STRATEGIC PRIORITY: Housing & Homelessness Solutions
AGENDA DATE: December 11, 2024
COUNCIL DISTRICT(S): 1
DEPARTMENT: Department of Housing and Community Development
EXECUTIVE: Robin Bentley
______________________________________________________________________
SUBJECT
Title
Authorize the Dallas Public Facility Corporation to (1) acquire, develop, and own the Burnett Lofts, a mixed-income, multifamily development to be located at 512 North Ewing Avenue, Dallas Texas 75203 and 801 North Lancaster Avenue, Dallas, Texas 75203; and (2) enter into a seventy-five-year lease agreement with Savoy Equity Partners, LLC or its affiliate, for the development of the Project - Estimated Revenue Forgone: General Fund: $50,583,880.60 (see Fiscal Information)
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BACKGROUND
The City is authorized by the Texas Public Facility Corporation Act, Chapter 303 of the Texas Local Government Code, as amended (the Act) to create a Public Facility Corporation for the purposes established in the Act, including the financing, acquisition, construction, and leasing of public facilities under the Act. On June 24, 2020, the City Council authorized the creation of the Corporation to further the public purposes stated in the Corporation’s articles of incorporation and bylaws pursuant to the Act by Resolution No. 20-1035, which were subsequently amended by Resolution 22-1194 (bylaws). Section 6.2 of the Corporation’s bylaws requires City Council approval by written resolution prior to entering into any agreement that would result in a property tax exemption. Per Section 7.3 of the bylaws, any public facility related to multifamily residential development of the Corporation shall not proceed unless (1) the development of the public facility could not be feasible but for the Corporation’s participation, and (2) the development of the public facility is in furtherance of the City of Dallas’ Dallas Housing Policy 2033 (DHP33).
Savoy Equity Partners, LLC (Applicant), a Texas limited liability company, submitted an application to the Dallas Public Facility Corporation (Corporation) for the development of the Burnett Lofts, a 172-unit mixed income multifamily development to be located at 512 North Ewing Avenue, Dallas Texas 75203 and 801 North Lancaster Avenue, Dallas, Texas 75203 (Project). The Project is located within the Tax Increment Financing Reinvestment Zone Number Three (“Oak Cliff Gateway TIF District”). The development is new construction and will not affect the annual TIF District increment. The Corporation will own the site and improvements and lease the Project back to the Applicant or its affiliate. Pursuant to the Texas Public Facility Corporation Act, Chapter 303 of the Texas Local Government Code, as amended (the Act), any public facility owned by a Public Facility Corporation is exempt from all ad valorem taxes. To qualify as a public facility, pursuant to the Act, a multifamily property must reserve at least 40% of the units for residents earning at or below 80% of the Area Median Income (AMI) and at least 10% of the units for residents earning at or below 60% of the AMI. The Project will reserve 42% of these units at 80% AMI and below and 10% of these units at 60% AMI and below and 48% of the units at market rate.
On October 22, 2024, the DPFC Board of Directors adopted a resolution authorizing the negotiation and execution of a term sheet for the Burnett Lofts in partnership with the Savoy Equity Partners, LLC. The Applicant will be a limited liability company, Savoy Equity Partners, LLC. This partner is Texas-based with real estate development and multifamily construction experience. Their current multifamily portfolio totals approximately 500 self-built units with approximately 600 additional units in various stages of development.
The property is in South Dallas, just south of Trinity River off 35E in North Oak Cliff. The Project will be situated on two 1.6-acre sites on Lancaster Avenue and North Ewing Avenue. Amenities will include a sky lounge and a resident coworking space and is accessible to Dallas Area Rapid Transit bus stops. The Project is zoned for multifamily development without any opposition. Savoy Equity Partners has held a meeting with the surrounding neighborhoods and has received support from each neighborhood group. The Applicant will consult with the Office of Emergency Management & Crisis Response for security input, community activities and the Crime Prevention through Environmental Design.
The anticipated unit mix and rental rates are as follows:
|
Unit Type |
AMI |
Units |
Rent |
|
1BR |
60% |
14 |
$1,188.00 |
|
1BR |
80% |
54 |
$1,584.00 |
|
1BR |
Market |
62 |
$1,708.00 |
|
2BR |
60% |
2 |
$1,425.00 |
|
2BR |
80% |
18 |
$1,900.00 |
|
2BR |
Market |
22 |
$2,445.00 |
The rents for individuals and families earning between 60% and 80% AMI are meant to provide housing to the “missing middle” of the market: residents that earn above low-income housing tax credit income restrictions of 60% AMI but would be cost burdened by market rents. These incomes range from approximately $54,560.00 to $77,900.00 in the City based on family size and represent a wide variety of employment sectors including, but not limited to, teachers, first responders, government employees, health care providers, etc. The rents for individuals and families earning below 60% are included to provide deeper affordability at this property. These incomes range from $40,920.00 to $58,440.00 depending on family size.
Total development costs are anticipated to be approximately $37,695,541.00 which includes the acquisition price for the land. The development budget less soft/financial costs is anticipated to be approximately $30,890,693.00, which is $179,597.00 per unit.
|
Proposed Financing Sources |
Amount |
|
Mortgage Loan |
$25,604,604.00 |
|
Developer/Investor Equity |
$12,090,937.00 |
|
Total |
$37,695,541.00 |
|
Proposed Uses |
Amount |
|
Development Costs |
$24,828,853.00 |
|
Land Acquisition |
$ 5,630,679.00 |
|
Soft Costs/Other Costs |
$ 6,804,848.00 |
|
Contingency |
$ 431,161.00 |
|
Total |
$37,695,541.00 |
The Project will be owned by the Corporation and leased to the Applicant for a period of 75 years. In consideration for the Corporation’s participation in the Project, the Corporation is estimated to receive $124,654,359.00 in revenue over the 75 years of the lease. Potential proceeds to the DPFC include (1) a $250,000.00 structuring fee paid at closing; (2) an estimated $230,000.00 general contractor fee, half collected at closing and half collected at stabilization; (3) lease payments starting at $144,480.00 and increasing by 3% annually upon stabilization; (4) a 15% sales commission after repayment of debt, equity, and preferred equity returns upon first sale of the Project; and (5) a 2% sales commission on all future sales. In the event of a sale during the life of the Project, the Corporation will continue to receive the annual lease payments. Upon termination of the 75-year lease, the Corporation will own the Project free and clear.
The DPFC and the Corporation’s Counsel and Financial Advisors have confirmed that this Project would not be feasible but for the Corporation’s participation and that the Project furthers the goals of the DHP33. The DPFC Board recommends approval of this item to allow this mixed-income housing development to move forward.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On June 24, 2020, the City Council authorized the creation of the Dallas Public Facility Corporation (Corporation) to further the public purposes stated in the Corporation’s articles of incorporation and bylaws pursuant to the Act by Resolution No. 20-1035, and the bylaws, as amended by Resolution No. 22-1194 (collectively, the governing documents).
On April 12, 2023, the City Council adopted the Dallas Housing Policy 2033 (DHP33), by Resolution No. 23-0443, and the Dallas Housing Resource Catalog (DHRC), by Resolution No. 23-0444.
On September 24, 2024, the Dallas Public Facility Corporation Board of Directors approved the negotiation and execution of a term sheet with the Applicant.
FISCAL INFORMATION
Estimated Revenue Foregone: General Fund $50,583,880.60
MAP
Attached