STRATEGIC PRIORITY: Housing & Homelessness Solutions
AGENDA DATE: June 12, 2024
COUNCIL DISTRICT(S): 6
DEPARTMENT: Department of Housing & Neighborhood Revitalization
EXECUTIVE: Robin Bentley
______________________________________________________________________
SUBJECT
Title
Authorize an amendment to Resolution 23-0544, previously approved on April 26, 2023 authorizing the (1) Dallas Public Facility Corporation (DPFC) or its affiliate to purchase, using Community Development Block Grant (CDBG) Funds, and own property located at 9999 West Technology Boulevard, Dallas, Texas 75220 (the Property); (2) City Manager to negotiate and execute a development agreement and security instruments with the DPFC, each as approved to form by the City Attorney, and in compliance with 24 CFR 570.201(a) and (b), in an amount not to exceed $10,000,000.00 in CDBG Funds to acquire and own, and facilitate the development of a mixed-income affordable multifamily complex known as The Park at Northpoint to be located at the Property; and (3) DPFC to enter into a seventy-five-year ground lease with the LDG - The Park at Northpoint, LP and/or its affiliate, for the development of the Project at the Property - Not to exceed $10,000,000.00 - Financing: Community Development Block Grant Funds; Estimated Revenue Forgone: General Fund $178,205,551.00 for 75 years (see Fiscal Information)
Body
BACKGROUND
LDG Development and/ or its affiliate (Developer) submitted a Proposal on behalf of LDG The Park at Northpoint, LP (Owner) under the City’s Notice of Funding Availability (NOFA), issued on August 7, 2020, as amended, to receive gap financing in the form of a cashflow loan to support the acquisition and development of affordable housing units within the City limits. The NOFA was issued by the Department of Housing & Neighborhood Revitalization (Housing) in accordance with the City’s Comprehensive Housing Policy (CHP), as restated in the Dallas Housing Resource Catalog. The Developer received a fundable score of 99 out of 143 points. On April 26, 2023, by Resolution No. 23-0544, the City Council authorized the execution of a development loan agreement in an amount not to exceed $10,000,000.00 in Community Development Block Grant Funds.
On October 16, 2023, due to increases in development costs and construction loan rates, the developer submitted a subsequent proposal under the City’s NOFA, as amended, to the Dallas Public Facility Corporation (Corporation) and the City, to adjust the scope of work and unit mix in order to produce a financially feasible development project. The requested revisions, if approved, will reduce the development to a single phase of 426 units, and change to a three-story building type.
The Corporation will own the site and improvements and lease the Project back to the Developer 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 41% of these units at 80%-AMI, 5% of these units at 60%-AMI and 5% of these units at 50%-AMI.
In response to the Developer’s supplemental NOFA application requesting the changes, Housing requested additional consideration in order to bring this item before the Housing and Homelessness Solutions Committee and the City Council. The items agreed upon for additional consideration included the following:
1. Deeper Affordability - The Developer has agreed to commit to restricting 5% of the total units to 50% AMI.
2. Social Services - The Developer will provide a number of social services at the Property to include financial literacy, first-time homebuyer’s class, after school tutoring, monthly social events, free Wi-Fi, larger swimming pool, two fitness centers, two dog parks, walking trail, yoga studio, and business center. Resident services will be included in the Regulatory Agreement to provide further assurances to the City that these services will be provided.
3. Extended Affordability Period - The Developer has agreed to the City’s request for an extension of the affordability period for its original $10M investment to the DPFC in CDBG Funds from 20 years to 30 years. The additional 10 years will further restrict the affordable rents for Dallas residents secured through restrictive covenants on the Property.
The Developer will be a limited partnership. The company was founded in 1994 and has successfully completed over 77 multifamily properties totaling 13,673 units and is currently developing other workforce housing developments in partnership with the City of Dallas and the Dallas Housing Finance Corporation as well as the previously approved Legacy at White Rock project with the DPFC. The proposed property manager will be Solidago Residential Services based in Austin, Texas. Currently, Solidago manages 6,600 multifamily units including 6,300 affordable units.
The Project will be situated on approximately 15 acres on Technology Boulevard West in Northwest Dallas, at the intersection of Interstate 35 and Loop 12. Amenities will include a business center, community room, theater room, walking trail, dog parks, playscape areas, picnic areas, fitness center and swimming pools. In addition, the Project will now include social services not previously considered, such as financial literacy, first time homebuyer’s education, after school tutoring services and free Wi-Fi access.
