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Presentation, discussion, and possible action on a loan request 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 930 Military Parkway
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RECOMMENDED ACTION
recommendation
WHEREAS, the above listed development was awarded 9% housing tax credits during the 2024 competitive Application round;
WHEREAS, 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 Developer applied for additional funds under the Department’s 2025-1 National Housing Trust Fund (NHTF) Notice of Funding Availability;
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);
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred; and
WHEREAS, the Department is now recommending approval of a loan in the amount of $4,000,000, with proposed loan terms and details concerning the Development’s financials outlined below;
NOW, therefore, it is hereby
RESOLVED, that the that loan of $4,000,000 of NHTF to 930 Military Parkway is approved, subject to conditions that may be applicable as found in the Real Estate Analysis Underwriting Report attached to this Board Action Request, any HUD required environmental conditions, and the conditions as outlined herein; 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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LOAN BACKGROUND
Development Information: 930 Military Parkway is to be located in Mesquite, Dallas County, and proposes the new construction of 111 units that will serve the general population. The Development will serve households with incomes at or below 30% to 80% of Area Median Family Income (AMFI), and will also include 16 market-rate units.
The Development was initially proposed to have nine 30% AMFI units in its 2024 9% housing tax credit Application. As a result of this loan and a related amendment that is also being presented for approval at this meeting, 10 additional units will be converted to 30% AMFI. These deeply affordable units are critically needed and difficult to produce.
Financial Information: The Department’s $4,000,000 NHTF loan is to be structured as fully repayable at 2.00% interest and is in second-lien position.
The Development was initially awarded $2,000,000 in housing tax credits in 2024. Since the last underwriting, total building costs have decreased by $187,000, and total development costs have increased by $3.1 million, bringing the current total development cost to approximately $36 million. The biggest contributing factor to this increase was the site work costs, which increased by $2.64 million. The interest rate on the permanent loan has risen from 5.25% to 5.75%, and credit pricing has decreased from $0.91 to $0.88. The Department’s NHTF loan will partially replace the permanent loan. This lower interest rate will help maintain the financial feasibility of the development while supporting deeper affordability than originally proposed. Annual debt service on the loan will be $159,006.
The funds from this loan are sourced from the Department’s 2023 NHTF grant, which has a federal commitment deadline of August 3, 2025. Notwithstanding any other deadline established by rule, the Borrower must submit all required due diligence and provide timely comments on the draft NHTF Contract to ensure execution of the Contract by both parties no later than July 30, 2025. Failure to meet this deadline may result in termination of the award, which will not be appealable to the Board of Directors if the Department no longer has access to the 2023 NHTF funds. The Borrower may also be subject to penalties under 10 TAC §13.11(b).
FORCE MAJEURE BACKGROUND
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Development |
930 Military Parkway |
|
Target Population |
General |
|
HTC Award |
$2,000,000 |
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City |
Mesquite |
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Total Units |
111 |
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HTC Units |
95 |
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Initial Year of Award |
2024 |
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Extension Requested |
Six months |
930 Military Parkway is a 111-unit development located in Mesquite, Dallas County. The development received an award of 9% Housing Tax Credits in 2024 and executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
Since the Application was initially filed, unforeseen increases in construction costs and persistently high interest rates have created a $4 million financing gap, requiring the Developer to pursue additional funding through TDHCA’s 2025-1 MFDL NOFA. The need for federal funds has introduced delays that could not have been reasonably mitigated by the Developer. Closing is projected for August 21, 2025, with construction completion anticipated in January 2027.
The Applicant asserts that these delays were unforeseeable and materially impede construction progress. A six-month extension to the placed-in-service deadline (to June 30, 2027) and an extension of the 10% Test deadline (to December 31, 2025) are requested under the QAP’s force majeure provision to maintain project feasibility and secure investor commitments.
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 the request and determined that the delays caused by the Development’s funding gap meet the criteria of a force majeure event under the rule.
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 December 31, 2025.
• The new placed-in-service deadline will be June 30, 2027.
If the Board denies the request:
• The original 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 does not change any deadline for 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 930 Military Parkway under the force majeure provisions of 10 TAC §11.6(5).