STRATEGIC PRIORITY: Growing
AGENDA DATE: March 26, 2025
COUNCIL DISTRICT(S): 11
DEPARTMENT: Department of Housing and Community Development
EXECUTIVE: Robin Bentley
______________________________________________________________________
SUBJECT
Title
Authorize the Dallas Public Facility Corporation (DPFC) to (1) acquire, develop, and own The Humphreys, a 322 unit mixed-income, multifamily development to be located at 5339 Alpha Road, Dallas, Texas 75240 (Project); and (2) enter into a seventy-five-year lease agreement with Ethos Property Development, LLC (Applicant) or its affiliate, for the development of the Project - Estimated Revenue Forgone (75 Years of Estimated Taxes): General Fund: $127,165,063.00 (see Fiscal Information)
Body
BACKGROUND
The City of Dallas (City) is authorized by the 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, by Resolution No. 20-1035, the City Council authorized the creation of the Dallas Public Facility Corporation (Corporation) pursuant to the Act to further the public purposes stated in the Corporation’s Articles of Incorporation and Bylaws, which were subsequently amended by Resolution No. 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) and the Dallas Housing Resource Catalog (DHRC).
Ethos Property Development, LLC (Applicant), a Texas limited liability company, submitted an application to the Corporation for the development of The Humphreys, a 322-unit mixed income multifamily development to be located at 5339 Alpha Road, Dallas TX 75240 (Project). The development is new construction, and the Corporation will own the site and improvements and lease the Project back to the Applicant or its affiliate. Pursuant to 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 40% of these units at 80% AMI and below and 10% of these units at 60% AMI and below and 50% of the units at market rate.
On January 28, 2025, the DPFC Board of Directors adopted a resolution authorizing the negotiation and execution of a term sheet for The Humphreys in partnership with Ethos Property Development, LLC. The Applicant is a limited liability company. This partner is Texas-based with real estate development and multifamily construction experience. Their current multifamily portfolio includes 6 multifamily projects in Texas with 3 more currently under construction.
The Project is in North Dallas, just north of 635 LBJ Freeway, and one block east of the Dallas North Tollway. The Project will be situated on a 3.3-acre site on Alpha Rd. Amenities will include a dog park, fitness center, and swimming pool. The Project is zoned for multifamily development without any opposition. The Applicant will consult with the Office of Emergency Management and 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 |
|
Efficiency |
60% |
5 |
$ 1,160.00 |
|
Efficiency |
80% |
17 |
$ 1,546.00 |
|
Efficiency |
Market |
22 |
$ 1,599.00 |
|
1BR |
60% |
16 |
$ 1,242.00 |
|
1BR |
80% |
64 |
$ 1,656.00 |
|
1BR |
Market |
80 |
$ 2,099.00 |
|
2BR |
60% |
11 |
$ 1,490.00 |
|
2BR |
80% |
41 |
$ 1,986.00 |
|
2BR |
Market |
51 |
$ 2,499.00 |
|
3BR |
60% |
2 |
$ 1,721.00 |
|
3BR |
80% |
6 |
$ 2,295.00 |
|
3BR |
Market |
7 |
$ 3,559.00 |
The rent for individuals and families earning between 60% and 80% AMI are meant to provide housing to the “missing middle” of the market: residents who 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 $88,792,630.00 which includes the acquisition price for the land which is $275,753.51 per unit.
|
Proposed Financing Sources |
Amount |
|
Mortgage Loan |
$ 71,873,629.00 |
|
Developer/Investor Equity |
$ 16,919,002.00 |
|
Total |
$ 88,792,630.00 |
|
Proposed Uses |
Amount |
|
Development Costs |
$ 52,562,381.00 |
|
Land Acquisition |
$ 14,490,000.00 |
|
Soft Costs/Other Costs |
$ 21,740,249.00 |
|
Total |
$ 88,792,630.00 |
The Project will be owned by the Corporation and leased to the Applicant for a period of 75 years. The estimated revenue foregone is $127,165,063.00, however, in consideration for the Corporation’s participation in the Project, the Corporation is estimated to receive $383,958,485 in public benefit over the 75 years of the lease. Potential proceeds to the Corporation include (1) a $250,000.00 structuring fee paid at closing; (2) an estimated $433,640.00 general contractor fee, half collected at closing and half collected at stabilization; (3) lease payments starting at $324,000.00 and increasing by 3% annually upon stabilization ($79,920,186 over 75 years); (4) a 15% sales commission after repayment of debt, equity, and preferred equity returns upon first sale of the Project; (5) a 2% sales commission on all future sales; and (6) $303,354,659 in rental savings. 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 Corporation and its 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 Corporation’s Board recommends approval of this item to allow this mixed-income housing development to move forward.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On January 28, 2025, the Dallas Public Facility Corporation Board of Directors approved the negotiation and execution of a term sheet with the Applicant.
The Housing and Homelessness Solutions Committee was briefed by memorandum regarding the project on February 24, 2025. <https://cityofdallas.legistar.com/View.ashx?M=F&ID=13697992&GUID=47BD67BF-79EE-45ED-92E9-CCA8BF0C2965>
FISCAL INFORMATION
Estimated Revenue Foregone (75 Years of Estimated Taxes): General Fund $127,165,063.00
MAP
Attached