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Presentation, discussion, and possible action regarding the Issuance of a Multifamily Housing Governmental Note (Murdeaux Villas) Series 2026 Resolution No. 26-010 and an increase to the Housing Tax Credit amount
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RECOMMENDED ACTION
recommendation
WHEREAS, at the Board meeting of April 8, 2021, Resolution No. 21-024 was approved authorizing the issuance of a Multifamily Housing Governmental Note for Murdeaux Villas, Series 2021, and a Determination Notice was issued;
WHEREAS, Murdeaux Villas subsequently closed on the governmental note amount of $35,000,000 on May 28, 2021;
WHEREAS, as a result of unforeseen changes in circumstances following the Board’s approval of the original Resolution and issuance of the original governmental note, including inflation and related increases in construction costs, and removal of the developer entity, the Owner has requested the Department issue additional revenue bonds or notes in one or more series for the purpose of providing additional tax-exempt bond financing for the Development as further described herein;
WHEREAS, Murdeaux Villas (#21614) was induced by the Board on October 10, 2024, with a requested bond amount of $5,000,000;
WHEREAS, a supplemental bond application for Murdeaux Villas, sponsored by Trinity Housing Development, LLC, was submitted to the Department on September 5, 2024;
WHEREAS, a Certificate of Reservation was issued in the amount of $5,000,000 on January 27, 2026, with a bond delivery deadline of July 26, 2026;
WHEREAS, the application reflects an increase to the annual housing tax credit from $2,218,728 which was the original amount reflected in the Determination Notice, to $3,687,762, representing a 66.21% increase;
WHEREAS, 10 TAC §10.401(d) requires approval by the Board if an increase to the amount of tax credits exceeds 120% of the amount of credit reflected in the Determination Notice;
WHEREAS, in connection with the underwriting of the supplemental bonds and evaluation of costs, staff has determined that the increase is necessary for the viability of the transaction;
WHEREAS, staff recommends approval of the issuance of a Multifamily Housing Governmental Note for Murdeaux Villas (Series 2026); and
WHEREAS, recognizing the cost certification package has not yet been submitted by the Development Owner, staff recommends approval of up to a 75% increase to the original annual housing tax credit amount reflected in the Determination Notice that would not necessitate additional Board consideration;
NOW, therefore, it is hereby
RESOLVED, that the issuance of a tax-exempt Multifamily Housing Governmental Note (Murdeaux Villas) Series 2026 in the amount of $5,000,000, Resolution No. 26-010, is hereby approved in the form presented to this meeting;
FURTHER RESOLVED, the annual housing tax credit increase for Murdeaux Villas, of up to 75% from the tax credit amount reflected in the Determination Notice is approved; and
FURTHER RESOLVED, that if approved, staff is authorized, empowered, and directed, for and on behalf of the Department to execute such documents, instruments and writings and perform such acts and deeds as may be necessary to effectuate the foregoing.
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BACKGROUND
General Information: The Multifamily Housing Governmental Note will be issued in accordance with Tex. Gov’t Code §2306.353 et seq., which authorizes the Department to issue governmental notes for its public purposes, as defined therein. Tex. Gov’t Code §2306.472 provides that the Department’s governmental notes are solely obligations of the Department, and do not create an obligation, debt or liability of the State of Texas or a pledge or loan of faith, credit or taxing power of the State of Texas.
Development Information: Murdeaux Villas is located at 125 Murdeaux Lane in Dallas, Dallas County, and involves the acquisition and rehabilitation of 301 units that will serve the general population. The prior award, in 2021, resulted in an increase in the total number of units, from 240 units to 301 units as three and four-bedroom units with a history of low occupancy were converted to one-bedroom and efficiency units. The original award from 2002 requires all of the units to serve households at 50% of the Area Median Family Income (AMFI) for a minimum of 30 years. In conjunction with the 2021 award, 151 units will be rent and income restricted at 50% of AMFI and the remaining 150 units will be rent and income restricted at 60% AMFI.
The Owners have requested an additional issuance of revenue bonds or notes in the amount of $5,000,000 due to unexpected increases in construction costs and changes in the development team that jeopardize the ability of the project to satisfy the requirements of the 50% Test. Moreover, the additional costs incurred have resulted in an increase to the housing tax credit amount. The Determination Notice issued in 2021 reflected a housing tax credit amount of $2,218,728. In underwriting the supplemental bond allocation, there has been an increase to the housing tax credit amount to $3,687,762, resulting in a 66.21% increase.
Pursuant to 10 TAC §10.401(d) approval by the Board is required if an increase to the amount of tax credits exceeds 120% of the amount of credit reflected in the Determination Notice. While the project is close to being completed, there may still be nominal cost increases and a final accounting of costs that could increase the tax credit amount further. Staff is requesting approval of the additional tax credit increase at this time and that such increase be limited to 75% without necessitating additional Board consideration once the cost certification package is submitted. The fee associated with the increase in credits will be due at the time of cost certification once the final tax credit amount is determined.
Organizational Structure and Previous Participation: The Borrower is Murdeaux Rehab Development, LP, and includes the entities and principals as illustrated in Exhibit A. Given the enactment of Texas House Bill 21 (HB 21), which amended Section 394.031 of Local Government Code (Housing Finance Corporations in Municipalities and Counties), it necessitated a change in the Sole Member of the General Partner. Under HB 21, the area in which a housing finance corporation may own real property for residential development is limited to the boundaries of the county that sponsored the corporation. As a result, the Garland Housing Finance Corporation has been removed as the Sole Member of the General Partner and replaced with Trinity Housing Development. The applicant’s portfolio is considered a Category 2 and was deemed acceptable.
Tax Equity and Fiscal Responsibility Act (TEFRA) Public Hearing/Public Comment: On March 18, 2022, the IRS released Revenue Procedure 2022-20, which permanently allows TEFRA hearings for qualified activity bonds to be held telephonically. Staff conducted a telephonic hearing for the proposed development on April 22, 2025. Representatives from the Department and the Developer were present, and no public comment was made. A copy of the hearing transcript is included herein. The Department has not received any letters of support or opposition for the development.
Summary of Financial Structure
The transaction originally involved the issuance of an unrated tax-exempt fixed rate note in the amount of $35,000,000 that was initially purchased by the International Bank of Commerce (IBC Bank), who has served as construction lender. IBC Bank acquired the loan and the Department’s related multifamily note at closing, which has been used to fund a tax-exempt, interim construction loan of up to $35,000,000.
Under the proposed structure, the Department will issue an additional unrated tax-exempt fixed rate note in the amount of $5,000,000 that will be purchased by IBC Bank. The construction loan will have a 17-month term with interest only payments. The interest rate will be fixed at approximately 6.25%.
IBC Bank will provide equity bridge loans in the amount of $23,500,000 and $6,500,000 during the construction period as well, with an estimated interest rate of 7.50% and term of approximately 12 months.
Trinity Housing Development will provide a construction to permanent loan in the amount of $13,639,128. The loan will be non-amortizing with cash flow payments only with a term of 40 years. The interest rate will be based upon the Applicable Federal Rate, which is currently estimated to be 4.62%.