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Presentation, discussion, and possible action regarding the Issuance of Multifamily Housing Revenue Bonds (Walnut Springs) Series 2024A-1 and Series 2024A-2 Resolution No. 25-008, an award of Direct Loan funds, and a Determination Notice of Housing Tax Credits
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RECOMMENDED ACTION
recommendation
WHEREAS, the Board previously adopted an Inducement Resolution on September 7, 2023;
WHEREAS, a 4% Housing Tax Credit application for Walnut Springs, sponsored by AAHFC Walnut Springs GP, LLC, and the Alamo Area Housing Finance Corporation, was submitted to the Department on May 3, 2024;
WHEREAS, an application was submitted under the Tax Credit Assistance Program (TCAP) 2024-3 Multifamily Direct Loan Notice of Funding Availability (2024-3 NOFA) with an Application Acceptance Date of May 6, 2024;
WHEREAS, a Certificate of Reservation was issued in the amount of $35,000,000 on July 17, 2024, with a bond delivery deadline of January 13, 2025; and
WHEREAS, staff recommends approval of the issuance of Multifamily Housing Revenue Bonds for Walnut Springs Apartments (Series 2024A-1 and Series 2024A-2), an award of Tax Credit Assistance Program Repayment Funds (TCAP), and the issuance of a Determination Notice;
NOW, therefore, it is hereby
RESOLVED, that the issuance of tax-exempt Multifamily Housing Revenue Bonds (Walnut Springs Apartments) Series 2024A-1 and Series 2024A-2 in the aggregate principal amount of $26,950,000, Resolution No. 25-008, is hereby approved in the form presented to this meeting;
FURTHER RESOLVED, the issuance of a Determination Notice of $2,436,232 in 4% Housing Tax Credits, and $10,000,000 in TCAP Direct Loan funds for Walnut Springs Apartments, subject to underwriting conditions that may be applicable as found in the Real Estate Analysis report posted to the Department’s website, is hereby approved in the form presented to this meeting; 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 Bonds will be issued in accordance with Tex. Gov’t Code §2306.353 et seq., which authorizes the Department to issue revenue bonds for its public purposes, as defined therein. Tex. Gov’t Code §2306.472 provides that the Department’s revenue bonds 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: Walnut Springs is to be located at 2551 North Guadalupe Street in Seguin, Guadalupe County, and proposes the new construction of 177 units that will serve the general population. The Certificate of Reservation from the Bond Review Board was issued under the Priority 3 designation, which does not have a prescribed restriction on the percentage of Area Median Family Income (AMFI) that must be served. This application proposes to implement the Average Income set-aside. The application identifies 13 units to be rent- and income-restricted at 50% of AMFI, 151 units to be rent- and income-restricted at 60% of AMFI, and 13 units to be rent- and income-restricted at 70% of AMFI. Layered among the HTC units are 60 TCAP units, of which 13 are proposed to be rent- and income-restricted at 50% of AMFI and 47 are proposed to be rent- and income-restricted at 60% of AMFI.
Organizational Structure and Previous Participation: The Borrower is LDG Walnut Springs, LP, and includes the entities and principals as illustrated in Exhibit A. The applicant’s portfolio is considered a Category 2 and was deemed acceptable, without further review or discussion.
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 July 9, 2024. 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
Under the proposed structure, the Department will issue unrated, fixed rate tax-exempt bonds as Series 2024A-1 and Series 2024A-2, in the aggregate principal amount of $26,950,000, to be purchased by NewPoint Real Estate Capital. The Bond Resolution included herein includes an exhibit that references a range of bond amounts that correspond to the applicable all-in interest rate. For purposes of the Department’s underwriting, the Series 2024A-1 bonds were underwritten utilizing a bond amount of $13,966,000, with a maximum interest rate based upon the sum of 2.90% and the 15-year BVAL Municipal Index (non-callable) as published by Bloomberg, estimated at the time of underwriting to be 5.83%. The Series 2024A-1 bonds will be construction to permanent financing, have a 17-year term, with the first 10 years being interest only, a 40-year amortization, and a maturity date 40 years after closing, approximately December 1, 2064.
The Series 2024A-2 bonds utilize the same range of bond amounts that correspond to the applicable all-in interest rate. For purposes of the Department’s underwriting, the Series 2024A-2 bonds were underwritten utilizing a bond amount of $13,034,000 with a maximum interest rate based upon the sum of 3.45% and the 15-year BVAL Municipal Index (non-callable) as published by Bloomberg, estimated at the time of underwriting to be 6.28%. The Series 2024A-2 bonds are intended to be construction only, with a 32-month term with the option of two six-month extensions, and a final maturity date of August 1, 2028 (inclusive of both extensions).
Rickhaus Design, LLC, an affiliate of the applicant, will provide a forgivable loan in the amount of $3,200,000 with a 40-year term and interest rate of 6.00%.
A request for $10,000,000 of the Department’s Multifamily Direct Loan TCAP funds will support 60 of the units. The interest rate will be 2% as required under the 2024-3 NOFA, with a 40-year amortization. The permanent term of the TCAP loan will be 17 years.