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Presentation, discussion, and possible action regarding a Material Amendment to the Housing Tax Credit Application and 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 Athens Trails (HTC #24215)
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RECOMMENDED ACTION
recommendation
WHEREAS, Athens Trails (Development) received an award of 9% Housing Tax Credits (HTCs) in 2024 for the new construction of 57 multifamily units for the elderly in Athens, Henderson County;
WHEREAS, Athens Trails, LP (Applicant) requests approval for a 10.53% reduction in the number of units from 57 to 51 units, with a decrease of six one-bedroom units;
WHEREAS, this change would result in a revision to the rent and income restrictions from five units at 30% Area Median Income (AMI), 12 units at 50% AMI, and 40 units at 60% AMI to three units at 30% AMI, eight units at 50% AMI, and 40 units at 60% AMI;
WHEREAS, the elimination of the six units would result in a 9.14%, or 3,894 square feet, reduction in the Net Rentable Area, from 42,582 square feet to 38,688 square feet;
WHEREAS, the change would result in a 10.53% decrease in the residential density, going from 23.04 units per acre to 20.61 units per acre;
WHEREAS, there will also be a 5.54% reduction to the Common Area, from 10,100 to 9,540 square feet;
WHEREAS, Board approval is required for a reduction to the number of units or bedroom mix of units, a significant modification of the site plan, a reduction of 3% or more in the square footage of the units and common areas, a significant modification of the architectural design of the Development, and a modification of the residential density of at least 5% as directed in 10 TAC §10.405(a)(4)(A), (B), (D), (E), and (F), and in Tex. Gov’t Code §2306.6712(d)(1), (2), (4), (5), and (6), and the Applicant has complied with the amendment requirements therein;
WHEREAS, the requested changes do not negatively affect the Development or negatively impact the viability of the transaction and would not have adversely affected the selection of the Application or affect the HTC amount awarded;
WHEREAS, after receiving its award, the Development Owner 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 Owner has 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 Development, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred;
NOW, therefore, it is hereby
RESOLVED, that the requested amendment for Athens Trails is approved as presented at this meeting, and the Executive Director and his designees are each authorized, directed, and empowered to take all necessary action to effectuate the foregoing; and
FURTHER 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 Development.
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BACKGROUND
Athens Trails was approved for a 9% HTC award in 2024 for the construction of 57 units, of which all are designated as low-income units, of multifamily housing for the elderly in Athens, Henderson County. In a letter as of August 25, 2025, Bronte Bejarano, the representative of the Applicant, requested approval for a material amendment to the Application to preserve the feasibility of the Development.
The Applicant requests approval for a 10.53% reduction in the number of units from 57 to 51 units, which will decrease the one-bedroom units by six, from 30 to 24, while maintaining the proposed number of two-bedroom units at 27. This change would result in a revision to the rent and income restrictions from five units at 30% AMI, 12 units at 50% AMI, and 40 units at 60% AMI to three units at 30% AMI, eight units at 50% AMI, and 40 units at 60% AMI. This change will also result in a reduction of 3,894 square feet (9.14%) in the Net Rentable Area, from 42,582 square feet to 38,688 square feet and a 10.53% reduction to the residential density from 23.04 units per acre to 20.61 units per acre. There will also be a reduction of 560 square feet (5.54%) to the Common Area, from 10,100 square feet to 9,540 square feet. Additionally, the number of parking spaces will decrease from 113 to 96 to correspond to the unit reduction and will remain in compliance with the requirements of the City of Athens.
The Applicant indicated that this request is the result of a decrease in the proposed purchase price of the tax credits from an initial rate of $0.84 per credit to $0.73 per credit due to credit pricing being negatively impacted by speculation of a proposed reduction to the corporate tax rates. This results in a potential 13.10% equity loss. The Applicant also anticipates an increase in the permanent loan interest rate from 6.75% to 7.50%. In addition to the drop in equity pricing and increase in interest rates, construction cost increased after the Application was submitted.
The Applicant stated it was not possible to retain feasibility without reducing the number of units. After extensive analysis, a reduction from 57 units to 51 units in combination with the other amendments allowed the property to be feasible and meet underwriting thresholds. In accordance with 10 TAC §10.405(a)(7)(A)(ii), the Applicant provided a letter from the syndicator and lender confirming that the Development would not be financially feasible without the proposed changes.
Staff confirmed that the revised design plans and parking would continue to meet accessibility requirements. Additionally, staff reviewed the original Application and scoring documentation against this amendment request and concluded that the reduction to the number of units would have resulted in the loss of points. However, the loss of these points would not have affected the selection of the Development for an award in the competitive round. The Development was re-underwritten with the proposed amendment and revised financial information. The analysis supports no change to the HTC allocation and demonstrates the Development remains feasible.
Staff recommends approval of the requested material amendment to the Application.
FORCE MAJEURE BACKGROUND
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Development |
Athens Trails |
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Target Population |
Elderly |
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HTC Award |
$1,262,000 |
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City |
Athens |
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Total Units |
57 |
|
HTC Units |
57 |
|
Initial Year of Award |
2024 |
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Extension Requested |
Six months |
Athens Trails is a 57-unit development located in Athens, Henderson County. The development received an award of 9% Housing Tax Credits in 2024. As a result, the current deadline to place in service in December 31, 2026.
Since its initial award, the Application has experienced disruptions caused by rising construction costs, fluctuations in equity pricing, and increasing interest rates. At the time of the initial Application, the Owner anticipated equity pricing of $0.84; however, this has since fallen to $0.73. In addition, the interest rate on the permanent loan was expected to be 6.75% but has risen to 7.5%. These changes have rendered the Development financially infeasible. The material amendment included in this item is necessary for the Development to be feasible.
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 this request and determined that construction cost increases, equity pricing fluctuations, and rising interest rates constitute a force majeure event under the rules.
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, 2026.
• The new placed in service deadline will be December 31, 2027.
If the Board denies the request:
• The current 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.
This request has no impact on any funding source other than the Low Income Housing Tax Credit program.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Athens Trails under the force majeure provisions of 10 TAC §11.6(5).