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Presentation, discussion, and possible action on Inducement Resolution No. 25-007 for Multifamily Housing Revenue Bonds regarding authorization for filing an application for private activity bond authority for Fiji Lofts (#21608)
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RECOMMENDED ACTION
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WHEREAS, a supplemental bond application For Fiji Lofts was submitted to the Department for consideration of an inducement resolution;
WHEREAS, at the Board meeting of November 10, 2021, Resolution No. 22-010 was approved authorizing the issuance of Multifamily Housing Revenue Bonds for Fiji Lofts, Series 2021;
WHEREAS, the applicant has cited unforeseen changes in circumstances following closing on the original Bonds, including increases in construction costs as well as a change in the design to construction an additional 30 affordable units, and has requested the Department issue additional tax-exempt bond financing for the Development as further described herein; and
WHEREAS, approval of the inducement will allow staff to submit an application to the Bond Review Board (BRB) for the issuance of a Certificate of Reservation associated with the Development;
NOW, therefore, it is hereby
RESOLVED, that based on the foregoing, Inducement Resolution No. 25-007 to proceed with the application submission to the BRB for possible receipt of State Volume Cap issuance authority under the Private Activity Bond Program for the supplemental bond application for Fiji Lofts is hereby approved in the form presented to this meeting.
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BACKGROUND
General Information: The BRB administers the annual private activity bond authority for the State of Texas. The Department is an issuer of Private Activity Bonds and is required to induce an application for bonds prior to the submission to the BRB. Approval of the inducement resolution does not constitute approval of the development but merely allows the Applicant the opportunity to move into the full application phase of the process. Once the application receives a Certificate of Reservation, the Applicant has 180 days to close on the private activity bonds.
During the 180-day process, the Department will review the complete application for compliance with the Department’s Rules, including, but not limited to, site eligibility and threshold, as well as previous participation as it relates to developments previously funded through the Department. During the review of the full application, staff will also underwrite the transaction and determine financial feasibility in accordance with the Real Estate Analysis Rules. It is anticipated that another public hearing will be required in order to meet federal requirements, and the transcript from that hearing will be presented to the Board for a decision on the issuance of the supplemental bonds.
This inducement resolution would reserve approximately $6,000,000 in private activity bond volume cap. The supplemental bonds for Fiji Lofts will be entered into the 2025 Private Activity Bond Lottery to secure a bond reservation under the Department’s 2025 set-aside, which is anticipated to be approximately $200,000,000. Based on the applications received to date, the set-aside is oversubscribed.
Fiji Lofts was originally approved at the Board meeting held on November 10, 2021, and subsequently closed on December 10, 2021, with a bond issuance of $23,849,000. The development originally involved the new construction of 174 units located at 301 South Corinth Street in Dallas, Dallas County. In December 2022, the Department’s Governing Board approved a material amendment to increase the total number of units from 174 to 204 units. All of the units will be rent and income restricted at 60% of Area Median Family Income.
A supplemental bond allocation is being requested to aid in the absorption of increased costs in order to satisfy the federal requirements of the 50% Test. A project is eligible for the 4% Housing Tax Credit so long as at least 50% of the aggregate basis of the building(s) comprising the project, included the land on which the building is located, is financed with tax-exempt bonds. The Department performs a preliminary calculation of the 50% test in conjunction with its underwriting, as published on the underwriting report. At the time of the original approval, utilizing a bond issuance amount of $23,849,000, the percent financed by tax-exempt bonds was 63%.
As previously stated, there were increased costs as the project has been progressing in construction, and there were also 30 additional units that were not contemplated at the time of the original closing. With the additional tax-exempt bond financing being requested, the applicant has indicated the 50% Test calculation to be approximately 54% at the time of project completion. Staff will re-evaluate the increased costs in its underwriting that will be presented to the Board at a later date.
At the time of the original award, the Department received a letter of support for the proposed development from Councilmember Carolyn King Arnold, of the Dallas City Council, District 4, which is included herein for reference.
Bond Inducement Amount: $6,000,000