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Presentation, discussion, and possible action regarding a request for a Multifamily Direct Loan assumption, modification, and re-subordination for Timbers Edge Apartments (TCAP #13090009753)
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RECOMMENDED ACTION
recommendation
WHEREAS, in 2008, the Texas Department of Housing and Community Affairs (the Department) awarded housing tax credits (HTC #08416) to Timbers Edge Apartments (the Development), and in 2010, two rounds of Tax Credit Assistance Program (TCAP) funds were awarded, as cash flow, forgivable loans, in the amounts of $3,409,016 and $618,990, for a total of $4,028,006 under the TCAP Tax Credit Replacement Initiative for the acquisition and rehabilitation of 150 multifamily units in Beaumont, Jefferson County;
WHEREAS, on May 11, 2023, the Board approved the request by Beaumont Timbers Edge, LP (Current Owner) to assume the TCAP loans, to re-subordinate the TCAP loans to new debt, and the modification of the TCAP loans from forgivable to non-forgivable, with the payment schedule changing from semi-annual to a balloon payment at maturity on September 1, 2026 with the intention to subsequently re-syndicate the Development using 4% Housing Tax Credits (HTCs), tax exempt bonds, and other resources;
WHEREAS, Beaumont Timbers Edge I, LP (Applicant), an affiliate of the Current Owner, received a reservation for bonds to be issued by a local issuer, allowing for the submission of a 4% HTC application (HTC #26423/25452) to the Department;
WHEREAS, the Applicant is requesting approval to assume the TCAP loans and requesting that the loans be modified to extend the maturity from September 1, 2026, to no later than February 16, 2052, which is 40 years from when the permanent period started for these loans, to include annual cash flow payments with a balloon payment for the balance due at maturity with a proposed paydown of $50,000 at closing;
WHEREAS, as part of this assumption and modification, the TCAP loans will be resubordinated to the new first lien debt, and the TCAP Land Use Restriction Agreement (LURA) and Written Agreement will be amended to reflect a longer term to match that of the loans and to state that the TCAP LURA will survive a foreclosure or deed in lieu of foreclosure; and
WHEREAS, Board approval is required for the assumption, re-subordination, and modification of the TCAP loan because the proposed transaction does not meet the conditions in 10 TAC §13.13(c)(2)(D) and (d)(2)(B) for Executive Director approval;
NOW, therefore, it is hereby
RESOLVED, that the request for the Applicant to assume and re-subordinate the TCAP loans and Written Agreement, to modify the TCAP loans to extend the maturity date to no later than February 16, 2052, and change the payment terms to annual cash flow payments with a balloon payment for the balance due at maturity is approved, as well as all other modifications to the loan and contract documents as presented at this meeting, and the Executive Director and his designees are hereby authorized, empowered, and directed to take all necessary action to effectuate the foregoing; and
FURTHER RESOLVED, the TCAP LURA and Written Agreement will be amended to reflect a longer term to match that of the TCAP loans, and the Written Agreement and the TCAP LURA will be amended to state that this agreement will survive a foreclosure or deed in lieu of foreclosure.
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BACKGROUND
Timbers Edge Apartments received an award of housing tax credits in 2008 and two TCAP awards in 2010 for the acquisition and rehabilitation of 150 multifamily units in Beaumont, Jefferson County. All 150 of the units in the Development are income and rent restricted. The TCAP funds were awarded in the form of two loans in the amounts of $3,409,016 (loan #09753) and $618,990 (loan #09753B), for a total loan amount of $4,028,006. The TCAP loans were structured as cash-flow loans with a 0% interest rate and were forgivable upon maturity on September 1, 2026, if the borrower was not in default under any terms of the loan documents, written agreement, or the Land Use Restriction Agreement. Thirty semi-annual installments of $113,633.87 and $20,633 were due March 1st and September 1st, with the first payments beginning March 1, 2012, and continuing until September 1, 2026, when the loans were to mature. The Notes allowed the scheduled payments to be deferred based on a calculation of 10% of cash flow multiplied by a percentage of the TCAP Note. Prior to maturity, upon the sale of the Development or upon the refinance of any loans held by the senior lender or any other superior lienholder during the term of the loans, 10% of the remaining sale proceeds after repayment of the senior loans or 10% of the refinancing proceeds would be due and payable under the Notes and applied to the outstanding principal balance.
On May 11, 2023, the Board approved a request from Christopher A. Akbari, the representative for Beaumont Timbers Edge, LP, to assume, re-subordinate, and modify the TCAP loans. The modification included converting the loans from forgivable to non-forgivable and adjusting the payment schedule from semi-annual to a balloon payment due at maturity on September 1, 2026. The intention was to rehabilitate the property using 4% Housing Tax Credits, tax-exempt bonds, and other resources. At the time of re-syndication, the TCAP loans would be paid in full.
In a letter dated March 31, 2026, Christopher A. Akbari, the representative for Beaumont Timbers Edge I, LP (Applicant) requested approval for the TCAP loans to be assumed, modified, and re-subordinated. The requested modification of the TCAP loans is to extend the maturity date to no later than February 16, 2052, which is 40 years from when the permanent period started for these loans, and changing to annual cash flow payments and a balloon payment for the balance due at maturity. The Applicant is also requesting approval to transfer the ownership from the Current Owner to the Applicant, but that approval will be processed as part of the new 4% HTC award, separately from this request.
The Applicant states that they are continuing with their financing plan, have received a bond reservation, and have submitted a 4% HTC application to the Department. Unfortunately, current market conditions are different than the 2023 proposed plan. The adjusted financing plan is largely due to lower tax credit pricing as a result of capital exiting and uncertainty in the market going forward. The scope of work and cost for the rehabilitation are higher than originally anticipated to provide the quality and extension of the useful life of the Development. To support the cost of the rehabilitation, the capital stack now includes a HUD 221(d)(4) loan, tax credit equity, deferred developer fee, NOI during construction, and a seller note.
The Development was re-underwritten based on the proposed modification and revised financial information submitted with the new 4% HTC application. To comply with 10 TAC §13.13, the Applicant has proposed a $50,000 paydown of the TCAP debt at closing, which will result in a total TCAP loan balance of $3,690,698. The financial analysis indicates the Development is feasible with the proposed modification.
Staff recommends approval of the requested assumption and re-subordination of the TCAP loans and written agreement and the modification of the TCAP loans to extend the maturity date to no later than February 16, 2052, and revise the payment terms to annual cash flow payments out of 75% of annual cash flow as defined by HUD with the balance of the loans due at maturity. The LURA and Written Agreement will be amended to reflect a longer term to match that of the TCAP loans, and the TCAP LURA will be amended to state that this agreement will survive a foreclosure or deed in lieu of foreclosure.