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I AM GONNA CALL THE MEETING TO ORDER.UM, AND, UH, I'LL ASK MR. QUINTO TO DO A ROLL CALL.
ALRIGHT, EVERYONE, UH, IF YOU COULD JUST SAY HERE, AFTER I CALL YOUR NAME.
BRAD, CAN YOU SAY HERE AGAIN, WE CAN'T HEAR YOU HERE.
CAN ANYBODY ELSE HEAR ME? I CAN
UH, BRAD, CAN YOU HEAR US? I CAN HEAR WE CAN'T HEAR YOU.
SOMEBODY ELSE? CAN SOMEONE ELSE ONLINE SAY, TRY TO SPEAK? CAN YOU GUYS HEAR ME? THIS IS DIRECTOR.
IT'S JUST REALLY QUIET IN HERE.
WE JUST HAD OUR VOLUME DOWN IN HERE.
ALL RIGHT, WE CAN HEAR YOU NOW.
DIRECTOR PRISMA GARCIA? I DID NOT SEE HER.
IS SHE ONLINE? I DON'T THINK SO.
IS SHE HERE? I DID NOT SEE HER HERE.
DIRECTOR BEVERLY BANKS SAID SHE WOULD NOT BE HERE.
AND DIRECTOR PATTY COLLINS HERE.
I, I'D NOW LIKE TO OPEN, UH, THIS UP TO PUBLIC TESTIMONY ON ITEMS. IT'S ACTUALLY FOUR AND FIVE.
UM, SO IF ANYBODY HAS ANY TESTIMONY, PLEASE LET US KNOW.
OKAY? I DON'T HEAR IT ANY, SO WE'LL MOVE ALONG TO THE APPROVAL OF THE MINUTES FOR THE JUNE 28TH, 2022, CITY OF DALLAS HOUSING FINANCE CORPORATION MEETING.
UM, SO, UH, I'D LIKE TO GET A MOTION AND A SECOND ON THE FLOOR, AND THEN WE CAN HAVE DISCUSSION.
I'LL MOVE TO ACCEPT THE MINUTES AS WRITTEN.
DO I HAVE A SECOND? SECOND, MITCH.
DID ANYONE HAVE ANY DISCUSSION OR CORRECTIONS? OKAY.
WE'RE ALL BEING VERY QUIET TODAY.
SO, UM, UH, ALL IN FAVOR OF APPROVAL OF THE MINUTES, SAY AYE.
UM, NEXT ITEM NUMBER FIVE, CONSIDER AN ADOPT A RESOLUTION APPROVING A MEMORANDUM OF UNDERSTANDING WITH OPPORTUNITY HOUSING GROUP FOR THE ACQUISITION OF THE BRISCOE, A MULTI-FAMILY RESIDENTIAL DEVELOPMENT LOCATED AT 1 2 6 3 9 COY ROAD AND THE CREATION WITH THE TEXAS SECRETARY OF STATE OF A LIMITED LIABILITY COMPANY TO OWN THE DEVELOPMENT WITH THE CORPORATION AS THE SOLE MEMBER TO BE NAMED D H F C, THE BRISCOE L L C, AND ALL ACTIONS OF D H F C, THE BRISCOE L L C NECESSARY FOR THE ACQUISITION, FINANCING, AND OPERATION OF THE BRISCOE.
I'LL, UM, TURN IT OVER FOR THE PRESENTATION.
UM, SO JUST A QUICK OVERVIEW HERE.
THIS IS AN EXISTING 322 UNIT CLASS, A MULTIFAMILY PROPERTY.
IT WAS BUILT, I BELIEVE, IN 2017.
IT'S LOCATED IN NORTH DALLAS OFF OF COY ROAD.
UM, SO IT'S PROPOSED, UM, THAT THE AFFORDABILITY BE RESTRICTED.
50% OF THE UNITS AT 80%, 40% OF THOSE UNITS WILL BE AT 140 AND 10% UNRESTRICTED.
SO, UH, THIS IS A LITTLE DIFFERENT THAN OUR NORMAL
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LITECH PROJECT, UM, BUT WE WILL BE ABLE TO GET SOME IMMEDIATE AFFORDABILITY INTO AN EXISTING PROJECT IN A, IN A VERY DESIRABLE AREA IN THE CITY, UM, IN THE NORTHERN REGION.SO WE'RE, WE'RE TRYING TO, TO SPREAD NORTH AND NOT, NOT FOCUS SO MUCH ON THE SOUTH.
UM, SO THIS WILL BE OPERATED AS A CLASS A PROPERTY FOR THE LIFE OF THE PROJECT.
OUR PARTNERS WILL BE, UM, OPERATING IT.
WE WILL BE THE A HUNDRED PERCENT OWNER.
UM, BUT OUR, OUR PROPERTIES HERE ARE, EXCUSE ME, OUR PARTNERS HERE, O H G, WILL BE OPERATING THE, UH, THE ASSET AS THE ASSET MANAGER.
UM, SO THE RENT SAVINGS AVERAGE ABOUT 180 A MONTH FOR EACH UNIT.
SO THAT WOULD BE IMMEDIATE, UM, AS SOON AS IT CLOSED.
UM, AGAIN, THE D H F C WILL OWN A HUNDRED PERCENT OF THE PROPERTY.
UM, WE HAVE THE RIGHT TO SELL ANYTIME AFTER YEAR 15.
AND SO THE QUICK ANALYSIS, UM, OF THE SALES PRICE WOULD BE ABOUT 51 MILLION AT YEAR 15, OR UP TO 299 MILLION A YEAR, 35, UM, AS WE PAID ON THOSE BONDS, YOU KNOW, OBVIOUSLY THE PROFIT WILL INCREASE, AND SO IT'S PROPOSED THAT A HUNDRED PERCENT OF THE CASH FLOW WILL BE USED JUST TO PAY DOWN THE BONDS, UH, EVERY YEAR.
BUT WE CAN STRUCTURE THIS TO LIMIT IT TO 85% WITH THE H F C, RETAINING THE, THE OTHER 15%.
AND WE DO HAVE OUR PARTNER HERE, LAUREN SEAVER, UM, SHE HAS A QUICK PRESENTATION, UH, TO GO OVER THIS PROPOSAL WITH US.
SO, YEAH, AND JUST BEFORE THAT, I WANNA SAY A COUPLE THINGS TOO.
UH, UH, THIS LOCATION, THIS SITE, THIS, THIS PROPERTY, UM, USING OUR TRADITIONAL STRUCTURE OF, YOU KNOW, TAX CREDITS AND PRIVATE ACTIVITY BONDS, I DON'T THINK WE WOULD EVER BE ABLE TO REPLICATE THIS IN THE, IN THE CITY.
ONE, THE LAND WOULD BE TOO EXPENSIVE WITHOUT HAVING SOME SORT OF MAJOR FINANCIAL SUBSIDY IN ADDITION TO THE CITY.
WE ALSO WOULDN'T BE ABLE TO TIE THE LAND UP LONG ENOUGH TO BE ABLE TO EVEN CONSIDER CONSTRUCTING SOMETHING LIKE THIS.
SO, UH, THIS IS, THIS, THIS PROGRAM AND THIS STRUCTURE THAT OPPORTUNITY HOUSING GROUP WILL PRESENT, UH, IN A MOMENT, UH, WAS DEVELOPED AS A, AS A WAY TO ACQUIRE PROPERTY, UH, USING, UH, TAX EXEMPT BONDS THAT WE HAVE THE AUTHORITY TO ISSUE TO FUND A HUNDRED PERCENT OF THE ACQUISITION COSTS.
IT DOESN'T RELY ON STATE BOND VOLUME CAP, WHICH I THINK WE'RE ALL AWARE OF IS, UH, SCARCE, TO SAY THE LEAST.
