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Presentation, discussion, and possible action regarding the Issuance of a Multifamily Housing Governmental Note (The Legacy on Kiest) Series 2025, Resolution No. 25-022, and a Determination Notice of Housing Tax Credits
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RECOMMENDED ACTION
recommendation
WHEREAS, the Board adopted an inducement resolution for The Legacy on Kiest at the Board meeting of April 11, 2024;
WHEREAS, an application for The Legacy on Kiest requesting 4% Housing Tax Credits, sponsored by DHFC The Legacy on Kiest GP, LLC and the Dallas Housing Finance Corporation, was submitted to the Department on March 5, 2025;
WHEREAS, in lieu of a Certification of Reservation, a Carryforward Designation Certificate from the Texas Bond Review Board (BRB) was issued on January 6, 2025, and will expire on December 31, 2027; and
WHEREAS, staff recommends approval of the issuance of a Multifamily Housing Governmental Note for The Legacy on Kiest (Series 2025), and the issuance of a Determination Notice;
NOW, therefore, it is hereby
RESOLVED, that the issuance of a Multifamily Housing Governmental Note (The Legacy on Kiest) Series 2025 in the amount of $30,000,000, Resolution No. 25-022, is hereby approved in the form presented to this meeting;
FURTHER RESOLVED, the issuance of a Determination Notice of $2,509,813 in 4% Housing Tax Credits for The Legacy on Kiest, subject to underwriting conditions that may be applicable as found in the Real Estate Analysis report posted to the Department’s website, is hereby approved in the form presented to this meeting; and
FURTHER RESOLVED, that if approved, staff is authorized, empowered, and directed, for and on behalf of the Department to execute such documents, instruments and writings and perform such acts and deeds as may be necessary to effectuate the foregoing.
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BACKGROUND
General Information: The Multifamily Housing Governmental Note will be issued in accordance with Tex. Gov’t Code §2306.353 et seq., which authorizes the Department to issue governmental notes for its public purposes, as defined therein. Tex. Gov’t Code §2306.472 provides that the Department’s multifamily housing governmental notes are solely obligations of the Department, and do not create an obligation, debt or liability of the State of Texas or a pledge or loan of faith, credit or taxing power of the State of Texas.
Development Information: The Legacy on Kiest is proposed to be located at 2621 Southerland Avenue in Dallas, Dallas County, and involves the new construction of 180 units that will serve the general population. A 2024 Traditional Carryforward designation was received from the Bond Review Board and the designation does not require any restrictions regarding the Area Median Family Income (AMFI), however, the application reflects that a Priority 2 designation has been elected, which requires at least 80% of the units within the development to have rents restricted to 60% of AMFI. The Priority 2 designation allows up to 20% of market-rate units. The application will adhere to the requirements of the priority designation, as it reflects that all the units will be rent- and income-restricted at 60% of AMFI.
Organizational Structure and Previous Participation: The Borrower is LDG The Legacy on Kiest, LP, and includes the entities and principals as illustrated in Exhibit A. The applicant’s portfolio is considered Previously Approved and was deemed acceptable.
Tax Equity and Fiscal Responsibility Act (TEFRA) Public Hearing/Public Comment: On March 18, 2022, the IRS released Revenue Procedure 2022-20, which permanently allows TEFRA hearings for qualified activity bonds to be held telephonically. Staff conducted a telephonic hearing for the proposed development on April 24, 2025. Representatives from the Department and the Developer were present, and no public comment was made. A copy of the transcript is included herein. The Department has not received any letters of support or opposition for the development.
Summary of Financial Structure
Under the proposed structure, the Department will issue an unrated, fixed rate tax-exempt note in the principal amount of $30,000,000, that will be purchased by Community Housing Investment Partners II, LP, as facilitated by R4 Capital Funding, LLC (R4). The interest rate will be fixed at closing and will be the greater of (i) the sum of (A) 1.50%, and (B) the 10-year Treasury Security, published by Thomson Reuters on the date of determination, or (ii) 5.50%, subject to adjustment as described in the Funding Loan Agreement. For purpose of underwriting, a rate of 6.14% was used. The loan will have a 60-month interest only period.
At stabilization, the permanent loan is anticipated to be in the amount of $25,131,000 with a 16-year term, 40-year amortization, and a maturity date 40 years after closing, approximately July 1, 2065. R4 Capital will also provide a taxable construction loan in the amount of $8,500,000. The term of the taxable loan will be approximately 60 months and the interest rate will be based upon the three-year Treasury Security as published by Thomson Reuters, plus a spread of 2.50%, estimated at the time of underwriting to be 6.85%.
A loan in the amount of $1,500,000 from the Dallas Housing Finance Corporation has been requested. The interest rate is anticipated to be 5.00% with a 30-year term. The loan will be repaid from available cash flow.
In addition, Rickhaus Design, LLC, an affiliate of the applicant, will provide a forgivable loan in the amount of $1,500,000. The loan will have a 30-year term and interest rate of 6.00%.