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Presentation, discussion, and possible action related an amendment of the loan terms for Manson Place (22503)
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RECOMMENDED ACTION
recommendation
WHEREAS, Manson Place is a 76-unit development in Houston, Harris County, that has previously been awarded 9% Housing Tax Credits and a $4,000,000 loan of National Housing Trust Fund (NHTF), which is structured as partially amortizing and partially deferred payable at an interest rate of 0.5%;
WHEREAS, the Department’s loan is in second-lien position, and the borrower has requested to increase the first-lien loan by approximately $3,700,000, while simultaneously eliminating the third-lien loan;
WHEREAS, this structure is not prohibited by the rules, but does require Board approval in accordance with 10 TAC §13.12(c), as more debt is being added ahead of the Department’s loan;
WHEREAS, the Real Estate Analysis Division has not evaluated this proposed structure, and the Board’s approval on this item would be conditioned upon the successful underwriting of the proposed structure in accordance with program rules; and
WHEREAS, the Department is in the process of closing on its loan, and this approval is necessary to complete that process.
NOW, therefore, it is hereby
RESOLVED, the amendment of the loan terms for Manson Place is hereby approved, conditioned upon successful underwriting of the proposed financing structure.
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BACKGROUND
Manson Place is a 2021 9% Housing Tax Credit recipient that has since received supplemental Housing Tax Credits and has been approved for $4,000,000 National Housing Trust Fund loan. The loan is structured as partially amortizing and partially deferred-payable with a 0.5% interest rate, as was allowed in the 2022-1 Notice of Funding Availability from which the funds were sourced.
The Department’s loan is in second-lien position, and the current underwriting includes first and third-lien loan that are both administered by Amegy Bank. The first-lien loan is $7,100,000, and the third-lien loan is $3,700,000, as is outlined in the Real Estate Analysis Report attached to this item. This ordering is determined by Department rules, which require that the NHTF loan be ahead of any smaller source of funding. The Department is preparing to close on its loan, and the Applicant has requested to combine the first and third-lien loans into a single source of funding, with a single deed of trust and subordination agreement. This would result in a first-lien loan of approximately $10,800,000, while the NHTF loan would remain in second position.
Department rules do not prohibit this change, and it would have been allowed at initial Application; however, as the Board previously approved the award with $7,100,000 of debt ahead of the NHTF loan, approval is required to proceed with putting additional funds ahead of ours.
The Department’s Real Estate Analysis Division has not underwritten the proposed change. If the Board approves this request, it will be conditioned upon the successful completion of underwriting and meeting all financial feasibility rules using the proposed structure. Should the Development not underwrite as proposed, the Department will not move forward with closing the loan as proposed.
Staff recommends approval of this request.