SO, UH, LOOKING AT THIS TO BE ABLE TO, LIKE AARON SAID, UH, TO BE ABLE TO PROVIDE, UM, INSTANT AFFORDABILITY TO QUALIFIED RESIDENTS IS, IS CERTAINLY SOMETHING WE'RE EXCITED TO DO, ESPECIALLY IN, IN THIS PART OF THE CITY WHERE, UM, TO BE ABLE TO HAVE A PRO A CLASS A PROPERTY LIKE THIS IS, IS VERY EXCITING.
SO WE'RE HAPPY THAT WE WERE PRESENTED, UH, AN APPLICATION, UM, FROM OPPORTUNITY HOUSING GROUP.
AND WITH THAT, I'LL, I'LL TURN IT OVER TO LAUREN SEAVER.
GOOD AFTERNOON, PRESIDENT HELLAN, MEMBERS OF THE BOARD.
UM, THANK YOU VERY MUCH FOR HAVING ME HERE TODAY.
UM, I HAVE A BRIEF PRESENTATION ON OPPORTUNITY HOUSING GROUP'S, WORKFORCE HOUSING PROPOSAL FOR THE BRISCOE.
UH, WE'RE VERY EXCITED TO BRING THIS OPPORTUNITY BEFORE YOU, UM, AS HOPEFULLY THE FIRST OF, OF MANY, UH, BECAUSE WE'VE, WE'VE REALLY SEEN THE BENEFIT OF HOW THIS PROGRAM HAS WORKED IN THE PRIOR TRANSACTIONS THAT WE'VE GONE FORWARD WITH, UM, AND REALLY IS ONE OF THE FEW TOOLS THAT WE'VE SEEN THAT CAN REALLY MAKE AN IMMEDIATE DIFFERENCE FOR MIDDLE INCOME RENTERS.
SO I'LL GO THROUGH IN FURTHER DETAIL HOW IT WORKS.
UH, FIRST TO INTRODUCE OUR TEAM, UM, OPPORTUNITY HOUSING GROUP, WHICH IS MY FIRM, UM, ACTS AS THE SPONSOR AND PROJECT ADMINISTRATOR.
THAT'S REALLY THE, THE, WHAT WOULD BE THE DEVELOPER AND ASSET MANAGER ROLE.
UM, IN A TYPICAL TRANSACTION, WE BRING EXTENSIVE EXPERIENCE IN MULTI-FAMILY ACQUISITIONS AND DEVELOPMENT.
WE'RE PART OF A LARGER DEVELOPMENT FIRM CALLED BLAKE GRIGGS PROPERTIES.
UM, MY TWO PARTNERS HAVE BOTH BEEN IN THE, UM, IN THE MULTIFAMILY BUSINESS FOR 40 YEARS EACH.
I'VE BEEN WORKING WITH THEM FOR 10 YEARS.
AND THROUGH OUR WORK ON THE DEVELOPMENT SIDE, WE'VE REALLY SEEN, UM, THE CHALLENGES WITH PRODUCING HOUSING THAT'S AFFORDABLE TO MIDDLE INCOME RENTERS, UH, BECAUSE OF COSTS ON THE, ON THE SUPPLY SIDE, WE'RE REALLY ONLY TO DEVELOP, ABLE TO DEVELOP AT THE HIGH END OF THE MARKET.
AND THEN, OF COURSE, THERE ARE PROGRAMS THAT ARE ABLE TO DEVELOP LOW INCOME HOUSING THAT HELP FOLKS BELOW 60% OF A M I.
BUT BETWEEN 60 AND 140% OF A M I, WE HAVE THIS, UM, HUGE PORTION OF THE WORKFORCE OVER 30%, UM, WITH REALLY NO SUPPLY SOLUTIONS.
SO WE WERE VERY EXCITED TO FIND THIS PROGRAM.
UM, THE PROGRAM STARTED IN CALIFORNIA.
UM, SEVERAL TRANSACTIONS NOW HAVE BEEN DONE IN TEXAS OVER THE PAST SIX MONTHS.
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WE CLOSED $900 MILLION WORTH OF THESE ACQUISITIONS, 1600 UNITS.UM, AND OUR CURRENT PROJECTS ARE SAVING RESIDENTS $4,700 PER UNIT PER MONTH, WHICH IS WELL BEYOND WHAT WE PROJECTED WHEN WE CLOSED, WHICH WAS CLOSER TO ABOUT 2,500 PER YEAR.
SORRY, 4,700 PER UNIT PER YEAR VERSUS ABOUT 2,500 PER YEAR.
UM, WE WORK ON ALL OF OUR ACQUISITIONS WITH CITIGROUP AS OUR BOND UNDERWRITER.
UM, SO IF YOU MOVE FORWARD, CITIGROUP WOULD, UM, ISSUE THE BONDS ON BEHALF OF D H F C.
UM, THEY ARE THE NUMBER ONE BOND UNDERWRITER NATIONALLY AND IN TEXAS.
UH, THEY HAVE AN EXTENSIVE AFFORDABLE HOUSING PRACTICE, SO THEY'RE VERY FAMILIAR, UM, BOTH WITH THE AFFORDABLE HOUSING SIDE AND, UM, THE MUNI BOND AND SALES SIDE.
UM, THEY'VE DONE AN EXCELLENT JOB OF EXECUTING THE TRANSACTIONS TO DATE.
THEY HAVE VERY CLOSE RELATIONSHIPS WITH THE BUYERS OF THESE BONDS.
AND SO WE HAVE A VERY CLOSE FINGER ON THE PULSE, UM, OF THE MARKET IN TERMS OF WHAT THE BUYERS ARE LOOKING FOR, THE TERMS THEY'LL ACCEPT, AND THE RATES THAT WE NEED TO UNDERWRITE.
SO THEY'VE, THEY'VE BEEN VERY CLOSELY INVOLVED IN PUTTING TOGETHER THIS PROPOSAL.
UM, WE ALSO WORK WITH GREYSTAR, UM, WHO'S BEST IN CLASS PROPERTY MANAGER.
SO AFTER CLOSING, GREYSTAR WOULD BE HIRED, UM, TO BE THE PROPERTY MANAGER FOR THE PROJECT.
AND THEN NORRIS, GEORGIA AND OSTRO IS CITY GROUP'S COUNCIL.
UM, THEY'VE BEEN VERY HEAVILY INVOLVED IN, UH, CREATING THIS PROGRAM IN TEXAS, AND THEY'VE, UM, WORKED ON THE TRANSACTIONS THAT HAVE CLOSED TO DATE IN TEXAS.
SO THEY, THEY HAVE A LOT OF A SPECIFIC EXPERIENCE.
THEY'VE ALSO WORKED ON ALL OF OUR TRANSACTIONS.
UM, SO I'M, I'M SURE THIS IS NOT TELLING YOU ANYTHING YOU DON'T ALREADY KNOW, BUT, UM, THERE REALLY IS A HOUSING CRISIS FOR THE MISSING MIDDLE IN ADDITION TO, TO THE LOW INCOME SEGMENT.
UM, AND TO SOME EXTENT THE HIGH INCOME SEGMENT TOO.
IT'S REALLY, UM, BECOMING CHALLENGING THESE DAYS.
BUT THE MISSING MIDDLE THAT WE'RE FOCUSED, FOCUSED ON, UM, HAS REALLY FELT THE BRUNT OF DRAMATIC SUSTAINED RENT INCREASES.
UM, 13.7% IN DALLAS YEAR TO DATE SO FAR.
UM, AND CAUSING FOLKS TO HAVE TO MOVE OUT OF THE CITY AND HAVE TO RECONSIDER WHERE THEY LIVE, CREATING INCOME INEQUALITY, UM, AND THE FOLKS WHO FALL INTO THE MISSING MIDDLE ART TEACHERS, CONSTRUCTION WORKERS, GOVERNMENT EMPLOYEES, NURSES, FIRST RESPONDERS, FOLKS WHO WERE CRITICAL TO OUR COMMUNITIES.
