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Presentation, discussion, and possible action on recommendation to debar multiple parties due to the foreclosures of The Life at Clearwood (HTC 01485 / CMTS 487) and The Life at Westland (HTC 02485 / CMTS 3284)
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RECOMMENDED ACTION
recommendation
WHEREAS, on December 12, 2024, the TDHCA Governing Board approved the debarment of Olive Tree Multifamily Manager LLC and Ian Bel through December 12, 2027, due to the August 6, 2024 foreclosures of The Life at Timber Ridge Apartments (HTC 01101 / CMTS 343) and The Life at Timber Ridge II Apartments (HTC 03456 / Bond 03456B / CMTS 3411);
WHEREAS, The Life at Clearwood (HTC 01485 / CMTS 487) (Clearwood) and The Life at Westland (HTC 02485 / CMTS 3284) (Westland) were subject to HTC Land Use Restriction Agreements;
WHEREAS, Clearwood and Westland were foreclosed on December 3, 2024, terminating both land use restriction agreements;
WHEREAS, Olive Tree Multifamily Manager LLC and Ian Bel were the responsible parties in control of Clearwood at the time of its foreclosure;
WHEREAS, Olive Tree Multifamily Manager II LLC and Ian Bel were the responsible parties in control of Westland at the time of its foreclosure;
WHEREAS, controlling a multifamily Development that was foreclosed after April 1, 2021, where the foreclosure or deed in lieu of foreclosure terminates a subordinate TDHCA LURA is grounds for discretionary debarment under 10 TAC §2.401(a)(7);
WHEREAS, representatives for Olive Tree Multifamily Manager LLC, Olive Tree Multifamily Manager II LLC, and Ian Bel, participated in a second informal conference with the Enforcement Committee on January 30, 2025, regarding multiple enforcement referrals, including the debarment referrals relating to the foreclosures of Clearwood and Westland;
WHEREAS, on February 13, 2025, the TDHCA Executive Director issued a debarment determination notice recommending an extended debarment term for Olive Tree Multifamily Manager LLC and Ian Bel through December 12, 2028, and a matching debarment term for Olive Tree Multifamily Manager II LLC; and
WHEREAS, staff has based the above debarment recommendations relating to the foreclosures of Clearwood and Westland on the Department’s rules for debarment and an assessment of each and all of the material factors identified at 10 TAC §2.401(j) that are to be considered in determining a recommended period of debarment, applied specifically to the facts and circumstances present in this case.
NOW, therefore, it is hereby
RESOLVED, that a Final Order of Debarment through December 12, 2028, for Olive Tree Multifamily Manager LLC, Olive Tree Multifamily Manager II LLC, and Ian Bel, substantially in the form presented at this meeting, and authorizing any non-substantive technical corrections, is hereby adopted as the order of this Board.
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BACKGROUND
REFERRED VIOLATIONS SUBJECT TO DEBARMENT:
1. Tex. Gov’t. Code 2306.0504(b) states, “(b) The department may debar a person from participation in a department program on the basis of the person's past failure to comply with any condition imposed by the department in the administration of its programs.”
2. 10 TAC §2.401(a)(7) states, “(a) The Department may debar a Responsible Party, a Consultant and/or a Vendor who has exhibited past failure to comply with any condition imposed by the Department in the administration of its programs. […] (7) Controlling a multifamily Development that was foreclosed after April 1, 2021, where the foreclosure or deed in lieu of foreclosure terminates a subordinate TDHCA LURA;”
The Department awarded 9% housing tax credits to build and operate The Life at Clearwood (“Clearwood”) and The Life at Westland Estates (“Westland”), and recorded HTC LURAS in 2003 and 2004, respectively.
Clearwood and Westland were foreclosed on December 3, 2024, terminating both TDHCA LURAs, except for the three-year safe harbor periods for existing low-income tenants.
PROPERTY INFORMATION:
1. Clearwood: 2001 9% HTC award for new construction. 276 units in Houston, all restricted at 60% AMI. HTC LURA was signed in 2003. The 15-year federal HTC Compliance Period expired December 31, 2018, but the state HTC Extended Use Period runs 30 years, and was set to terminate December 31, 2033. This LURA terminated early due to foreclosure on December 3, 2024.
