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Presentation, discussion, and possible action regarding an extension of the development period for Grim Hotel
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RECOMMENDED ACTION
recommendation
WHEREAS, Grim Hotel executed a contract for $4,000,000 in Neighborhood Stabilization Program (NSP) funds on October 25, 2019;
WHEREAS, that contract and a subsequent extension approved by the Board allowed for a Development Period that extended to April 27, 2025;
WHEREAS, construction has completed, and the project is approximately 60% occupied, and the Owner has requested the Department to consent to a six-month extension for the maturity of its bonds;
WHEREAS, the specific subordination agreement that was signed with the Development’s permanent lender requires that the bonds mature during the Department’s Development Period for its NSP loan, and therefore that Period would need to be extended in order to consent to the extension of the maturity date for the bonds; and
WHEREAS, Board approval is necessary to extend the Development Period an additional six months, and such approval would not delay housing for persons in need or otherwise modify the Department’s loan;
NOW, therefore, it is hereby
RESOLVED, that the extension of the Development Period for Grim Hotel is hereby approved.
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BACKGROUND
Grim Hotel received a loan of $4,000,000 in NSP funding in 2019 for the conversion of an existing hotel in Texarkana to 93 Units of affordable housing. The loan is fully repayable at 2.00% interest. The Development’s financing also includes bonds from a local issuer. The Development has completed construction and is currently in the process of reaching full occupancy. Current occupancy is approximately 60%.
The Developer has requested that the Department consent to a six-month extension for the bond maturity date to allow for the property to fully stabilize financially. Such a request would typically be handled administratively by staff, but this is not possible in this case without the Board approving an extension of the Development Period for the NSP loan. The Department’s loan must be in first-lien position during the permanent period, which begins after the Development Period ends. The Department’s loan cannot be in first-lien position while the bonds are outstanding, and therefore, if the bonds have not matured, then the NSP Development Period cannot end. The NSP Program does not have the same federal project completion and expenditure deadlines as HOME and NHTF, so there is no increased federal liability associated with this extension, although it delays the start of the NSP federal affordability period.
The Development has completed construction and is in the process of leasing up, so this approval does not cause the delay of housing for Texans in need. The approval would delay the start of the loan’s repayment by six months, but all other loan terms would remain the same. Staff recommends approval.