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Dallas City Council
9/25/24 | Full Report
Welcome to Ultraground. We send you data from discussions and pro formas.
CC September 25, 2024
District: 11 | Far North Dallas
220-Unit Acqui-Rehab HFC | 13695 Goldmark Dr | Approved
Citywide
Forward Dallas Comprehensive Land Use Plan | Approved
District: 7 | Southeast Dallas
364-Unit LIHTC Multifamily | 2770 Bethurum Ave | Postponed
District: 5 | Southeast Dallas
5.75-Acre Mixed-use | 8702 Odom Dr | Approved
You saved: 8h 12m
DISTRICT: 11
Waterford at Goldmark 13695 Goldmark Dr
Far North Dallas | 4.87 Acres | 220 Units | Approved
April Housing, a Blackstone Subsidiary, is acquiring and renovating the property built in 1997. The Dallas City Council approved the Dallas Housing Finance Corporation to issue up to $31 million in tax-exempt bonds and The DHFC board unanimously approved final resolutions for the Waterford at Goldmark. The 220-unit acqui-rehab deal at 13695 Goldmark Drive, which received a tax credit reservation this year after applying last year, involves financing, acquisition, and substantial rehabilitation to the tune of $40,000 per unit.
MOU 10/8/24
Term | Waterford at Goldmark MOU, Pro Forma |
|---|---|
HFC/PFC MOU Date | 10/8/24 |
HFC/PFC Approved/Denied | Approved |
HFC/PFC Reasoning | Neutral/Questions: |
HFC/PFC Developer Fee/ One Time Fee/Structuring Fee | 25% of 15% of total development costs |
HFC/PFC Management/Administrative Fee | $50,000 annually (3% increase/year) + $20,000 annually (3% increase/year) + $1,500/year compliance fee |
Lease Payment to HFC/PFC | Equal to purchase price of Land |
HFC/PFC Commission on First Sale/Disposition Fee | 40% of net sales price or loan proceeds |
HFC/PFC Future Sale Commission/Disposition Fee | 40% of net sales price or loan proceeds |
Contingency | $1,319,185 |
Permanent Loan | Up to $31,000,000, ($26,514,560 in Tax Credit PF) |
LP Equity | $22,246,421 |
Construction Loan | $18,170,849 |
Total Financing | $59,790,780 |
Development Costs | $61,641,710 |
Project Budget | $61,641,710 |
Land Acquisition | $3,410,000 |
Soft Costs | $2,504,782 |
Developer Fees | 15% of total development costs, ($6,627,431 in PF) |
Deferred Developer Fee | $5,391,378 |
Hard Construction Costs | $16,542,574 |
Financing Fees | $9,759,572 |
Reserves | $1,062,352 |
Housing Tax Credits Equity | $22,246,421 |
The total development cost is $61,641,710. The backbone is a $26,514,560 permanent loan from PNC Multifamily/Fannie Mae, featuring a 5.60% interest rate and 40-year amortization. This is complemented by $22,246,421 in tax credit equity, based on $2,341,963 annual credits and a competitive $0.95 syndication rate. A $3,657,314 seller note from M N Goldmark Ltd, carrying a 7.25% interest rate over 55 years, adds another layer to the capital stack.
The renovation budget allocates $40,000 per unit, totaling $8,880,000 in hard costs. This includes $1,100,000 for new roofing and $3,400,000 for mechanical systems upgrades. Notably, $880,000 is set aside for tenant relocation during construction, demonstrating a commitment to resident welfare.
The project's financial structure includes $5,391,378 in deferred developer fees and $1,062,352 in new operating reserves. The absence of property taxes in the pro forma suggests a full tax exemption, a common feature for affordable housing owned by public facilities corporations in Texas.
The 15-year pro forma projects stable operations, with a first-year net operating income of $1,944,861 and a 1.15 debt coverage ratio, improving to 1.40 by year 15. An annual issuer fee of $26,514 to the Dallas Housing Finance Corporation is included in the ongoing expenses.
Council Member Jaynie Schultz's comment reflects the City's careful approach:
‟They've made incredible efforts toward this. They've done a really good job, and I'm very pleased with this.
This statement came after two deferrals, allowing the developer to address needed repairs before financial approval.
Developer: April Housing, Bradley Fisher Phone: (913) 787-1676 Email: [email protected] LinkedIn
Pro Forma: Waterford at Goldmark 8/18/24 PF
Case Report: Waterford at Goldmark SR
Project Plans: Waterford at Goldmark Plan
Two Pro Formas January → August 2024 | Waterford at Goldmark
How has this deal changed from January to August 2024?
This summary compares the financial structure of the Waterford at Goldmark at two points in time: January 22, 2024, based on a City of Dallas memo, and August 18, 2024, from an updated pro forma. It highlights key changes in costs and financing over this seven-month period, reflecting the evolution of the deal process.