UM, AND A LOT OF JOBS THAT CAN'T BE DONE REMOTELY TOO.
SO WE FOLKS WE REALLY NEED TO MAKE SURE CAN BE HOUSED IN THE LOCATIONS WHERE THEIR JOBS ARE.
UM, 29% OF DALLAS RENTERS ARE PAYING MORE THAN 40% OF THEIR INCOME AS RENT.
SO THAT'S ABOUT 90,000 FAMILIES.
UM, AND IMPACTS OF THIS, UH, OF COURSE, IT HURTS FAMILIES, UM, IN TERMS OF NOT HAVING THE INCOME.
IT HURTS COMMUNITIES, FOLKS CAN'T, UM, PROJECT STAYING IN ONE LOCATION HURTS EMPLOYERS, UM, HURTS THE ENVIRONMENT WITH PEOPLE COMMUTING ADDITIONALLY, AND AS I MENTIONED BEFORE, NEW CONSTRUCTIONS AND, UH, TAX CREDITS AND SUBSIDY PROGRAMS HAVE LIMITED ABILITY TO HELP THIS DEMOGRAPHIC.
UM, THE WORKFORCE HOUSING PROGRAM, UM, THAT WE'RE PROPOSING HERE, UM, RESTRICTS RENTS TO AFFORDABLE LEVELS FOR MIDDLE INCOME RENTERS.
WE ACQUIRE MARKET RATE PROPERTIES AND CONVERT THEM, UM, TO MIDDLE INCOME AFFORDABILITY.
SO THERE'S NO TIME LAG FOR THE DEVELOPMENT PROCESS.
UM, WE KEEP THE EXISTING RESIDENTS IN PLACE AND ACTUALLY 78% OF THE CURRENT RESIDENTS AT THE BRISCOE WILL AUTOMATICALLY QUALIFY FOR THE PROGRAM.
UM, SO THAT'S, THAT'S A REALLY GOOD THING.
UM, AND THEN ASIDE FROM THE TAX EXEMPTION, THE PROPERTY TAX EXEMPTION, THERE ARE NO OTHER PUBLIC SUBSIDIES OR TAX CREDITS THAT ARE REQUIRED.
UM, AND THEN FINALLY, AND THIS IS VERY DIFFERENT FROM, FROM YOUR TYPICAL STRUCTURE, BUT D H F C RECEIVES A HUNDRED PERCENT OF THE EQUITY OF THE ASSET.
SO THAT MEANS THAT, UM, I'LL, I'LL GET INTO IT IN MORE DETAIL LATER, BUT IT MEANS THAT AFTER, UM, THE 15 YEAR LOCKOUT PERIOD, D H F C CAN USE THAT ACCRUED EQUITY, UM, AS CASH EITHER TO, TO CREATE OTHER AFFORDABLE HOUSING OR TO INVEST IN OTHER PROJECTS OR TO DEEPEN THE AFFORDABILITY OF THIS PROJECT.
SO YOU HAVE A, A QUITE A BIT OF VALUE THAT YOU'RE ACCRUING THAT CAN BE USED IN OTHER WAYS.
UM, JUST A, A FEW MORE DATA POINTS.
UM, THE CRISIS IS CERTAINLY NOT GETTING BETTER.
UH, MULTI-FAMILY CONSTRUCTION IT LEVELS IN THE D F W AREA ARE AT THEIR LOWEST POINT SINCE 2015.
UM, D F W ADDED 147,000 JOBS SINCE PRE PANDEMIC AND LED NATIONAL POPULATION GROWTH AT 97,000 PEOPLE FROM 2020 TO 2021.
UM, AND THAT'S ALL DRIVING THIS, THIS INCREASE IN RENT WE CAN CONTINUE.
SO HERE'S THE PROJECT, UM, CALLED THE BRISCOE IN NORTH DALLAS ON COTE ROAD ACROSS FROM COSTCO.
UM, IT'S REALLY A BEAUTIFUL PROPERTY, VERY WELL MAINTAINED, BUILT 2017 BY LENNAR.
UH, IT HAS A MIX OF ONE, TWO, AND THREE BEDROOM UNITS, THE UNITS, AND I'D ENCOURAGE YOU ALL TO TOUR IF YOU LIKE, AND I CAN HELP ARRANGE THAT.
UM, BUT THE UNITS ARE REALLY VERY WELL DONE.
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THE ONE BEDROOM HAS A HUGE CENTER ISLAND, REALLY, UH, LIVES LIKE, LIKE A SINGLE FAMILY HOME OR TOWNHOUSE.UM, THERE ARE PRIVATE GARAGES THAT CAN BE RENTED, FULL AMENITY PACKAGE POOL WITH LOUNGE CHAIRS IN THE WATER GYM, UM, DOG SPA, YOU KNOW, EVERYTHING.
SO, UH, WE'RE, WE'RE VERY EXCITED TO HAVE A PROPERTY LIKE THIS, UM, TO BE ABLE TO PRESENT TO THE PROGRAM.
AND WE DO, UH, FROM OUR WEARING OUR REAL ESTATE INVESTOR HAT, WE DO TRY TO PICK PROPERTIES FOR CONVERSION THAT WE THINK ARE STANDALONE, REALLY GOOD QUALITY REAL ESTATE IN GOOD LOCATION WITH JOB DRIVERS THAT ARE GONNA STAY OCCUPIED AND PERFORM WELL, UM, IN ORDER TO MEET THE INVESTMENT OBJECTIVES OF THE, OF THE PROGRAM AND ALSO THAT ARE NEW SO THAT WE CAN PROJECT, UM, AND, AND BE CONFIDENT IN OUR RESERVE PROJECTIONS FOR OPERATING THE ASSET FOR THE LONG TERM.
AND SO WE'RE, WE'RE VERY HAPPY WITH ALL OF THOSE, UH, QUALITIES OF THIS PROJECT.
SO HOW DOES IT WORK? AND I APOLOGIZE, IT'S PROBABLY A LITTLE SMALL.
UM, SO THE SAY PHASE WE'RE IN RIGHT NOW.
SO OPPORTUNITY HOUSING GROUP SOURCES A TRANSACTION AND NEGOTIATES A PURCHASE AND SALE AGREEMENT.
SO WE'VE, WE'VE EXECUTED A PURCHASE AND SALE AGREEMENT FOR THIS TRANSACTION, WHICH ROUGHLY GIVES US THE TIME TO GET THROUGH THIS PROCESS.
WE MAY HAVE TO AMEND IT SLIGHTLY IN ORDER TO FIT THE EXACT MEETING DATES, BUT WOULD WOULD ALLOW US TO GO THROUGH THE CITY PROCESS AND THEN MARKET THE BONDS AND CLOSE SOMETIME IN OCTOBER.
UM, AND WE COMPLETE DUE DILIGENCE AT OUR SOLE COST AND RISK.
SO WE WILL, UM, INITIATE THAT WITHIN THE NEXT TWO WEEKS.
UM, AND WE, WE PERFORM ALL THE STUDIES AND ALL THE, ALL THE STANDARD STUDIES THAT YOU'D BE DOING AS A BUYER OF REAL ESTATE.
UM, D H F C OR, UM, THERE'S SUBSIDIARY, A D H F C.
THE BRISCOE, L L C TECHNICALLY, UM, AT CLOSING WOULD ISSUE THE TAX EXEMPT BONDS VIA CITIGROUP AND THE BONDS FINANCE A HUNDRED PERCENT OF THE ACQUISITION.
WE WOULD ASSIGN OUR P SS A TO THE D H F C SUBSIDIARY AT CLOSING.
UM, D H F C THEN ACQUIRES THE PROPERTY.
