Dallas Housing Finance Corporation (DHFC)

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DHFC April 16, 2024

District: 8 | Southwest Dallas

• 204-Unit HFC | 8004 West Virginia Dr | Approved

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DISTRICT: 8

West Virginia Apartments 8004 West Virginia Dr

Southwest Dallas | 10.51 Acres | 204 Units | Approved

The Dallas Housing Finance Corporation (DHFC) is negotiating a Memorandum of Understanding (MOU) with April Housing, a Blackstone subsidiary, using some unprecedented terms. The deal involves the financing, acquisition, and rehabilitation of the 204-unit West Virginia Apartments, an affordable housing complex located in Southwest Dallas.

This partnership allows DHFC to further their mission of preserving and extending affordability on critical housing for Dallas residents. With a renovation budget of $8.8 million, averaging $40,000 per unit, the property will undergo significant upgrades to address deferred maintenance, enhance unit interiors, and improve community amenities. These investments will meaningfully improve the quality of life for the existing residents.

The deal terms of the MOU were discussed in detail. A few key points of negotiation included:

• A proposal by the sponsor to limit DHFC's total return to around 40% of the estimated tax exemption value, which is not something DHFC has agreed to previously. The Board and counsel are carefully reviewing this provision.

Regarding the sponsor's proposal to limit DHFC's total return, Braxton from Hilltop Securities noted:

The ensuing discussion suggested that the provision would allow the sponsor to capture any returns above the 40% threshold, which raised concerns among some Board members. DHFC's counsel emphasized the need to carefully review and negotiate this point, as it represents a departure from past precedent.

Another deviation from other deals is the 30% developer fee for DHFC, which is higher than the typical 25%. While the exact reason for the higher percentage was not explicitly stated, a few potential explanations were mentioned:

While the exact reason for the higher percentage was not explicitly stated, a potential explanation was mentioned: lower ground lease payments.

Due to the need for the sponsor to defer a portion of their developer fee, the ground lease payments to DHFC will be lower in the early years. They will increase once the deferred developer fee is paid off. This allows the deal to pencil while still providing DHFC with upside participation.

As Braxton Parsons from Hilltop Securities noted:

The Board and counsel also highlighted the importance of DHFC retaining sufficient control rights to approve major decisions in the operations of the property with respect to major decisions on the property. The MOU will likely be tweaked to bolster these protections.

Ultimately, the Board determined this to be a solid investment opportunity with an experienced sponsor in a strong location. The property's proximity to major employers, retail, and services creates an opportunity for DHFC to positively impact both the residents and surrounding neighborhood through this rehabilitation partnership.

Developer: April Housing, Bradley Fisher Phone: (913) 787-1676 Email: [email protected], Joseph Baclit Phone: (909) 908-7290 Email: [email protected]

Dallas Case Report: West Virginia Dallas Details

Project Plans: West Virginia Plan

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