Term | 1/22/24 | 8/18/24 |
|---|---|---|
Contingency | N/A | $1,319,185 |
Permanent Loan | $21,997,721 | $26,514,560 |
Housing Tax Credits Equity | $13,550,724 | $22,246,421 |
Construction Loan | N/A | $18,170,849 |
Development Costs | $52,259,996 | $61,641,710 |
Purchase Price | $27,500,000 | $27,500,000 |
Soft Costs | $1,266,500 | $2,504,782 |
Developer Fees | $5,033,154 | $6,627,431 |
Deferred Developer Fee | $4,528,010 | $5,391,378 |
Hard Construction Costs | $13,016,774 | $14,511,030 |
Financing Fees | $1,118,267 | $9,759,572 |
Reserves | $4,325,301 | $1,062,352 |
The total development cost increased from $52,259,996 to $61,641,710, a substantial rise of approximately $9.4 million. This increase is primarily reflected in two critical areas: debt and equity financing.
The permanent loan amount grew from $21,997,721 to $26,514,560, an increase of about $4.5 million.
More notably, the Low Income Housing Tax Credit (LIHTC) equity saw a dramatic increase from $13,550,724 to $22,246,421, a jump of roughly $8.7 million. This significant boost in tax credit equity is particularly important as it represents a substantial increase in non-debt financing. This could indicate either a more favorable tax credit allocation from TDHCA or improved pricing from investors, both of which are positive signals for the Dallas affordable housing market.
Hard construction costs increased modestly from $13,016,774 to $14,511,030, an uptick of about $1.5 million. While this increase is not insignificant, it's relatively small compared to the overall budget increase, suggesting that the project team has managed to contain construction cost escalation effectively.
The significant decrease in reserves - $4,325,301 in January to $1,062,352 in August -could be due to refined project planning, reallocation of funds to cover increased costs elsewhere, or changes in lender/investor requirements
Developer fees also saw an increase from $5,033,154 to $6,627,431, with a corresponding rise in deferred developer fees from $4,528,010 to $5,391,378. This increase in fees, particularly the portion that's deferred, demonstrates a willingness to align the developer's interests with the project's long-term success.
U/ Finance
CITYWIDE
ForwardDallas
Citywide | Approved
ForwardDallas 2.0 is Dallas’ comprehensive land use plan, adopted to guide development through 2045. It provides a framework for future zoning decisions and infrastructure investments across Dallas.
The plan introduces significant changes affecting development:
In the Community Residential placetype, which covers large portions of Dallas including areas like Lakewood, Winnetka Heights, and Hillcrest Forest, the plan now explicitly states that "incompatible multiplex, townhome, duplex, triplex and apartment development should be located outside of existing single-family neighborhoods." This directive substantially limits potential sites for multifamily projects in established residential areas.
Instead, the plan emphasizes locating multifamily developments near transit stations, along commercial corridors, and in transition areas between non-residential and existing residential zones. Specific areas mentioned include TOD sites like those around DART stations, and commercial corridors such as Ross Avenue near Lower Greenville.
The plan suggests considering former civic/institutional properties for diverse housing types, potentially opening up opportunities in areas with defunct public facilities or religious institutions.
Council Member Ridley proposed an amendment to modify the land use matrix, moving single-family attached uses (townhomes and duplexes) from primary to secondary uses in the Community Residential place type. This amendment was voted down 10-5, maintaining these housing types as primary uses in that category. This preserves some flexibility for smaller-scale multifamily development in residential areas.
During the council meeting, Council Member Zarin D. Gracey introduced an amendment specific to the Mountain Creek Lake area. This amendment was not part of the pre-existing Economic Development Committee recommendations but was proposed and approved during the meeting itself.
The amendment adds a footnote to the Regional Open Space place type in the plan. Specifically, it states: "In the Regional Open Space place type, a master plan review for compatibility with the power station should be undergone in the area adjacent to Mountain Creek Lake."
Council Member Gracey explained that this amendment aims to preserve recreational opportunities around Mountain Creek Lake while acknowledging the presence of the power station. He emphasized that while he believes the new owners of the power station property will be good partners, this amendment ensures future development in the area will be subject to additional scrutiny.
Council Sentiment
The Dallas City Council's sentiment towards increased density and development outlined in the plan reveals stark divisions. At the far end of opposition, Council Member Cara Mendelsohn (District 12) strongly rejects the plan, labeling it a "developer's dream come true" and expressing concerns about excessive multifamily additions. Similarly, Council Member Carolyn King Arnold (District 4) stands firmly for single-family neighborhood protection, even invoking vivid imagery of "igloo-shaped, Tesla-shaped boxed" projects to emphasize her opposition to new development styles.
Moving towards the center, Council Member Paul E. Ridley (District 14) advocates for protecting single-family neighborhoods while acknowledging room for improvement, indicating a cautious approach to change. Mayor Eric Johnson's position, while not explicitly stated, suggests skepticism towards the plan based on his voting record.