THE REGULATORY AGREEMENTS RECORDED AT CLOSING THEREAFTER.
RENTS ARE RESTRICTED TO AFFORDABLE LEVELS FOR MIDDLE INCOME RENTERS, AND I'LL SHOW YOU THE INCOME LIMITS.
UM, THE PROPERTY THEN BECOMES EXEMPT FROM PROPERTY TAX, WHICH IS THE BIG COMPONENT OF THE SUBSIDY, WHICH ALLOWS US TO WORK.
THE OTHER COMPONENT OF THE SUBSIDY IS THE LOW RATES THAT INVESTORS ARE WILLING TO PAY ON THESE TAX EXEMPT MUNI BONDS.
SO THERE'S, THERE'S A LOT OF DEMAND FROM LARGE BOND FUNDS.
UM, VANGUARD, FIDEL, FIDELITY FRANKLIN, FOR EXAMPLE, UM, ARE THE BIG BUYERS OF THESE BONDS.
AND BECAUSE THERE'S THIS DEMAND FOR THE TAX EXEMPTION, UM, THE LOW RATE GIVES US A LOW COST OF CAPITAL, WHICH IS ENABLES US TO MAKE IT WORK.
UM, RESIDENTS BENEFIT FROM IMMEDIATE RENT SAVINGS.
UM, THE WAY THE RENT SAVINGS ROLL IN IS AT LEASE EXPIRATION.
SO WHEN A TENANT COMES UP FOR THEIR LEASE EXPIRATION, THEY COMPLETE THE QUALIFICATION PROCESS, WHICH WOULD BE GIVING PROOF OF THEIR INCOME.
IF THEY QUALIFY, THEY WOULD GET THE RENT SAVINGS ON THEIR RENEWAL.
IF NOT, THEN THEY'RE ALLOWED TO STAY AT MARKET RATE.
UM, AND THROUGH NATURAL ATTRITION, UM, WHEN THOSE FOLKS LEAVE, THEY'D BE BACKFILLED WITH FOLKS WHO DO QUALIFY.
SO, SO IT'S A, IT'S A GOOD WAY TO TRANSITION THE PROPERTY WITHOUT DISPLACING ANY OF THE CURRENT RESIDENTS WHO MAY NOT QUALIFY.
AND ATTRI ATTRITIONS TYPICALLY IN A MARKET RATE PROJECT ABOUT 50% PER YEAR.
SO WE'D EXPECT THE PROJECT TO BE FULLY CONVERTED WITHIN THE FIRST TWO TO THREE YEARS.
UM, OUR ROLE OPPORTUNITY HOUSING GROUP FOLLOWING THE ACQUISITION WOULD BE AS AN ASSET MANAGER.
SO WE'D ENTER INTO A CONTRACT WITH THE D H F C SUBSIDIARY AT CLOSING.
UM, WE THEN WOULD MANAGE ALL THE COMPLIANCE, MAKE SURE THE BOND, UM, BOND OBLIGATIONS ARE MET.
WE WOULD REPORT TO D H F C AND TO THE BOND INVESTORS.
UM, AND WE'D ALSO MANAGE GREYSTAR AS THE PROPERTY MANAGER.
UM, AND THEN ONCE THE BONDS ARE REPAID, WHICH TYPICALLY IS PROJECTED WITHIN 35 TO 40 YEARS, D H F C OWNS THE ASSET FREE AND CLEAR.
YOU DO HAVE A RIGHT AFTER 15 YEARS, WHICH IS THE LOCKOUT FOR THE INVESTORS ON THE BONDS, UM, TO REFINANCE OR, UM, TAKE MONEY OFF THE TABLE OTHERWISE, OR SELL.
UH, SO WE CAN GO TO THE NEXT SLIDE.
UM, SO ACTUALLY LET'S, LET'S, UH, SKIP PAST THIS ONE SINCE I'M GOING SLOWLY.
UM, I HAVE ANOTHER SLIDE WHICH SUMMARIZES THAT LATER.
SO HERE'S A, HERE'S A SUMMARY OF SOME OF THE KEY TERMS OF THE M O U.
UM, AND IT'S A DETAILED DOCUMENT, BUT THE OWNER WOULD BE D H F C.
THE ASSET, AS WE KNOW, IS THE BRISCOE OPPORTUNITY HOUSING GROUP, IS THE PROJECT ADMINISTRATOR.
CITI GROUP IS THE UNDERWRITER THAT ISSUES THE BONDS.
UM, GREYSTAR WOULD BE HIRED AS THE PROPERTY MANAGER.
THE INCOME RESTRICTIONS WE'RE PROPOSING ARE 50% OF THE UNITS AT INCOMES BELOW
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80% A M I, 40% OF THE UNITS AT INCOMES BELOW 140% OF A M I AND 10% OF UNITS UNRESTRICTED.UH, THE TERM IS 35 TO 40 YEARS, UH, THE AMORTIZATION, AND THIS IS, THIS IS AN IMPORTANT FEATURE THAT ENABLES THESE BONDS TO WORK.
UM, IT'S CALLED A TURBO AMORTIZATION STRUCTURE.
SO THERE'S NO FIXED AMORTIZATION REQUIRED, BUT ALL EXCESS CASHFLOW GOES TO REPAY THE BONDS.
AND SO THAT GIVES THE STRUCTURE FLEXIBILITY BECAUSE IT CAN'T BE IN DEFAULT FOR FAILING TO MEET AMORTIZATION IN A PARTICULAR PERIOD.
UM, SO THAT ENABLES IT TO, TO WEATHER UPS AND DOWNS IN THE MARKET.
UM, BUT IT DOES ENABLE THE BONDS TO GET REPAID IN THE 35 TO 40 YEAR TERM.
SO THAT, THAT'S BEEN A BIG, UH, CHANGE IN WHAT INVESTORS ARE LOOKING FOR AND ARE WILLING TO ACCEPT THAT ENABLES THIS STRUCTURE TO WORK.
UM, AND IN TERMS OF OPERATIONS, NO ONE WILL SEE ANY DIFFERENCE OTHER THAN THE RESIDENT RENT SAVINGS.
WE OPERATE THIS IN A PURELY CLASS, A MANNER, SAME AS WE OPERATE OUR MARKET RATE CLASS A ASSETS.
UM, GREYSTAR WILL, UM, KEEP THE ASSET IN EXCELLENT CONDITION.
WE, UH, BUDGET FOR EXTENSIVE RESERVES TO, UH, TO MAKE SURE THAT THE ASSET IS WELL MAINTAINED.
UM, SO HERE'S THE DETAIL OF THE PROPOSED RESIDENT RENT SAVINGS.
UM, HOPEFULLY YOU CAN SEE THAT.
UH, BUT YOU CAN SEE THERE, UM, IN THE THREE COLUMNS IN THE MIDDLE, YOU CAN SEE THE, UM, D H F C RENTS POST-CLOSING, LOW MIDDLE AND MARKET RATE.
UM, SO, EXCUSE ME, THE LOW CATEGORY YOU SEE 50% OF THE PROJECT, WHICH IS 161 UNITS.
UM, AND THE INCOME, AND THAT'S THE INCOME FOR A FAMILY OF TWO.
JUST AS AN EXAMPLE, IT VARIES BASED ON HOW MANY PE PEOPLE ARE IN THE HOUSEHOLD, BUT THE INCOME LIMIT WOULD BE BELOW 62,400 FOR A FAMILY OF TWO.
UM, AND YOU CAN SEE THE RENTS THERE, 1527 VERSUS CURRENT MARKET OF 1749.
SO THOSE FOLKS WILL BE SAVING ABOUT $222 PER UNIT PER MONTH.
AND THEN IN THE MIDDLE INCOME CATEGORY, A BIT HIGHER, 16.04.
