, repairs and maintenance, payroll and benefits, advertising and marketing, professional fees, general and administrative, ground rent, and all other expenses per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
|
EQUALS |
UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI) |
21 |
MINUS |
Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. expense per Part III, Chapter 5: Seniors Housing Properties, Section 505: Replacement Reserve. |
|
EQUALS |
UNDERWRITTEN NCF |