Developer will work with the Office of Integrated Public Safety Solutions throughout the planning and design process for security input, community activities, and incorporate best practices of Crime Prevention Through Environmental Design. Additionally, the Developer will provide modern security features to include a full camera system, controlled access, a community crime watch program, and participation in National Night Out to ensure a safe living environment for all residents and staff.
The Project is in close proximity to Dallas Area Rapid Transit bus stops, a Wal-Mart Supercenter, a Sam’s Club, Village at Bachman Lake, Las Colinas Plaza, Texas Health Family Care and William P. Clements Jr. Hospital.
The Project has been re-zoned for multifamily development without any opposition to the request. The Developer will consult with the Office of Integrated Public Safety Solutions for security input, community activities and the Crime Prevention Through Environmental Design. The Developer will also provide security features such as a full camera system, controlled gate access with perimeter fencing.
The 426 units will be comprised of 186 one-bedroom units, 198 two-bedroom units and 42 three-bedroom units. All units will include energy efficient appliances, washer/dryer hookups, covered entries/patios and additional Class A features in the unit finish out.
The anticipated unit mix and rental rates are as follows:
|
Unit Type |
AMI |
Units |
SF |
Rent |
|
1 bedroom |
50% |
10 |
650 |
$ 898.00 |
|
1 bedroom |
60% |
10 |
650 |
$1,092.00 |
|
1 bedroom |
80% |
76 |
650 |
$1,479.00 |
|
1 bedroom |
Market Rate |
90 |
850 |
$1,518.00 |
|
2 bedrooms |
50% |
10 |
850 |
$1,084.00 |
|
2 bedrooms |
60% |
10 |
850 |
$1,316.00 |
|
2 bedrooms |
80% |
80 |
850 |
$1,780.00 |
|
2 bedrooms |
Market Rate |
98 |
850 |
$1,875.00 |
|
2 bedrooms |
50% |
2 |
1163 |
$1,257.00 |
|
2 bedrooms |
60% |
2 |
1163 |
$1,525.00 |
|
2 bedrooms |
80% |
18 |
1163 |
$2,062.00 |
|
2 bedrooms |
Market Rate |
20 |
1163 |
$2,428.00 |
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% AMI are included to provide deeper affordability at this property. These incomes range from $40,920.00 to $58,440.00 depending on family size. This project also aims to provide a small number of units serving households at 50% AMI and below.
Total development costs are anticipated to be approximately $121,907,308.00 which includes the acquisition price for the land. The development budget less soft/financial costs is anticipated to be approximately $91,678,608.00, which is 215,208.00 per unit.
|
Proposed Financing Sources |
Amount |
|
Mortgage Loan |
$ 69,020,000.00 |
|
Developer Equity |
$ 42,887,308.00 |
|
City of Dallas CDBG Loan |
$ 10,000,000.00 |
|
Total |
$121,907,308.00 |
|
Proposed Uses |
Amount |
|
Acquisition |
$ 10,000,000.00 |
|
Development Costs |
$ 91,678,608.00 |
|
Soft Costs & Fees |
$ 20,228,700.00 |
|
Total |
$121,907,308.00 |
The Project will be owned by the Corporation and leased to the Developer 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 $102,907,468.00 in revenues over the 75 years of the lease. Potential proceeds to the DPFC include (1) a $250,000.00 structuring fee paid at closing; (2) 25% of the sales tax savings on all construction materials; (3) lease payments starting at $425,000.00 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 seventy-five-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 DPFC owns the asset. The 2023 City tax bill for this property is $54,072.98 and the 75-year estimate of foregone taxes is $178,205,551.00. However, the workforce housing rental savings of $147,011,186.00 over 75 years and the estimated $102,907,468.00 in revenues provides the City with $249,918,655.00 in benefits that outweigh the foregone revenue.
The Corporation’s estimated revenues were calculated by the Corporation’s counsel and financial advisors. Market rent comps and current construction costs were analyzed to ensure the project costs were reasonable for the market. The Corporation’s 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 project. The Project’s revenue considerations 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) and the Dallas Housing Resource Catalog (DHRC).
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 and the DHRC. Staff recommends approval of this item to allow this mixed-income housing development to move forward.
