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Presentation, discussion, and possible action regarding a Material Amendment to the Housing Tax Credit Application, changes to the ownership structure, and waiver of §11.101(b)(1)(A)(vii) of the 2023 Qualified Allocation Plan for Cabana Design District (HTC #23100)
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RECOMMENDED ACTION
recommendation
WHEREAS, Cabana Design District (the Development) received an award of 9% Housing Tax Credits (HTCs) for the adaptive re-use of a former hotel into 160 multifamily units, of which 64 are low-income units, in Dallas, Dallas County;
WHEREAS, Cabana Design District LP (the Development Owner or Owner) requests approval for a material amendment to the Application for an increase to the number of units from 160 to 175, with the number of low-income units increasing from 64 to 70;
WHEREAS, Board approval is required for a modification of the number of units or bedroom mix of units, a significant modification of the architectural design of the Development, and for a modification of the residential density of at least 5%, as directed in Tex. Gov’t Code §2306.6712(d)(2), (5), and (6) and 10 TAC §10.405(a)(4)(B), (E), and (F), and the Owner has complied with the amendment requirements therein;
WHEREAS, Board approval is required for a waiver of §11.101(b)(1)(A)(vii) of the 2023 Qualified Allocation Plan (QAP), as the revised unit mix proposed by the Owner includes more than 30% efficiency and/or one-bedroom units;
WHEREAS, the Owner also requests approval for a change to the ownership structure involving the replacement of SSFP Cabana Design District LLC (49% interest), one of the members of the general partner, with Hunt Capital Partners, LLC (39.5% Interest), Cabana HCP, LLC (10.5% interest) and Finn Architecture and Design LLC (10.5% interest), while Sycamore Strategies, LLC (39.5% interest) will remain as a member and manager of the general partner;
WHEREAS, the Owner also requests approval for a change involving the Developer, as SSFD Cabana Design District Developer LLC will be replaced by Hunt Capital Partners, LLC;
WHEREAS, Stuart Shaw Family Partnership, LLC will be replaced by Sycamore Strategies, LLC and Hunt Capital Partners, LLC as Guarantors;
WHEREAS, Board approval of this amendment does not constitute a waiver of any of the other rules or statutes applicable to the 2023 HTC Application, including but not limited to the accessibility requirements stated in Chapter 1, Subchapter B; and
WHEREAS, the requested changes do not negatively affect the Development, impact the viability of the transaction, impact the scoring of the Application, or change the amount of the tax credits awarded;
NOW, therefore, it is hereby
RESOLVED, that the requested amendment to the Application, changes to the ownership structure subject to completion and clearance of the previous participation review, and waiver of §11.101(b)(1)(A)(vii) of the 2023 Qualified Allocation Plan for Cabana Design District are approved as presented at this meeting, and the Executive Director and his designees are each hereby authorized, directed, and empowered to take all necessary action to effectuate the foregoing.
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BACKGROUND
Cabana Design District received a 9% HTC award in 2023 for the adaptive reuse of a former hotel and later corrections facility into 160 units in Dallas, Dallas County. In a letter dated May 24, 2024, Jess Krochtengel, representative for the Owner, requested approval for an increase to the total number of units from 160 to 175. The amendment request letter states that, after award, the Owner was able to do laser scanning and modeling of the structure, and once this data was incorporated, it was deemed necessary to include shear walls. These problems were not contemplated by the Owner at the time of application. The Owner and their engineer explained that it has been determined that the building needs the addition of shear walls to ensure the building’s stability for wind and seismic loads. The proposed walls will be grouted masonry walls with limited penetrations running from the basement up multiple floors in the tower. As a result, the addition of shear walls cuts through many of the two-bedroom units in the tower, which necessitates converting those units to one-bedroom units. Additionally, the engineer recommended to minimize penetrations through the existing floor slabs of the tower. These penetrations include utilities and stairs that are not already in existence. To comply with this recommendation, the developer will need to stack identical units for utilities and also eliminate the two-level lofted units within the existing tower levels. As a result, the unit mix would change from eight efficiency units, 40 one-bedroom units, 98 two-bedroom units, and 14 three-bedroom units to 21 efficiency units, 71 one-bedroom units, 74 two-bedroom units, and nine three-bedroom units. The Development elected to do average income, and will continue to have an average income under 54% for the low-income units. The number of market rate units is increasing from 96 to 105.
The proposed unit mix includes over 52% of the units as efficiency and one-bedroom units, and the Owner is requesting a waiver for the requirement in the 2023 QAP that states that Adaptive Reuse Developments may not propose more than 30% efficiency and/or one-bedroom units. The Owner pointed out that the QAP changed from 2023 to 2024 to exclude Historic Developments from this requirement.
The Development will include residential units in a historic structure and also include units in a parking garage that is not historic. The Owner’s original plan was to demolish a portion of the existing parking garage and reconstruct new units in that portion. However, the Owner provided a letter as of June 7, 2024, from the National Park Service indicating that the Owner’s original plan to partially demolish the south portion of the parking garage would not meet the standards for the historic component of the Development, and as a result, the Owner had to redesign the unit mix in the parking garage to use existing elements.
The Owner states that granting the waiver regarding the number of efficiency and one-bedroom units will further the purposes of the Department under Tex. Gov’t Code §§2306.001, 2306.002, 2306.6701 by assisting the City of Dallas on the redevelopment of the Cabana Hotel, which is a goal of their Design District TIF Policy. The Owner also states that the Development is bringing low-income units into a submarket that does not have any affordable HTC units.
The increase in the number of units results in a 9.38% increase in the residential density, which will increase from 48.81 units per acre to 53.39 units per acre. This change in the number of units will result in an increase in net rentable area from 152,463 square feet at Application to 160,492 square feet, which is an increase of 5.27% or 8,029 square feet.
The Owner also requests approval for a change to the ownership structure and for changes to the Developer and Guarantor. SSFP Cabana Design District LLC (49% interest), one of the members of the general partner, will be replaced with Hunt Capital Partners, LLC (39.5% Interest), Cabana HCP, LLC (10.5% interest) and Finn Architecture and Design LLC (10.5% interest), while Sycamore Strategies, LLC (39.5% interest) will remain as a member and manager of the general partner. SSFD Cabana Design District Developer LLC will be replaced by Hunt Capital Partners, LLC in the structure of the Developer, and Sycamore Strategies, LLC and Hunt Capital Partners, LLC will replace Stuart Shaw Family Partnership, LLC as Guarantors.
The Owner provided updated financial information that has been analyzed by the Real Estate Analysis (REA) Division. REA’s analysis of the updated financial information indicates that the Development is still feasible, and continues to support the originally awarded HTC amount. Staff also determined that the proposed changes noted above would not have impacted the selection of the Application for an award, except for the requested waiver.
Staff recommends approval of the amendment request, changes to the ownership structure subject to completion and clearance of the previous participation review, and the waiver of §11.101(b)(1)(A)(vii) of the 2023 Qualified Allocation Plan as presented herein.