SO THEY'RE SAVING 1 45 PER MONTH, AND THEN THE 10% THAT REMAIN AT MARKET IS REMAIN.
UM, AND HERE'S THE, THE SUMMARY OF THE ECONOMICS TO D H F C.
UH, SO AS I MENTIONED, D H F C IS A HUNDRED PERCENT EQUITY OWNER OF THE ASSET WITH NO EQUITY PARTNERS.
UM, THAT IS, UH, SO OPPORTUNITY HOUSING GROUP IS NOT A PARTNER.
WE DON'T GET ANY SPLIT OF THE, OF THE CASH FLOW OR ANY OF THE EQUITY WHEN THE PROJECT IS SOLD.
WE, WE RECEIVE OUR COMPENSATION THROUGH AN ASSET MANAGEMENT FEE, AND THEN AS A, UM, SUBORDINATE TRANCHE OF BONDS.
UM, BUT D H F C RECEIVES ALL OF THE EQUITY.
SO AS SUMMARY, YOU CAN SEE IN YEAR 15, AND THIS IS THE SUM OF THE PROPERTY TAX OVER THE 15 YEARS OR THE 35 YEARS.
SO OVER 15 YEARS, THE PROPERTY TAX SUBSIDY IS WORTH 29 MILLION.
THE RESIDENT RENT SAVINGS WORTH 26 MILLION.
THE CASH BENEFITS TO D H F C, UM, AND ONGOING ASSET MANAGEMENT FEE OF FIVE 86,000.
AND THE DISPOSITION PROCEEDS, AND THAT'S, THAT'S ASSUMING THAT THE ASSET REMAINS AT THE CURRENT LEVEL OF MIDDLE INCOME.
AFFORDABILITY AT SALE IS 51 MILLION.
AND SO IF YOU ADD UP ALL THE PUBLIC BENEFITS, 78 MILLION VERSUS THE SUBSIDY OF 29 MILLION, YOU'RE SEEING A RETURN OF 263%.
AND IF YOU RUN THAT OUT FARTHER TO YOUR 35, YOU SEE THAT MULTIPLIES BECAUSE, UM, THE RENT SAVINGS CONTINUE TO MULTIPLY OVER TIME BECAUSE THE, THE RENT INCREASES ON THE AFFORDABLE UNITS ARE RESTRICTED BY A M I GROWTH.
SO THAT CAUSES, UM, THE RENT SAVINGS TO BECOME FURTHER AND FURTHER BELOW MARKET AS TIME GOES ON.
AND THEN THE OTHER KEY COMPONENT IS MUCH LIKE A HOME MORTGAGE.
A LOT OF THE AMORTIZATION OF THE BONDS HAPPENS ON THE BACK END.
AND SO, UM, YOU CAN REALLY SEE THE VALUE OF THE PROPERTY ACCRUING BETWEEN YEARS 15 AND 35.
UM, SO HERE'S A SUMMARY OF THE PROJECT BENEFITS, AND THIS IS MY LAST SLIDE HERE.
UM, SO THE OPPORTUNITY IS TO IMMEDIATELY CONVERT THE BRISCOE TO MIDDLE INCOME AFFORDABILITY TO BENEFIT ESSENTIAL WORKERS IN DALLAS.
UM, WE HAVE IT UNDER CONTRACT.
UM, WE COULD CLOSE BY OCTOBER.
UM, WE HAVE OUR, OUR TEAM SET TO GO AND, AND PREPARED TO MOVE FORWARD.
UM, IT'S A LANDMARK CLASS A ASSET, UM, IN A GREAT PART OF TOWN.
UM, SO WE'RE VERY EXCITED ABOUT THAT.
LOW INCOME RESIDENTS RECEIVE INITIAL RENT SAVINGS OF 2,700 PER UNIT PER YEAR.
UM, THE FINANCING'S ENTIRELY NON RECOURSE TO D H F C.
UM, THE ONLY RECOURSE THAT THE BOND HOLDERS HAVE IS AGAINST THE ASSET, UM,
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EXPERIENCE.OUR EXPERIENCED TEAM HAS EXECUTED OVER A BILLION DOLLARS IN WORKFORCE HOUSING TRANSACTIONS.
SO WE, WE REALLY KNOW WHAT WE'RE DOING.
WE'RE CONFIDENT WE CAN GET THIS DONE AND HAVE THE TEAM TO MANAGE IT PROPERLY.
UM, AFTER WE CLOSE, WE, UM, D H F C OWNS THE ASSET FREE AND CLEAR AT THE END OF THE BOND TERM.
UM, AND WE TALKED ABOUT THE SUBSTANTIAL VALUE THAT ACCRUES TO, TO D H F C THROUGH THAT, UM, WE BUDGET SIGNIFICANT RESERVES AND HAVE A BEST IN CLASS OPERATOR TO MAKE SURE THE ASSETS MAINTAINED IN CLASS A CONDITION.
UM, AND FINALLY, WE'RE, WE'RE VERY EXCITED ABOUT THIS.
WE THINK THAT IT, UM, CAN REALLY BE AN, AN EXCELLENT OPPORTUNITY AND I WOULD LOVE TO, UM, CONTINUE TO BRING MORE OF THESE TYPES OF QUALITY TRANSACTIONS BEFORE D H F C, WE MOVE FORWARD.
UM, SO THAT'S THE END OF MY PRESENTATION.
I'M HAPPY TO ANSWER ANY QUESTIONS.
WHAT HAPPENED TO MY, MY MICROPHONE FELL
UM, SO NOW I WILL JUST, UH, OPEN UP TO QUESTIONS FROM THE BOARD.
THINK DIRECTOR NITSCHKE AND PHARAOH AND GARCIA ALL HAVE THEIR HANDS RAISED.
I GUESS WE'LL START WITH, UH, VICE PRESIDENT NITSCHKE.
SO, UH, THANKS FOR THE PRESENTATION.
UM, I'M TRYING TO UNDERSTAND AT A CONCEPTUAL LEVEL, BASED ON THE CURRENT, UM, INCOME MIX, UH, AT THIS PROJECT AND AN AREA AROUND THE PROJECT, ARE WE, ARE WE CREATING NEW AFFORDABILITY OR ARE WE JUST PRESERVING EXISTING AFFORDABILITY, UM, FOR 15 YEARS WITH THIS DEAL? SO 78% OF THE RESIDENTS AT THE PROJECT DO YOU QUALIFY INCOME-WISE FOR THE PROGRAM.
UM, BUT THESE ARE FOLKS THAT, THAT MAKE INCOMES THAT ARE BELOW THE, THE LEVELS, UM, THAT WE'RE SETTING HERE, BUT BASED ON THAT, ARE NOW PAYING TOO MUCH OF THEIR INCOME TOWARDS RENT.
SO THESE ARE FOLKS THAT ARE REALLY FEELING THIS, THE, UH, CONSTRAINT PAYING MORE THAN THEY CAN AFFORD BECAUSE THEY WANNA LIVE IN THIS LOCATION, AND THOSE FOLKS WILL RECEIVE THE AFFORDABILITY.
SO WE'RE CREATING NEW AFFORDABILITY, NOT NECESSARILY FOR NEW PEOPLE.
THEY REDUCE THEIR RENT, BUT WHEN THEY'RE QUALIFYING, RIGHT, WE'RE REDUCING THEIR RENT.
AND WHEN THEY QUALIFY THEY RIGHT, THEY'D RE RECEIVE A $222 PER MONTH RENT REDUCTION.
UH, SECOND QUESTION, AND I APOLOGIZE IF I MISSED THIS.
IN THE PRESENTATION, IN THE BRIEFING, THERE WAS A NOTE THAT THE PURCHASE PRICE IS 82 MILLION.
