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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 2910 Motley Senior Living and 3606 S Cockrell Hill Road Senior
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RECOMMENDED ACTION
recommendation
WHEREAS, 2910 Motley Senior Living and 3606 S Cockrell Hill Road Senior were awarded 9% housing tax credits during the 2024 Competitive Housing Tax Credit cycle;
WHEREAS, the Development Owners 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 Owners have 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 Developments, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owners have 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 Developments.
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BACKGROUND
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Development |
2910 Motley Senior Living |
|
Target Population |
Elderly |
|
HTC Award |
$2,000,000 |
|
City |
Mesquite |
|
Total Units |
133 |
|
HTC Units |
88 |
|
Initial Year of Award |
2024 |
|
Extension Requested |
Six months |
|
Development |
3606 S Cockrell Hill Road Senior |
|
Target Population |
Elderly |
|
HTC Award |
$2,000,000 |
|
City |
Dallas |
|
Total Units |
120 |
|
HTC Units |
88 |
|
Initial Year of Award |
2024 |
|
Extension Requested |
Six months |
2910 Motley Senior Living
2910 Motley Senior Living is a 133-unit development located in Mesquite, Dallas County. The development received an award of 9% Housing Tax Credits in 2024, and executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
The development has encountered financing delays due to unforeseen increases in construction costs, high interest rates, and a decline in equity pricing, resulting in a $5.3 million funding gap. To resolve this, the Applicant is pursuing soft financing through TDHCA’s 2025-1 National Housing Trust Fund (NHTF) NOFA. The following circumstances have delayed progress:
• Development costs rose from $35.7 million to nearly $37 million due to unexpected pricing increases;
• Higher interest rates and lower equity pricing have created a significant financing gap;
• The investor and lender will not proceed to closing without an approved placed-in-service extension.
The Applicant is requesting a six-month extension to the placed-in-service deadline (to June 30, 2027) and an extension of the 10% Test deadline (to December 31, 2025) to allow time for the award and closing of NHTF funds and commencement of construction.
3606 S Cockrell Hill Road Senior
3606 S Cockrell Hill Road Senior is a 120-unit development located in Dallas, Dallas County. The development received an award of 9% Housing Tax Credits in 2024, and executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
The development has since faced delays due to a financing gap caused by unforeseen construction cost increases and sustained high interest rates. To address the shortfall, the Applicant applied for a $5 million HOME loan from the City of Dallas. This loan is scheduled to be presented to Dallas City Council for final approval on June 25, 2025. Federal requirements associated with the HOME funds have delayed closing. The following circumstances have impacted the project timeline:
• Total development costs increased from $31.3 million to $35 million due to construction pricing volatility;
• The funding gap required application for City of Dallas HOME funds, which were awarded but are subject to federal environmental clearance before land acquisition and closing;
• Closing is now projected for September 2025, but cannot proceed without TDHCA approval of a placed in service deadline extension;
• Investor and lender require confirmation of the extension prior to finalizing financing terms.
The Applicant is requesting a six-month extension to the placed in service deadline (to June 30, 2027) and an extension of the 10% Test deadline (to December 31, 2025) to allow time for the award and closing of NHTF funds and commencement of construction.
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 the request and determined that the unexpected cost increases meet the criteria of a force majeure event under the rule.
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, 2025.
• The new placed in service deadline will be June 30, 2027.
If the Board denies the request:
• The original 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.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for 2910 Motley Senior Living and 3606 S Cockrell Hill Road Senior under the force majeure provisions of 10 TAC §11.6(5). If the Board approves a loan for 2910 Motley, this action does not change any deadlines associated with the NHTF funding.