In the middle ground, council members like Kathy Stewart (District 10) and Jesse Moreno (District 2) offer measured support, recognizing the need for change while remaining cautious about its implementation. Council Member Zarin D. Gracey (District 3) indicates a moderate stance on development. He didn’t oppose change or increased density outright, but rather advocated for planned, strategic growth. His focus on master planning demonstrates a desire for development to be carried out in a coordinated, comprehensive manner rather than piecemeal.
At the other end of the spectrum, strong proponents of increased density emerge. Council Member Omar Narvaez (District 6) enthusiastically supports adaptive reuse of empty office buildings for workforce housing. Council Member Chad West (District 1) frames the plan as essential for future generations' ability to afford living in Dallas. Council Member Jaynie Schultz (District 11) draws a parallel between tackling housing issues and the city's success in reducing crime, advocating for bold action.
Deputy Mayor Pro Tem Adam Bazaldua (District 7) emphasizes the plan as a carefully negotiated compromise, suggesting that while it may not satisfy everyone, it represents progress. Mayor Pro Tem Tennell Atkins (District 8) pushes for forward momentum, urging the Council to act rather than delay.
Community Sentiment
Analyzed speakers: 55
Sentiment breakdown:
Strongly against increased density/development: 40%
Moderately against: 20%
Neutral or mixed: 15%
Moderately in favor: 15%
Strongly in favor of increased density/development: 10%
Key quotes representing different sentiments:
Strongly against: "Single-family neighborhoods should be left alone. They are the route. If I wanted to live in a place with commercial apartments, I would have gone there, but I don't." - Mary Paras, District 1
Moderately against: "I understand the need for more affordable housing in our city, and I support the Forward Dallas’ goal of meeting that need. However, there have to be some protections for single-family neighborhoods." - Linda Blase, District 2
Neutral or mixed: "I applaud this committee for trying to increase the supply, but the burden on this potentially is escalation of home prices." - Nate Weymouth (no address given)
Moderately in favor: "Dallas needs an increased supply and more diverse mix of housing, actively planning to limit our own long-term housing growth in the midst of skyrocketing housing prices, stagnating population growth and dire city finances is entirely irresponsible." - Mark Ishmael, District 2
Strongly in favor: "For Dallas to grow and flourish, we need to build not only more housing, but more variety in housing for both purchase and for rent." - Andrew Warren, District 9
Analysis: The community speakers demonstrated a diverse range of opinions, with a majority leaning against increased density and development in established neighborhoods. Many expressed concerns about protecting single-family neighborhoods, while others emphasized the need for affordable housing and diverse housing options.
U/ Sentiment
DISTRICT: 7
The Culbreath 2770 Bethurum Ave
Southeast Dallas | 44.04 Acres | 364 Units | 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
Owner: Dallas Housing Authority (DHA), Betty Culbreath Phone: (469) 249-9012, Debbie Quitugua Phone: (214) 951-8308 Email: [email protected], and VOANS (Joint)
Case Report: The Culbreath SR
Pro Forma: The Culbreath PF
Project Plans: The Culbreath Plan
DISTRICT: 10
Southeast Dallas | 5.75 Acres | Approved
City Council 9/25/24
R-7.5(A) → MU-1 | Approved
City Plan Commission 8/8/24
Approved
Previously limited to one dwelling unit per 7,500 square feet, the site can now accommodate up to 25 dwelling units per acre with a mixed-use product incorporating three use categories. This could theoretically allow for over 140 units, though a more realistic estimate might be between 70 to 85 townhome units, depending on the exact mix of residential and commercial uses, parking requirements, and site design considerations.
The height allowance has also increased dramatically, from 30 feet to a potential 120 feet for mixed-use projects with retail, although proximity slope restrictions may limit the actual achievable height. The front yard setback has been reduced from 25 feet to 15 feet, allowing for more efficient land use.
The surrounding area is primarily vacant or single-family residential. The staff report noted that the proposed development "will be beneficial to the existing single-family neighborhood because it will foster economic growth and provide much needed diverse housing to the area." This aligns with several Comprehensive Plan goals, including strengthening neighborhoods, creating housing opportunities, and fostering economic development.
Community engagement for this rezoning was notably positive. Rob Baldwin, the owner's representative, reported strong community involvement, including meetings with the commissioner and neighbors. A recent neighborhood meeting drew no opposition, indicating local acceptance of the proposed development. This positive reception could bode well for future affordable housing initiatives in the area.
The site's location in far southeast Dallas, near Balch Springs, places it in an "H" Market Value Analysis (MVA) area, indicating a weaker market. While this presents challenges, it also aligns with goals for providing affordable housing in areas of need and where it could have a significant positive impact.
The approval process was smooth, with unanimous City Plan Commission approval on 8/8/24 and City Council approval on 9/25/24 without discussion. It's worth noting that no other zoning cases have occurred nearby in the past five years.
Owner: Kent Carter Phone: (214) 327-7800
Case Report: Z234-147(GB)
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