UM, BUT WE ARE DOING BONDS AT LIKE 1 1 13 5 WITH 10.4 MILLION HELD IN RESERVES THAT STILL LEFT, UH, A LITTLE BIT OF A DIFFERENCE BETWEEN THE TOTAL BOND AMOUNT AND WHAT'S ACCOUNTED FOR HERE.
CAN YOU HELP US UNDERSTAND WHY WE NEED 1 13 5 IN BONDS? YES.
YEAH, IT'S, IT'S THE FACT THAT THE BONDS DON'T SELL FOR THEIR FACE VALUE.
AND CITIGROUP WORKS TO OPTIMIZE FOR THE LOWEST TOTAL COST OVER THE DURATION OF OWNERSHIP OF THE BONDS.
AND THAT'S, THAT'S THE SUM OF PRINCIPAL PAYBACK AND INTEREST.
UM, AND SO THESE ARE CALLED DISCOUNT BONDS.
SO THE PRINCIPAL, IF THE FACE VALUE IS HIGHER THAN THE AMOUNT OF PROCEEDS THAT THE INVESTORS PAY FOR THEM, BUT THAT'S THE, THE, UM, OPTIMAL PRICING FOR THE BONDS IN ORDER TO MINIMIZE THE TOTAL COST OVER THE OWNERSHIP.
I GUESS I WOULD ADD THAT, UM, YOU KNOW, GOING BACK TO, TO THE FIRST QUESTION, UM, I THINK THAT THERE'S THE RISK THAT THE CURRENT TENANTS, EVEN IF THEY DIDN'T GET A DECREASE IN THEIR RENT, DEPENDING ON HOW MANY DEPENDENTS ARE IN THE UNIT, UM, THEY MIGHT END UP HAVING TO MOVE OUT BECAUSE IF SOMEONE ELSE BOUGHT THIS PROPERTY, THEN THEY'RE GONNA RAISE THE RENTS AND MAYBE THAT WOULD THEN BECOME UNAFFORDABLE TO THEM.
SO IT, I THINK THAT IS ANOTHER WAY OF LOOKING AT IT.
UM, AND I THINK DI UH, DIRECTOR PHARAOH HAD A QUESTION.
YES, I WAS LOOKING AT THE FEES TO O H G, THE $500 PER UNIT PER YEAR, THAT INCREASES ABOUT 3% ANNUALLY.
IS THAT A ESTIMATE OF INFLATION? UH, IT WAS AN ESTIMATE OF INFLATION WHEN WE CREATED THIS PROGRAM LAST YEAR,
AND SO MY MAIN QUESTION IS, IS THAT 3% CAPPED OR IS IT TIED TO LIKE THE PREVIOUS YEARS INFLATION AND COULD BE SUBJECT TO INCREASES? IT'S CAPPED.
THAT'S, THAT'S BECOME THE STANDARD IN THE MARKET WITH THE BOND INVESTORS.
[00:30:01]
I KNOW WITH THE CURRENT INFLATION THOUGH, I HAVE TO ASKUM, I THINK, UH, DIRECTOR, OH, OR SORRY, SECRETARY GARCIA HAD A QUESTION, AND THEN I NOTICED, UH, DIRECTOR LEWIS HAS ONE, SO, UH, HE CAN GO AFTER SECRETARY GARCIA.
UM, SO JUST TO MAKE SURE I, I'VE GOT THE TIMING RIGHT ON THIS, UM, THE TRANSACTION THEORY SHOULD CLOSE IN OCTOBER, UM, AND THE TAX EXEMPTION FOR THE DEVELOPMENT WILL START IMMEDIATELY ONCE THE TRANSACTION CLOSES, CORRECT? THAT'S RIGHT.
UM, AND THEN AS RENEWALS COME UP, INCOME QUALIFIED RESIDENTS WILL THEN GET A REDUCTION IN THEIR RENT ON RENEWAL, UM, BUT IF THEY'RE OVERQUALIFIED, THEY'LL STILL CONTINUE TO PAY THE SAME MARKET RATE RENT THEY'RE PAYING NOW, CORRECT? UM, THEY PAY WHAT THEY WOULD'VE PAID, SO THERE'D BE AN INCREASE ON THEIR RENEWAL GOTCHA.
AS IT WOULD'VE BEEN IF THEY WERE PAYING MARKET.
SO THEN AS SOON AS THEY MOVE OUT, THEN THAT UNIT THEN GOES INTO THE, EITHER THE 80% POOL OR THE ONE 40 POOL AND HAS TO REMAIN VACANT UNTIL IT'S FILLED WITH AN APPROPRIATE INCOME QUALIFIED RESIDENT, CORRECT? THAT'S RIGHT.
AND Y'ALL ARE ANTICIPATING AND YOU WANNA HAVE MM-HMM.
I WAS JUST GONNA SAY, YOU WANNA HAVE SOME INCREASE ON THE RENEWALS FOR MARKET RENT RATE FOLKS, BECAUSE THEN OTHERWISE YOU'RE NOT GOING, YOU'RE NOT HAVE EVERYONE STAY AND YOU WON'T HAVE THE VACANCY TO BACKFILL WITH THE INCOME QUALIFIED TENANTS.
AND YOU, YOU ARE ANTICIPATING THE TURNOVER RATE ON THE MARKET RATE UNITS THAT ARE CURRENTLY THERE TO BE ABOUT 50%, CORRECT? THAT'S RIGHT.
SO THEN THEY, YOU ANTICIPATE HAVING THE FULL TAX EXEMPTION FROM OCTOBER 1ST FROM WHEN EVERY, THE TRANSACTION CLOSES ON OCTOBER, AND THEN SLOWLY OVER THE NEXT TWO TO THREE YEARS, THAT'S WHEN WE'LL GET THE, THE DISTRIBUTION OF THE 40, 40 AND 10 ALL INCOME QUALIFIED OR THE 10% UNRESTRICTED, CORRECT? THAT'S RIGHT.
UM, Y'ALL DON'T FORESEE ANY REASON WHERE, FOR SOME REASON ANYONE RENEWS AND YOU CONTINUE GETTING MARKET RATES WITH THE TAX EXEMPTION? CORRECT? UM, WELL, UH, WE'LL HAVE 10% 10.
OUR PROPOSAL IS TO HAVE 10% REMAINING AT MARKET.
UM, I'M IN A SITUATION WHERE YOU, YOU, YOU KEEP A LOT OF THE MARKET RATE RESIDENTS, SO, SO THEY'RE NOT DISPLACED, BUT THE PROPERTY, THERE'S THE PROPERTY TAX EXEMPTION AND THE HIGHER NON-RESTRICTED RENT.
YOU, YOU'RE NOT ANTICIPATING ANY SITUATION LIKE THAT, CORRECT? NO.
AND OTHER, OTHER TRANSACTIONS HAVE BEEN DONE WITH THIS STRUCTURE IN TEXAS AND RECEIVED THE PROPERTY TAX EXEMPTION ON DAY ONE.
AGAIN, I'VE GOT NO PROBLEM WITH THAT.
I JUST WANNA MAKE SURE THAT WE'RE STARTING TO GET THE INCOME QUALIFIED RENTS IN AS SOON AS POSSIBLE WITHOUT, WITHOUT DISPLACING CURRENT RESIDENCE.
I MEAN, OVERALL, THIS SOUNDS FANTASTIC IN A, IN A GREAT IDEA.
AND THEN DIRECTOR LEWIS WAS NEXT.
UM, SO KIND OF A FOLLOW UP QUESTION, UH, FROM, UH, DR.
UH, SO IN REGARDS TO THE DIFFERENCE IN FUNDING ON THE FUNDS, UM, AND ALSO I WAS LOOKING AT THE KIND OF THE EXPENSES.
