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Presentation, discussion, and possible action on pre-applications received for consideration of an Inducement Resolution for Multifamily Housing Revenue Bonds to be issued by the Department
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RECOMMENDED ACTION
recommendation
WHEREAS, two pre-applications, sponsored by RISE Residential, LLC and as further detailed below, were submitted to the Department for consideration of an inducement resolution;
WHEREAS, Board approval of the inducement resolution is the first step in the application process for a multifamily bond issuance by the Department; and
WHEREAS, based on concerns as further noted herein staff recommends that the request for an inducement resolution be denied.
NOW, therefore, it is hereby
RESOLVED, that based on the information provided herein, staff recommends the request for an inducement resolution be denied.
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BACKGROUND
On September 5, 2024, the Department received two pre-applications from RISE Residential, LLC requesting an inducement resolution. Seaport Village, reportedly to involve the reconstruction of 192 units in Galveston, Galveston County, submitted a request for $25,000,000 private activity bonds and Sienna Villas, involving the rehabilitation of 144 units in Freeport, Brazoria County, submitted a request for $15,000,000 in private activity bonds.
The previous agenda item identified concerns relating to the Legacy Riverside Seniors transaction, a development for which the Department was the bond issuer and of which RISE Residential is involved. The Board write-up for the Murdeaux Villas agenda item also noted that RISE Residential was involved in that transaction; however, RISE has since exited. As staff was evaluating those requests for a supplemental bond allocation, the Seaport Village and Sienna Villas pre-applications were submitted. On September 5, 2024, RISE also submitted requests for the Department to issue supplemental bonds for two 4% Housing Tax Credit applications where the bonds were originally issued by Strategic Housing Finance Corporation, a local issuer. These developments are Austin Manor Apartment Homes and Lakeway Apartment Homes and are important to the request associated with this agenda item.
Considering the review that was ongoing relative to the Legacy Riverside transaction, and considering the new supplemental requests received, staff reviewed construction status reports associated with the Austin Manor and Lakeway developments and discovered similarities in construction timing relative to Legacy Riverside. Austin Manor closed in January 2020 and was identified in the Construction Status Report to be 55% complete. Lakeway Apartment homes closed in July 2019 and identified in the Construction Status Report to be 55% complete. There have been change orders for Austin Manor that total approximately $12.4M and change orders on the Lakeway development that total approximately $9.5M. Some of the concerns noted in the submitted third-party inspection reports include commentary relating to change orders of this magnitude being atypical in the industry, overall slow progress during site visits, along with comments relating to certain line items being 100% drawn (i.e. general contractor fee, overhead and general conditions), despite only being 55% complete.
In evaluating all the information available to the Department and considering these facts, staff does not recommend that the Department proceed with an intent to issue $40,000,000 from its set-aside for the Seaport Village and Sienna Villas developments.