2. Westland: 2002 9% HTC award for new construction. 192 units in Fort Worth, all restricted at 60% AMI. HTC LURA was signed in 2004. The 15-year federal HTC Compliance Period expired December 31, 2019, but the state HTC Extended Use Period runs 30 years, and was set to terminate December 31, 2034. This LURA terminated early due to foreclosure on December 3, 2024.
RESPONSIBLE PARTIES IN CONTROL (COLLECTIVELY REFERRED TO AS OLIVE TREE):
1. For Clearwood: Olive Tree Multifamily Manager LLC and Ian Bel.
At the time of foreclosure, Olive Tree Multifamily Manager LLC, controlled by Ian Bel, was the manager member for 9465 Clearwood Drive Houston JV LLC, the sole member of 9465 Clearwood Drive Houston LLC, the owner of Clearwood. This owner purchased the development in 2019.
2. For Westland: Olive Tree Multifamily Manager II LLC and Ian Bel.
At the time of foreclosure, Olive Tree Multifamily Manager II LLC, controlled by Ian Bel, was the manager member for 3000 Alemeda Street Fort Worth JV LLC, the sole member of 3000 Alemeda Street Fort Worth LLC, the controlling owner of Westland. This owner purchased the development in 2020.
FORECLOSED LOANS: Clearwood had a Deed of Trust dated March 4, 2020, in the original principal sum of $25,260,000.00. This was a floating rate loan with a rate cap of 5.35%. Westland had a Deed of Trust dated December 23, 2020, in the original principal sum of $15,400,000.00. This was a floating rate loan with a rate cap of 6.9%. Both loans were from a private investment company, Bridge Investment Group. Olive Tree states that floating rate loans are standard in the industry for a property of this age because it is difficult to get a fixed rate loan for a property that is post-15 until it is stabilized. The interest rates increased to the rate cap in 2023.
FACTORS CONTRIBUTING TO FORECLOSURE PER OLIVE TREE: Olive Tree indicated that it originally projected expenses to increase at 5% per year, however, unpredictable cost increases led to annual operating deficits, particularly increases in insurance, payroll, utilities, and taxes. Then the mortgage interest rate increased to its rate caps. Actual expenses were significantly above projections, and were ultimately unsustainable despite multiple capital calls from investors. Olive Tree states that the developments maintained high occupancy rates and were in good condition.
DEBARMENT IS DISCRETIONARY: Debarment is not required for this violation per the above referenced statute and rule.
FACTORS CONSIDERED TO DETERMINE RECOMMENDED DEBARMENT TERM: The Enforcement Committee held an informal conference with Olive Tree on January 30, 2025, and submitted a recommendation for debarment to the TDHCA Executive Director. On February 13, 2025, the TDHCA Executive Director issued a debarment determination notice recommending an extended debarment term for Olive Tree Multifamily Manager LLC and Ian Bel through December 12, 2028, and a matching debarment term for Olive Tree Multifamily Manager II LLC. Olive Tree has not appealed the debarment determination. There is no required minimum or maximum debarment term, and the Board may increase or decrease the term. Pursuant to 10 TAC §2.401(j), the recommended period of debarment was based upon the following material factors:
1. Repeated enforcement occurrences:
a. Foreclosure / debarment: Including Clearwood and Westland, there have been four foreclosures in this ownership portfolio within the past six months. Olive Tree Multifamily Manager II LLC does not have a prior foreclosure history, but Olive Tree Multifamily Manager LLC and Ian Bel controlled The Life at Timber Ridge Apartments (HTC 01101 / CMTS 343) and The Life at Timber Ridge II Apartments (HTC 03456 / Bond 03456B / CMTS 3411), which were both foreclosed on August 6, 2024. On December 12, 2024, the Board approved the debarment of Olive Tree Multifamily Manager LLC, and Ian Bel through December 12, 2027.
b. Administrative Penalty: The administrative penalty history for Olive Tree Multifamily Manager II LLC and Ian Bel includes an agenda item under consideration during this board meeting for The Life at Sterling Woods (HTC 04478 / CMTS 4176). The administrative penalty history for Olive Tree Multifamily Manager LLC and Ian Bel includes a 2022 file monitoring administrative penalty referral that was resolved informally for The Life at Timber Ridge Apartments. The Life at Timber Ridge II Apartments has an uncorrected NSPIRE inspection for 2024 which scored 72.84 out of 100, however, the property was foreclosed before the corrective action deadline, terminating the LURA except for the three-year safe harbor period.
