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Presentation, discussion, and possible action on a request for return and reallocation of tax credits under 10 TAC §11.6(5) related to Credit Returns Resulting from Force Majeure Events for Westwood Apartments
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RECOMMENDED ACTION
recommendation
WHEREAS, Westwood Apartments was awarded 9% housing tax credits during the 2024 Competitive Housing Tax Credit cycle;
WHEREAS, the Development Owner executed a Carryover Allocation Agreement that included certifications stating each building receiving an allocation would be placed in service by December 31, 2026;
WHEREAS, the Development Owner has requested an extension to the placement in service deadline under 10 TAC §11.6(5), related to Credit Returns Resulting from Force Majeure Events;
WHEREAS, the Department lacks authority to extend federal placement in service deadlines and may only reset such deadlines by requiring the credits to be returned and immediately reallocated to the Development, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred;
NOW, therefore, it is hereby
RESOLVED, that the request to treat the matter under the force majeure provisions of 10 TAC §11.6(5) is approved, and that the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar shall be applicable to the Development.
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BACKGROUND
|
Development |
Westwood Apartments |
|
Target Population |
General |
|
HTC Award |
$2,000,000 |
|
City |
Killeen |
|
Total Units |
102 |
|
HTC Units |
102 |
|
Initial Year of Award |
2024 |
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Extension Requested |
Six months |
Westwood Apartments is a 102-unit development located in Kerrville, Bell County. The development received an award of 9% Housing Tax Credits in 2024. As a result, the current deadline to place in service is December 31, 2026.
The Development is currently scheduled to close on September 5, 2025, pending approval of this item. The Development has experienced delays due to disruptions in the equity markets and extended local approval processes. The project was initially underwritten with a credit pricing of $0.86, but by the end of 2024, that pricing had dropped to roughly $0.70 - $0.78. These factors have jeopardized the original placed-in-service schedule. The following circumstances have impacted the timeline:
- Delays in securing feasible equity commitments as several major investors paused participation in early 2025 amid federal tax law uncertainty; and
- Reduced investor demand for LIHTC credits and depressed pricing, which prolonged negotiations and delayed final equity terms until July 2025.
Despite these delays, the development team has maintained progress by advancing permitting, finalizing the general contractor, and securing lender and investor commitments. The project currently anticipates completion by late 2026, only shortly before the current deadline; however, both the lender and equity partners have indicated that unforeseen issues during construction could push final delivery beyond the placed-in-service date. To allow for any such unforeseen delays, the Developer has requested an extension of six months, establishing a new placed-in-service deadline of June 30, 2027.
APPLICABLE RULE
Under 10 TAC §11.6(5), a Development Owner may return credits and receive a reallocation outside the standard allocation process if the return is the result of a qualifying force majeure event occurring prior to issuance of IRS Form(s) 8609. Pursuant to 10 TAC §11.6(5), the Department’s Governing Board may approve execution of a Carryover Allocation Agreement for the current program year with the Development Owner that returned the credits, but only if the following conditions are met:
(A) The credits were returned as a result of "Force Majeure" events that occurred before issuance of Forms 8609. Force Majeure events are the following sudden and unforeseen circumstances outside the control of the Development Owner: acts of God such as fire, tornado, flooding, significant and unusual rainfall or subfreezing temperatures, or loss of access to necessary water or utilities as a direct result of significant weather events; explosion; vandalism; orders or acts of military authority; unrelated party litigation; changes in law, rules, or regulations; national emergency or insurrection; riot; acts of terrorism; supplier failures; or materials or labor shortages. If a Force Majeure event is also a presidentially declared disaster, the Department may treat the matter under the applicable federal provisions. Force Majeure events must make construction activity impossible or materially impede its progress.
Staff has reviewed this request and determined that the significant drop in equity pricing and subsequent renegotiation of investor terms constitute a force majeure event under the rules.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar applicable to the Development.
• A new Carryover Allocation Agreement will be executed.
• The new 10% Test deadline will be July 1, 2026.
• The new placed-in-service deadline will be June 30, 2027.
If the Board denies the request:
• The current placed-in-service deadline of December 31, 2026, remains in place.
• The Development Owner may either meet the existing deadline, return the credits, or have the award terminated for failing to meet the deadline.
• Returned credits will first be reallocated within the original subregion in accordance with 10 TAC §11.6(2). If no pending applications are eligible within the subregion, the credits will be added to the statewide collapse for reallocation.
This request has no impact on any funding source other than the Low Income Housing Tax Credit program.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Westwood Apartments under the force majeure provisions of 10 TAC §11.6(5).