Administration Expense - The annual management, legal and accounting/audit fees, general and miscellaneous office expenses required for the operation of a property.

Affordable Housing Program "AHP" - A program offered by the Federal Home Loan Bank of Chicago. The program provides subsidies to member institutions (banks) to assist in the creation and preservation of housing for lower income families and individuals. The program must be used to finance the purchase, construction or rehabilitation of owner-occupied or rental housing that meets specific criteria.

Amortization Term - The number of years necessary to repay the debt, while interest is paid on the outstanding balance.

Annual Debt Service "ADS" - The yearly sum of periodic mortgage interest and principal payments, which can be fixed or variable, over the term of the mortgage loan.

Balance Sheet - A financial statement showing a "snapshot" of the assets, liabilities and net worth of a organization on a given date.

Bank-Owned Community Development Corporation "CDC" - A corporation, either for profit and nonprofit, that is capitalized by one or more banks. The purpose of a CDC is to make debt and/or equity investments in developments that promote community economic development.

Break-even Point - The percentage of potential gross income necessary to satisfy all annual operating expenses and debt service obligations of the development.

Building Cost per Unit - The projected initial development costs divided by the total number of units in the development.

Collateral - Assets pledged to secure a loan.

Community Based Organization, "CBO" - A nonprofit organization which works to serve the disadvantaged in the community in which it is located.

Community Development Block Grants "CDBG" funds - Federal aid that is intended for use by cities and towns to promote neighborhood revitalization, economic development and improved community facilities and services. Funds are administered by either state or city offices of economic development, depending on the size of the city or town. Certain areas in Wisconsin are "Entitlement Communities" which means that the area receives CDBG funds directly from the federal agency and administers these funds according to the needs of their community.

Comparable - Real property that can be used to establish the value of a specific property by comparison.

Congregate Housing - Also known as SRO, Single Room Occupancy Housing. A residence in which tenants have private rooms but share common areas, such as kitchen, dining room, living room and bathroom.

Debt Coverage Ratio "DCR" - The percentage relationship of net operating income to annual mortgage principal and interest payments.

Department of Housing and Urban Development "HUD" - Federal agency that promotes economic development and affordable housing, administers the Community Development Block Grant (CDBG) program.

Effective Gross Income "EGI" - The maximum potential gross income of a development minus lost revenue as a result of vacancy in the rental units.

Entitlement Community - A city or urban area with a population of 50,000 or more which receives Community Development Block Grand funds directly from HUD.

Equity Contributions - All of the capital provided by the development owner/investors including cash, real estate assets and/or non-cash investments such as professional services.

Fair Market Value - The highest price the property can command, in terms of money, in an open and competitive market.

Fully Amortized Mortgage - Debt requiring periodic payments of principal and interest of sufficient amount that will repay the entire debt by the maturity date.

General Partnership - A joint ownership agreement where all parties share gains and losses from the operation of a development as well as full liability for debts.

Grants - Gifts of money given by foundations, government agencies, corporations or others.

HOME Program - A Rental Housing Development Program that is offered to various types of nonprofit organizations for the development of affordable rental housing. The program is administered by the Division of Housing, Department of Administration, State of Wisconsin. Contact the Division of Housing for application information.

Income Statement - Summary of revenues, costs and expenses for a business over a period of time.

Leverage - The ability to use a small amount of funds to attract other funds, including loans, grants and equity investments.

Limited Liability Company "LLC" - A business structure where owners can have the corporate liability protection for their personal assets from business debt as well as the tax advantages of partnership or S Corporations.

Limited Partnership - General partner manages and accepts full liability for debts while the limited partner(s) have no direct management authority and are liable only for their share of the capital contributions.

Loan to Cost Ratio - The percentage relationship of mortgage principal to the total capital expenditure necessary to purchase/rehab, or construct a real estate asset.

Loan to Value Ratio - The percentage relationship of mortgage principal to estimated value of a development.

Market Value - Highest estimated price for a property sold to a knowledgeable buyer on the open market, without undue pressure to sell or purchase.

Mission Statement - A statement of purpose an organization is to carry out.

Mortgage - A temporary and conditional pledge of property to a creditor as security for the repayment of a debt. Mortgage Points - Initial charge to defray origination expenses. One Point is equal to 1.00% of the outstanding mortgage balance.

Neighborhood Housing Services "NHS" - A national network of neighborhood based service organizations that are locally operated and funded, which focuses on increasing the supply of affordable housing in the area.

Net Operating Income "NOI" - the remainder of annual effective gross income after deduction of vacancy allowance, operating expenses, capital replacement reserve.

Phase I Environmental Assessment - Identifies potential environmental liabilities associated with current and past uses of property with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERLA) and petroleum products.

PILOT - Payment in Lieu of Taxes - An agreed upon payment amount that a nonprofit organization has negotiated with the local community. This payment amount is paid by the nonprofit instead of paying the fully assessed tax payment amount.

Principal - The unpaid balance of a loan, not including interest.

Pro Forma Financial Statements - Projected financial statements for a given period in the future in which certain amounts are estimated.

Soft-Second Mortgage - A second mortgage, which offers, reduced interest and flexible repayment terms that minimize the debt of the borrower and reduces the primary lender's risk. Soft seconds are typically provided through government programs to both housing and business development projects.

Subordinated Debt - Debt that is paid after the debt of any lien holders that have loans of superior position.

Underwrite - To assess the risk of a proposed loan prior to agreeing to lend money.