2. Seriousness of underlying issues: Foreclosure is among the most serious potential debarment violations because it removes affordable housing that was intended to benefit low-income Texans for many years to come. In this new case for Clearwood and Westland, the Department lost 10 years of affordable housing for 468 collective units. The two prior Timber Ridge foreclosures caused the Department to lose 18 years of affordable housing at Phase I and 11 years at Phase II for 240 collective units. Taken as a whole, this is a loss of over 700 units of affordable housing in Houston and Fort Worth.
3. Presence or absence of corrective action: There is no way to correct a foreclosure after it occurs, but the Committee considered actions taken to prevent the foreclosures. Olive Tree provided the following information during an informal conference on January 30, 2025. In 2023, its investors funded an additional $1.4M for Clearwood (increasing the total investor equity investment to $8.4M) and an additional $576K for Westland (increasing the total investor equity investment to $6.8M) to cover operating deficits, but toward the end of 2023, no more equity was available, and the developments were unable to fully pay vendors and debt service. Olive Tree tried to apply for 4% TDHCA financing, but it was infeasible due to the interest rate spike. The lender agreed to modify both loans through November 2024, but was not willing to entertain any further workouts after November 2024. Olive Tree listed the properties for sale and had purchase offers sufficient to pay off the loans, but the offers were too late, and the lender refused to grant any further extensions. The lender was aware that its foreclosures would terminate the TDHCA LURAs, and Olive Tree believes that was an incentive for the lender to stop negotiating since the property values are significantly higher without the LURAs. Lender affiliates purchased both properties at the foreclosure sale auctions.
4. Other material factors: Olive Tree is experienced and has acquired more than 17,000 units of workforce and affordable housing in 9 states, focusing on preserving older non-stabilized assets. It states that the four foreclosures discussed herein are the only foreclosures in its entire portfolio, and that it has never previously defaulted on debt. However, Olive Tree also said that during its 2024 informal conference, suggesting at the time that The Life at Timber Ridge I and II was an anomaly. Olive Tree states that it spent more than $2.5M for capital improvements at Clearwood, outside of regular maintenance costs. It did not mention an amount invested for improvements at Westland, but the capital improvement expenditure for Clearwood is consistent with improvements that the Olive Tree disclosed last year regarding the Timber Ridge properties.
The previously approved debarment term for the Timber Ridge foreclosures was three years because of mitigating circumstances outlined above relating to market factors out of Olive Tree’s control. However, it was Olive Tree’s decision to take out floating rate bridge financing from a private investment company, which is riskier than traditional bank financing.
Olive Tree asserts that the industry is heading toward many defaults and foreclosures in the coming years. In lieu of debarment, it proposed participating in a “tailored solution” with TDHCA “to analyze and prove financial health” throughout the Department’s multifamily portfolio, identifying ideas and procedures to mitigate risks. However, TDHCA staff already analyzes financial reports to identify risks for rental developments.
Finally, Olive Tree emphasizes that it wants to continue operating in Texas and that it thinks it can add value in Texas. It does not believe that its foreclosures are comparable to the poor condition and poor compliance histories demonstrated by other responsible parties on the Department’s debarment list, since its foreclosures were caused by economic forces out of its control. However, this does not mitigate the serious economic impact on the public caused by the complete loss of these affordable housing units, even if the owner was operating in a compliant manner prior to foreclosure.
RECOMMENDATION: Accordingly, after consideration of all appropriate factors, the Enforcement Committee and Executive Director recommend a Final Order of Debarment for Olive Tree Multifamily Manager LLC, Olive Tree Multifamily Manager II LLC, and Ian Bel through December 12, 2028.
Exhibits:
1. Rule Excerpts