ESTIMATED SCHEDULE OF PROJECT
Begin Construction August 2024
Complete Construction August 2026
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On April 20, 2020, the City Council authorized final adoption of the FY 2020-21 Consolidated Plan Budget for U.S. Department of Housing and Urban Development Grant Funds which included Community Development Block Grant Residential Development Acquisition Loan Funds; and adoption of the FY 2019-20 Budget by Resolution No. 20-0655.
On June 9, 2021, the City Council authorized final adoption of the FY 2021-22 Consolidated Plan Budget for U.S. Department of Housing and Urban Development Grant Funds which included Community Development Block Grant Residential Development Acquisition Loan Funds by Resolution No. 21-0974.
On March 9, 2022, the City Council authorized final adoption of Reprogramming Budget No. 1 (Substantial Amendment No. 3) to the FY2021-22 Action Plan which included unspent prior year CDBG Funds in the amount of $2,569,591.00 for the Residential Development Acquisition Loan Program by Resolution No. 22-0501.
On June 22, 2022, the City Council authorized final adoption of the FY 2022-23 Consolidated Plan Budget for U.S. Department of Housing and Urban Development Grant Funds which included Community Development Block Grant Residential Development Acquisition Loan Funds by Resolution No. 22-1024.
On February 28, 2023, the DPFC Board of Directors approved a partnership term sheet with the Developer to develop and own the Project.
On March 8, 2023, the City Council authorized final adoption of Reprogramming Budget No. 1 (Substantial Amendment No. 1) to the FY 2022-23 Action Plan which included unspent prior year CDBG funds in the amount of $2,971,130.00 for the Residential Development Acquisition Loan Program by Resolution No. 23-0414.
On April 26, 2023, the City Council authorized (1) Dallas Public Facility Corporation (DPFC) to purchase, using Community Development Block Grant (CDBG) Funds, and own property located at located at 9999 West Technology Boulevard, Dallas, Texas 75220 (the Property); (2) City Manager to execute a development agreement and security instruments with the DPFC, each as approved to form by the City Attorney, and in compliance with 24 CFR 570.201(a) and (b), in an amount not to exceed $10,000,000.00 in CDBG Funds to acquire and own, and facilitate the development of a mixed-income affordable multifamily complex known as The Park at Northpoint to be located at the Property; and (3) DPFC to enter into a 75-year ground lease with the LDG The Park at Northpoint, LP, for the development of the Project at the Property - Not to exceed $10,000,000.00 - Financing: Community Development Block Grant Funds by Resolution No. 23-0544.
On March 26, 2024, the Dallas Public Facility Corporation Board of Directors approved to amend the terms of the project with the Developer.
The Housing and Homelessness Solutions Committee was briefed by memorandum regarding this matter on May 24, 2024. <https://cityofdallas.legistar.com/gateway.aspx?M=F&ID=0faabcf4-5730-4f7b-b1db-c8d253bba2f2.pdf>
FISCAL INFORMATION
|
Fund |
FY 2023 |
FY 2024 |
Future Years |
|
Community Development Block Grant Funds |
$10,000,000.00 |
$0.00 |
$0.00 |
Estimated Revenue Foregone: General Fund $178,205,551.00 for 75 years
Exhibit A provides supporting details on the estimated $101,615,648.00 in lease payments over seventy-five years in addition to an acquisition fee in the amount of $250,000.00 and sales tax abatement fee in the amount of $1,042,000.00 totaling $102,907,468.00 in projected revenue to the Corporation. Additionally, the estimated revenue forgone is $178,205,551.00 in City taxes over seventy-five years. The project will provide a projected amount of $147,011,186.00 in rent savings over the seventy-five-year period.
M/WBE INFORMATION
In accordance with the City’s Business Inclusion and Development Policy adopted on September 23, 2020, by Resolution No. 20-1430, as amended, the M/WBE participation on this contract is as follows:
|
Contract Amount |
Procurement Category |
M/WBE Goal |
|
$91,678,608.00 |
Construction |
32.00% |
|
M/WBE Subcontracting % |
M/WBE Overall % |
M/WBE Overall Participation $ |
|
32.00% |
32.00% |
$29,337,154.56 |
|
• This contract meets the M/WBE subcontracting goal. |
|
• LDG The Park at Northpoint, LP - Non-local; Workforce - 0.00% Local |
DEVELOPER
LDG - The Park at Northpoint, LP
Jake Brown, Development Manager
MAP
Attached