UM, I KNOW TYPICALLY IN THE PAST THERE'S BEEN LIKE, UH, FUNDING USED OR EXPENSES OR FROM THE PROFIT, UH, USED FOR LIKE PROGRAMMING FOR HOME OWNERSHIP OR, UM, TUTORING OR SOMETHING FOR THE, FOR LIKE KIDS OR THE REGISTER THAT LIVE THERE.
IS THAT SOMETHING THAT COULD BE IMPLEMENTED OR IS IMPLEMENTED? MAYBE I JUST OVERLOOKED IT? UM, WE HAVEN'T DONE THAT IN MIDDLE INCOME PROJECTS.
UH, WE'VE, UH, WE DO, WE DO HAVE TO COMPETE VERSUS MARKET RATE BUYERS IN ORDER TO BUY THESE PROJECTS.
AND SO WE HAVE SOME LIMITS IN WHAT WE CAN FIT INTO OUR, INTO OUR BUDGET THAT WAY.
SO WE HAVE PROGRAMMED THAT INTO THIS PROJECT.
SO, UH, I GUESS, UH, TO KYLE OR AARON, UM, IS THAT SOMETHING THAT WE CAN IMPLEMENT TO HELP WITH, YOU KNOW, THE TRANSITION, UH, AVAILABILITY FOR THOSE THAT MAY BE, UM, ELIGIBLE FOR OR HOME BUYING AND OPEN UP THE VACANCY FOR SOMETHING THAT REALLY NEEDS TO SPACE IN THAT AREA? AS FAR AS, UH, RESIDENT SERVICES PROGRAMMING? UH, IT'S DIFFICULT BECAUSE WE ARE STRUCTURING THIS TO JUST FUNCTION ALMOST LIKE A MARKET RATE DEVELOPMENT, AND, AND ADDING THE COST OF THOSE SERVICES DOES GET A LITTLE DIFF DIFFICULT.
UM, I DO KNOW THAT THERE ARE NONPROFITS OUT THERE THAT WOULD CERTAINLY LOVE TO COME IN AND, AND PROVIDE THOSE TYPE OF SERVICES, BUT IT'S GENERALLY A, A SLIGHTLY DIFFERENT COHORT OF, UM, OF RESIDENTS THAT ARE, THAT ARE THERE THAT THE, THE SERVICES MAY OR MAY NOT BE AS NEEDED AS IT AS IT IS ON SOME OF OUR, UM, LITECH TYPE DEALS.
UM, THIS IS CERTAINLY SOMETHING WE CAN EXPLORE.
UH, AND IF, IF IT'S POSSIBLE TO ADD,
[00:35:01]
IF IT, IF IT, IF THERE IS THE, THE, THE BOTTOM LINE AVAILABLE TO BE ABLE TO PROVIDE THAT HERE, THEN WE CERTAINLY, WE CAN CERTAINLY TAKE A LOOK AT IT.BUT OUR PUBLIC FACILITY CORPORATION DEVELOPMENTS, WHICH ARE SERVE A FUNCTION, LIKE JUST BASICALLY LIKE, UH, MARKET RATE DEVELOPMENTS, SIMILAR STRUCTURE AS THIS, IS THAT, AND WE, WE PROVIDE THE, THE MARKET RATE TYPE OF SERVICES AND PROGRAMMING AT THE, AT THE FACILITIES AND NOT NECESSARILY THE, THE DEEPER AFFORDABILITY RESIDENT SERVICES.
SO, UM, THIS IS SOMETHING WE CAN, WE CAN DISCUSS AND FURTHER DETAIL AND SEE HOW WE CAN, YOU KNOW, ALLOCATE THOSE TYPE OF SERVICES THERE.
BUT I DON'T, I KNOW THAT IT'S NOT A PART OF THE PLAN AT THIS MOMENT, BUT THIS IS CERTAINLY SOMETHING WE COULD DISCUSS.
YEAH, AND I WOULD, I WOULD ADD, I THINK AT THIS INCOME BAN, THE 80 TO ONE 40, THE RESIDENTS ARE GONNA BE A LOT MORE FINANCIALLY STABLE THAN, YOU KNOW, YOUR TRADITIONAL LITECH RESIDENT THAT'S 60 AND BELOW.
UH, SO JUST BY DEFAULT, THOSE SERVICES AREN'T AS NEEDED JUST 'CAUSE THEY ARE MORE FINANCIALLY STABLE.
THEY ARE, YOU KNOW, EVERYTHING IS FINE IN THEIR LIFE, MOST LIKELY, EXCEPT THE, THE RENT BURDEN, UM, VERSUS WHERE, WHERE THEY WORK IS, IS DIFFICULT.
AND THAT'S, THAT'S THAT MISSING MIDDLE PROBLEM.
AND SO THAT'S REALLY WHAT WE'RE TRYING TO FOCUS ON SOLVING HERE.
DIRECTOR LEWIS, WERE YOU ALLUDING TO ALSO THE POSSIBILITY THAT SINCE WE WOULD BE OWNING THIS PROPERTY, WE MIGHT, UM, MAKE SURE THAT THE RESIDENTS ARE AWARE OF THE SINGLE FAMILY PROGRAM THAT WE'RE ABOUT TO INSTITUTE? IS DID YOU SAY SOMETHING ABOUT THAT? YEAH, YEAH.
YOU KIND OF HIT THE NAIL ON THE HEAD.
YOU KNOW, I, I WOULD SAY, YOU KNOW, UM,
SO I THINK IT'LL BE AN OPPORTUNITY NOT TO, UH, YOU KNOW, NEGLECT THEM AS WELL FOR THESE TYPE OF OPPORTUNITIES, ESPECIALLY SINCE, YOU KNOW, WE'RE SOMEWHAT OWNING THE, UH, PROPERTY.
SO YES, PRESIDENT HEALTH AND THAT, THAT WILL BE SOMETHING THAT, UM, I DID SLIGHTLY MENTION, BUT NOT TO THAT DEGREE.
YEAH, I COMPLETELY MISSED THAT PART, SO I SERIOUSLY APOLOGIZE.
YEAH, THIS PROGRAM WILL BE DISTRIBUTED TO ALL OF OUR PROPERTIES AND MAKE SURE THAT EVERYBODY'S AWARE OF IT.
UM, I ALSO HAVE DOWN, UH, THE DIRECTOR PAGE, UH, WANTED TO ASK A QUESTION.
UM, SO ON THE BONDS, ARE THESE, UH, RECOURSE TO THE H F C OR NON-RECOURSE? THEY'RE NON-RECOURSE.
AND THESE ESSENTIAL FUNCTION BONDS, IS THERE ANY LIMITATION, UM, YOU KNOW, ON THE PART OF THE H F CT, OUR ABILITY TO ISSUE THESE? OR IS THERE SOME KIND OF ANNUAL OR CAP? NO.
UM, THE ASSET MANAGEMENT PHASE, I DISCUSSED THAT A LITTLE BIT EARLIER.
UM, IN ADDITION TO THAT THOUGH, DO YOU ALSO GET THE, SO WE'VE GOT THE SPONSOR BOND, WHICH IS, HAS A NOTIONAL AMOUNT OF $5 MILLION.
THEN AS I LOOK AT IT, IT LOOKS LIKE THERE'S A
AND SO THEN IN ADDITION, ARE YOU GETTING 500,000 A YEAR'S INTEREST ON THAT BOND? SO IS THE RIGHT WAY TO THINK ABOUT THIS BEING THE COMBINATION OF THE CONTRACTUAL ASSET MANAGEMENT FEE PLUS THE INTEREST ON THE SPONSOR BOND? YEAH, SO OUR, OUR COMPENSATION, UH, YOU'RE, YOU'RE RIGHT.
SO THOSE ARE THE TWO COMPONENTS OF O H G'S COMPENSATION.
