- Dallas Ultraground
- Posts
- Dallas | 364-Unit LIHTC Multifamily
Dallas | 364-Unit LIHTC Multifamily
1/22/25 | The Culbreath
Welcome to Ultraground. We send you data from discussions and pro formas.
CC January 22, 2025 - CC October 23, 2024
District: 7 | Southeast Dallas
364-Unit LIHTC Multifamily | 2770 Bethurum Ave | Approved
You saved: 8h 59m, 8h 12m
DISTRICT: 7
The Culbreath 2770 Bethurum Ave
Southeast Dallas | 44.04 Acres | 364 Units | Approved
City Council 1/22/25
Bonds | Approved
Approved with no discussion.
DHFC 1/14/25
4% Res | Approved
Council Member Adam Bazaldua noted this 364-unit deal would be his first LIHTC approval in District 7, breaking from his previous stance against such projects due to concerns about concentrated poverty. He supported this exception because "this is a very unique property" that will create "a true mixed-income community." The development will begin with senior affordable housing and later include single-family homes for purchase.
‟I wasn't a fan of this. This will be the first LIHTC project that I've approved in District Seven since I've been on Council. And that was intentional because of the concentration of poverty that we have already built from reasons of our past. However, this is a very unique property... We have the opportunity for a true mixed-income community. And this is going to be senior living... This will also have a mix of dwelling types, including single-family structures for purchase for homeownership.
City Council 9/25/24
Resolution of No Objection 4% | Postponed
The Culbreath, a 364-unit senior affordable housing deal in southeast Dallas, faced unexpected scrutiny at a City Council hearing on September 25, 2024. The discussion revealed a complex interplay between innovative financing and community concerns.
Council Member Adam Bazaldua moved to postpone the deal, citing a need for community input to "weigh in."
‟But when we're talking about a LIHTC property that's coming into anyone's community, I need to give my—I mean, with any zoning case, really, but specifically with a property in a district with a history of having a proliferation of them and a concentration of poverty. There has to be due diligence, and there has to be an opportunity for my community to weigh in.
Adding another layer to the discussion, Council Member King Arnold sought clarification on the project's naming, asking:
‟Who's doing the naming of this project?
Arnold learned that the development was named after Betty Culbreath, the current Dallas Housing Authority (DHA) Board Chair, confirming it wasn't a city decision.
The project's representative, Deborah Whelchel from VOANS, emphasized the time-sensitive nature of the application, noting a February 10th deadline for closing on a $50 million bond reservation. However, this urgency did not sway the Council’s desire for more community engagement. The Council voted to delay the decision until October 23, 2024.
Funding Source | Amount | Terms |
|---|---|---|
Tax-Exempt Bonds | $43,500,000 | 3.25% for 48 months |
Freddie Mac Forward Tax-Exempt Loan | $33,071,000 | 6.15% for 17 years, 40-year amortization |
Low Income Housing Tax Credit Equity | $33,762,934 | $0.92 per credit |
Amegy Bank Construction Loan | $45,800,000 | 7.85% for 24 months |
LISC Subordinate Loan | $3,000,000 | 4.5% for 18 years |
Dallas Housing Authority Loan | $12,000,000 | 0.5% for 50 years |
VOANS/Capital Magnet Fund Loan | $1,000,000 | 5% for 40 years |
Federal Home Loan Bank AHP Grant | $2,000,000 | Grant (no repayment) |
Reinvested Bond Proceeds | $5,183,750 | N/A |
Deferred Developer Fee | $3,731,024 | To be paid from cash flow |
The $93,748,707 deal showcases a sophisticated financing structure rarely seen in typical affordable housing deals. At its core is a $43,500,000 tax-exempt bond issuance at 3.25% for 48 months, utilizing a cash-collateralized mechanism. This structure helps meet the 50% test for 4% Low Income Housing Tax Credits while potentially lowering construction period interest costs.
The permanent financing relies on a $33,071,000 Freddie Mac Forward Tax-Exempt Loan at 6.15% for 17 years with a 40-year amortization. This is complemented by $33,762,934 in Low Income Housing Tax Credit equity, priced at $0.92 per credit. During construction, the project will use a $45,800,000 loan from Amegy Bank at 7.85% for 24 months.
The financing structure uses a 'cash-collateralized' bond mechanism, with $43,500,000 in short-term tax-exempt bonds to be retired at conversion. This approach maximizes tax credit basis and potentially lowers interest costs during construction. Let’s break it down:
Cash-Collateralized Short-Term Bond Structure
Financing structure used in some affordable housing deals, particularly those utilizing 4% Low Income Housing Tax Credits.
Here's a brief explanation:
Short-term tax-exempt bonds are issued, in this case $43,500,000.
These bonds are fully backed by cash or cash equivalents, typically held by a trustee.
During construction, as the developer draws on the taxable construction loan (here, the $45,800,000 from Amegy Bank), an equal amount of bond proceeds is released to pay for project costs.
This structure allows the project to meet the "50% test" required for 4% tax credits, where at least 50% of the project's aggregate basis must be financed by tax-exempt bonds.
The bonds are typically held for a short period (often 2-3 years) and then repaid when the project converts to permanent financing.
This mechanism can provide several benefits:
It may result in a lower overall interest rate during construction.
It can increase the project's eligible basis for tax credits.
It allows the use of a conventional construction loan while still accessing tax-exempt bond financing.
In The Culbreath's case, this structure is enabling them to maximize their tax credit equity while using a conventional construction loan, contributing to the project's complex but effective financing strategy.
The deal's complexity is further evident in its layered subordinate financing. This includes a $3,000,000 loan from LISC at 4.5% for 18 years, $12,000,000 from DHA at 0.5% for 50 years, and $1,000,000 from Volunteers of America National Services (VOANS) via the Capital Magnet Fund at 5% for 40 years. A $2,000,000 Federal Home Loan Bank Affordable Housing Program grant, $5,183,750 from reinvested bond proceeds, and $3,731,024 in deferred developer fees round out the capital stack.
Beyond the financial structure, the project incorporates 37 public housing units with operating subsidies and 150 project-based vouchers. This approach allows 327 of the 364 units (90%) to be affordable at or below 60% AMI, demonstrating a significant commitment to deep affordability
U/ Finance
Developer: Volunteers of America National Services (VOANS), Deborah Welchel Phone: (512) 671-0000 Email: [email protected] LinkedIn
10/23/24 Case Report: The Culbreath SR
Case Report: The Culbreath SR
Pro Forma: The Culbreath PF
Project Plans: The Culbreath Plan
Thank you for being a part of Ultraground.
How was this report? |