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Presentation, discussion, and possible action regarding changes to the ownership structure and a waiver of 10 TAC §11.9(b)(2)(A) for Parkside on Carrier (HTC #21093/23920)
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RECOMMENDED ACTION
recommendation
WHEREAS, Parkside on Carrier (Development) received a 9% Housing Tax Credit (HTC) award in 2021 and supplemental credits in 2023 for the new construction of 38 multifamily units for the elderly population in Grand Prairie, Dallas County;
WHEREAS, the HTC Application received two points for agreeing to include a certified Historically Underutilized Business (HUB) in the ownership structure of the General Partner and materially participating in the development and operation of the Development throughout the Compliance Period, and receiving a combination of ownership interest in the General Partner of the Owner, cash flow from operations, and developer fee which taken together equal at least 50% and no less than 5% for any category;
WHEREAS, Parkside on Carrier, L.P. (Development Owner or Owner) is seeking to revise the ownership structure by changing the current General Partner, JES Partnerships-Parkside, L.L.C., which is partly owned by a HUB, to a Special Limited Partner and adding a new General Partner, Parkside on Carrier GPHFC GP, L.L.C., an entity owned by the Grand Prairie Housing Finance Corporation, which will allow the Development to receive a property tax exemption;
WHEREAS, the Owner requests a waiver of the specific requirement in 10 TAC §11.9(b)(2)(A) that states the HUB must have an ownership interest in the General Partner, allowing the Development to continue to qualify for the two points for Sponsor Characteristics with the HUB in the ownership structure of the Special Limited Partner and continuing to meet the intent of 10 TAC §11.9(b)(2)(A) to have a HUB materially participate in the Development;
WHEREAS, the HUB will remain in the ownership structure as the sole member of Parkside HUB, L.L.C., the 40% member of the Special Limited Partner, and will continue to materially participate in the Development; and
WHEREAS, the requested changes and waiver do not negatively affect the Development, negatively impact the viability of the transaction, impact Tex. Gov't Code §§2306.001, 2306.002, 2306.359, and 2306.6701, or affect the amount of the tax credits awarded;
NOW, therefore, it is hereby
RESOLVED, that the requested waiver and changes to the ownership structure for Parkside on Carrier are approved as presented, and the Executive Director and his designees are each authorized, directed, and empowered to take all necessary action to effectuate the foregoing.
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BACKGROUND
Parkside on Carrier was approved for a 9% HTC award in 2021 and supplemental credits in 2023 for the construction of 38 units of multifamily housing, of which all are designated as low-income units, for the elderly population in Grand Prairie, Dallas County. The HTC Application for the Development received two points because the Development was structured to include a Historically Underutilized Business (HUB) in the ownership structure that would have some combination of ownership interest in the General Partner of the Owner, cash flow from operations, and Developer Fee, which taken together equal at least 50% and no less than 5% for any category. The HUB is also required to materially participate in the development and operation of the Development throughout the Compliance Period.
In a letter dated February 26, 2024, Brian Kimes, the representative of the Owner, proposed changes to the ownership structure for the Development and requested a waiver of the provision in 10 TAC §11.9(b)(2)(A) that specifies the HUB is required to have an ownership interest in the General Partner. The Owner is seeking to replace the current General Partner, JES Partnerships-Parkside, L.L.C., with Parkside on Carrier GPHFC GP, L.L.C., of which the sole member is the Grand Prairie Housing Finance Corporation, and moving JES Partnerships-Parkside, L.L.C. from the role of General Partner to the new role of Special Limited Partner. The requested changes to the ownership structure, along with a ground lease structure, will improve the financial feasibility of the Development by providing a property tax exemption. The Owner explained that these changes are necessary due to construction cost increases, increases in operating costs, particularly payroll, insurance, and property taxes, increases in interest rates, and decreases in equity pricing, and that the Development is not feasible without significant changes. The Owner also stated that the proposed ownership structure will adhere to Texas Property Tax Code section 11.1825, and will be recognized by the Dallas County Appraisal District for ad valorem tax exemption, pursuant to the Texas Property Tax Code.
However, this change to the ownership structure would result in the HUB no longer meeting the requirements for the two Sponsor Characteristics points awarded at Application because it will no longer be in the ownership structure of the General Partner. Therefore, the Owner requests to waive this specific requirement and to allow the Development to continue to qualify for the two Sponsor Characteristics points with the HUB in the ownership structure of the Special Limited Partner. The HUB would continue to be required to meet all other requirements in 10 TAC §11.9(b)(2)(A), including the requirement to materially participate in the development and operation of the Development throughout the Compliance Period. This revised ownership requirement would be codified in the LURA for the Development. It should be noted that the Application would likely not have been awarded without the two Sponsor Characteristics points.
The Owner states that the need for this waiver was not foreseeable at Application and that the granting of the waiver better serves the policies and purposes Tex. Gov't Code §§2306.001, 2306.002, 2306.359, and 2306.6701 by improving the feasibility of the Development, and the HUB will continue to materially participate in the Development. The Owner indicated that the Special Limited Partner will be the functional equivalent of a general partner. Therefore, this proposed structure results in no change to the Development and is merely a change in title, but not role, responsibility, or obligation, of the HUB member's participation. The Development will continue to comply with the intent, purpose and material provisions of the elected Sponsor Characteristics.
The requested change does not materially alter the Development in a negative manner, negatively impact the viability of the transaction, and was not reasonably foreseeable or preventable by the Owner at the time of Application.
Staff recommends approval of the waiver request and the changes to the ownership structure of the Development as presented herein.