STRATEGIC PRIORITY: Housing & Homelessness Solutions
AGENDA DATE: October 23, 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 Oakhouse at Colorado Phase 2, a mixed-income, multifamily development to be located at 909 East Colorado Boulevard; and (2) enter into a seventy-five-year lease agreement with Mintwood Real Estate, LLC or its affiliate, for the development of the Project - Estimated Revenue Forgone: General Fund $157,656,559.00 (For 75 years; see Fiscal Information)
Body
BACKGROUND
Mintwood Real Estate, LLC (Applicant), a Texas limited liability company, submitted an application to the Dallas Public Facility Corporation (Corporation) for the development of Oakhouse at Colorado Phase 2, a 358-unit mixed income multifamily development to be located at 909 East Colorado Boulevard (Project). 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 (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 50% of the units for residents earning at or below 80% of the Area Median Income (AMI). The Project will reserve 40% of these units at 80% AMI and below and 10% of these units at 60%.
The Applicant will be a limited liability company, Mintwood Real Estate LLC. This partner is Texas-based with real estate development and multifamily construction experience. Their current portfolio includes 6 multifamily projects in Dallas totaling approximately 855 units in various stages of development.
The property is a 358-unit mid-rise multifamily development in South Dallas, just south of Trinity River off 35E in North Oak Cliff. The Project will be situated on 3.2 acres on Colorado Blvd. Amenities will include a clubhouse, dog park, green space, a pool, and fitness center. The Project is accessible to Dallas Area Rapid Transit bus stops.
The Project is zoned for multifamily development without any opposition. Mintwood 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 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 |
|
Studio |
60% |
8 |
$1,158.00 |
|
Studio |
80% |
31 |
$1,410.00 |
|
Studio |
Market |
39 |
$1,450.00 |
|
1BR |
60% |
22 |
$1,240.00 |
|
1BR |
80% |
89 |
$1,654.00 |
|
1BR |
Market |
109 |
$1,850.00 |
|
2BR |
60% |
6 |
$1,489.00 |
|
2BR |
80% |
24 |
$1,986.00 |
|
2BR |
Market |
30 |
$2,300.00 |
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 $103,160,000.00 which includes the acquisition price for the land. The development budget less soft/financial costs is anticipated to be approximately $78,760,000.00, which is $220,000.00 per unit.
|
Proposed Financing Sources |
Amount |
|
Mortgage Loan |
$ 56,738,000.00 |
|
Developer/Investor Equity |
$ 46,422,000.00 |
|
Total |
$103,160,000.00 |
|
Proposed Uses |
Amount |
|
Development Costs |
$ 69,810,000.00 |
|
Land Acquisition |
$ 8,950,000.00 |
|
Soft Costs/Other Costs |
$ 19,722,157.00 |
|
Contingency |
$ 4,677,843.00 |
|
Total |
$103,160,000.00 |
The Project will be owned by the Corporation and leased to the Applicant and other potential owners for a period of 75 years. In consideration for the Corporation’s participation in the Project, the Corporation is estimated to receive $193,168,139.00 in revenues over the 75 years of the lease. Potential proceeds to the Corporation include (1) a $250,000.00 structuring fee paid at closing; (2) lease payments starting at $362,000.00 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 revenues of the Corporation will be used to fund operations and the provision of additional affordable and workforce housing throughout the City. This proposed development results in foregone tax revenues for the City while the Corporation owns the asset. The current City tax bill for this property is $61,565.00 and the 75-year estimate of foregone taxes is $157,656,559.00. However, the workforce housing rental savings of $152,149,728.00 over 75 years and the estimated $40,093,411.00 in revenues provides the City with $193,168,139.00 in benefits that outweigh the foregone revenue. Without the Dallas Public Facility Corporation’s participation in this project, the project would require a subsidy of approximately 90 million over the same period.
The Corporation’s estimated revenues were calculated by the Corporation’s partnership counsel and financial advisors. Market rent comps and current construction costs were analyzed to ensure the project costs were reasonable for the market. Corporation financial advisors also confirmed that but for the ad valorem tax exemption, the Project would not be economically feasible and would not attract responsible debt and equity investment in the property. The Corporation’s revenue consideration and affordability levels were also analyzed to confirm that the ad valorem tax exemption does not over subsidize the Project.
The City is authorized by 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 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’s Comprehensive Housing Policy (CHP), as restated in the Dallas Housing Policy 2033 (DHP33).
Staff 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 CHP, as restated in the DHP33. Staff recommends approval of this item to allow this mixed-income housing development to move forward.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On August 27, 2024, 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 this matter on September 23, 2024. <https://cityofdallas.legistar.com/View.ashx?M=F&ID=13322512&GUID=C38728FE-089E-4AB8-815A-4E509043A345>
The City Council was briefed by memorandum regarding this matter on October 18, 2024. <https://dallascityhall.com/government/citymanager/Documents/FY24-25%20Memos/Upcoming%20Council%20Agenda%20Item%2024-3060%20%E2%80%93%20Dallas%20Public%20Facility%20Corporation%20Project%20-%20Oakhouse%20at%20Colorado%20(Phase%202).pdf>
FISCAL INFORMATION
Estimated Revenue Foregone: General Fund $157,656,559.00 for 75 years. Exhibit A provides supporting details on the estimated $40,093,411.00 in lease payments over 75 years in addition to an acquisition fee in the amount of $250,000.00 totaling $40,343,411.00 to the Corporation. The project will provide a projected amount of $152,149,728.00 in rent savings over the 75-year period.
MAP
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