UM, YEAH, THE ASSET MANAGEMENT FEE REALLY COVERS OUR COST IN, UM, HAVING STAFF AND, AND, UM, OVERSEEING THE ASSET PROPERLY AND DOING ALL THE REPORTING, MAKING SURE THE INSURANCE IS IN PLACE, TALKING TO THE BOND INVESTORS.
UM, SO THAT'S, THAT'S OUR COMPENSATION FOR OUR ONGOING WORK.
UM, AND THAT'S ACTUALLY A CONTRACT THAT D H F C CAN CANCEL IF YOU'RE UNSATISFIED FOR ANY REASON.
UM, AND THEN THE SPONSOR BOND IS MEANT TO REPLICATE WHAT WOULD'VE BEEN OUR EQUITY POSITION IN A TRADITIONAL STRUCTURE.
UM, THERE IS NO EQUITY ALLOWED IN THIS STRUCTURE.
THAT'S A FEATURE OF, OF THE, UH, HOW THE TAX EXEMPT BOND, UM, REQUIREMENTS ARE.
SO, SO, SO IF YOU LOOK AT THAT, THE I R R ON THAT IS ABOUT 7%, WHICH MM-HMM.
AND CERTAINLY MUCH LOWER THAN TYPICAL EQUITY I R R, WHICH WOULD BE CLOSER TO 15%.
SO WE, THAT'S KIND OF BEEN A STANDARD STRUCTURE IN THE TRANSACTIONS SO FAR.
UM, AS RATES HAVE GONE UP, UM, IT'S SORT OF STAYED FIXED, SO IT, IT'S
[00:40:01]
GOTTEN A BIT COMPRESSED.DOES THAT, SO THAT 10%, UM, RETURN YOU GET IS, IS SUBJECT TO AVAILABLE CASH FLOW, AND TO THE EXTENT THERE'S NOT AVAILABLE CASH FLOW, DOES THAT COMPOUND ANNUALLY OR DOES IT JUST JUST ACCRUE WITH NO, IS IT COMPOUND OR NON-COMPOUNDED? JUST, IT JUST ACCRUES WITH NO COMPOUNDING.
UH, AND DIRECTOR DOER HAD A QUESTION.
UM, A COUPLE OF THESE QUESTIONS REALLY MAY REFER TO OUR OWN TEAM, UM, BUT I'LL START WITH, UM, A QUESTION.
WHAT, WHAT DO WE KNOW ABOUT THE 22% WHO ARE NOT, UM, WITHIN THIS TARGET, UM, AFFORDABILITY RANGE? DO YOU KNOW WHETHER OR NOT THEY ARE, UM, WHAT, WHAT DO WE KNOW ABOUT ABOUT THE GROUP THAT DON'T MEET THE CRITERIA? UM, ONLY THAT THEIR INCOME WAS HIGHER THAN THE, UM, INCOME LIMITS.
I, I DON'T HAVE A LOT OF INFORMATION.
I WILL SAY ONE THING ABOUT THE ANALYSIS I, I DID TO GET THAT 78%.
SO THE SELLER HAS DATA ON THE INCOME EARNING RESIDENTS OF EACH UNIT.
IT'S, THEY DON'T HAVE THAT WITH THE NUMBER OF DEPENDENTS IN EACH UNIT.
SO I MAY BE UNDER COUNTING THE NUMBER OF PEOPLE, UM, WHO QUALIFY BECAUSE IF THEY HAVE DEPENDENTS, EVEN IF THEIR INCOME IS HIGHER, THEY MAY STILL FIT UNDER THE, THE CAP.
UM, BUT I WASN'T ABLE TO COUNT THAT UNTIL WE ACTUALLY GET INTO THE PROJECT.
SO, IN OTHER PROJECT, SO IN OTHER WORDS, YOU BELIEVE THIS TO BE A CONSERVATIVE ESTIMATE? YES.
AND IT THEN THAT FOLDS INTO A QUESTION TO KIND OF TIE, TIE INTO CHRIS LEWIS'S QUESTION, DO YOU KNOW WHAT PERCENTAGE OF CHILDREN ARE OCCUPYING THESE UNITS? UM, NOT TO A DEGREE OF PRECISION, BUT WHEN I TOURED THIS MORNING WITH THE PROPERTY MANAGER, I DID ASK THAT, AND THEY SAID THERE WERE NOT A LOT OF CHILDREN IN THE PROPERTY.
A LOT OF ONE BEDROOMS AND A LOT OF, UH, A LOT OF YOUNG PROFESSIONALS.
DO YOU HAVE A SENSE OF, DO THEY WORK NEARBY OR A SENSE THAT THEY'RE LIKE MAYBE WORKING AT THE HOSPITAL NEARBY OR NOT HAVING, UM, SHE, SHE MENTIONED THE HOSPITAL AS A, AS A BIG SOURCE OF EMPLOYERS.
SHE SAID, UH, A LOT OF, UH, A LOT OF MEDICAL WORKERS.
AND I'VE BEEN OUTTA TOWN, SO I HAVEN'T HAD A CHANCE TO DRIVE BY.
I ASSUME THAT IT'S KIND OF IN THE MIDST OF OTHER APARTMENTS NEARBY.
RIGHT? THIS IS NOT, NOT AS JUST SINGLE.
UM, AND THEN REGARDING QUESTIONS THAT I THINK HAVE TO DO WITH SOME OF THE PRESUMPTIONS, MAYBE YOU PROVIDED THEM OR MAYBE OUR STAFF DID.
HOW DO WE COME UP WITH THE ASSESSMENT OF WHAT THE MARKET VALUE WILL BE IN 15 YEARS, IN 35 YEARS? UM, SO I DID THAT MATH, UM, AND I, I JUST TRENDED OUT THE, UM, THE MIDDLE INCOME RENTS FROM OUR PROFORMA.
OUR PROFORMA GOES OUT TO 35 YEARS.
SO YOU CAN SEE THE N O I CALCULATION IN THE, IN THE PROFORMA THAT WE SUBMITTED TO STAFF.
UM, AND THEN I APPLIED A CAP RATE TO THAT, WHICH I BELIEVE YOU HAD IT AT LIKE FOUR, OR IT WAS FOUR SOMETHING.
I THINK IT WAS, IT WAS EITHER FOUR AND A HALF OR FOUR AND THREE QUARTERS, UM, TO GET A DISPOSITION VALUE.
SO MY PERSONAL BACKGROUND WAS IN RESIDENTIAL REAL ESTATE.
SO THESE ARE NUMBERS THAT I DON'T REALLY KNOW HOW TO CONFIRM IF THEY'RE ACCURATE OR NOT.
IT SEEMS TO ME THAT IT'S, UM, I MEAN, I, I GUESS I'LL RELY UPON OTHERS IN THIS GROUP WHO WOULD KNOW WHETHER THAT SEEMS, UM, ACCURATE OR NOT.
I, I'M, I'M SURPRISED TO, IT STRIKES ME THAT THIS SEEMS LIKE A FAIRLY INFLATIONARY, UM, UH, PROPERTY VALUE, UM, INCREASE, BUT PERHAPS I JUST, YOU KNOW, DON'T KNOW THE MATH IF ANYBODY ELSE HAVE AN OPINION ON THAT.
SO I REQUESTED THE, UH, FINANCIALS ON THE PROPERTY JUST TO UNDERSTAND, I WAS, WHO IS THIS FULLY PREPARED TO SEE? WHO IS THIS? THIS IS DIRECTOR ELLIS.
UM, I WAS DEFINITELY PREPARED TO SEE A, UH, YOU KNOW, ABOVE MARKET PRICE ON THIS DEAL.
I DON'T THINK ANY SELLER OF ANY PROPERTY IS GOING TO AGREE TO THIS TYPE OF, UH, CONTRACT PERIOD WITH, YOU KNOW, AN H F C VOTING ON IT, A CITY COUNCIL VOTING ON IT, THE TEXAS ATTORNEY GENERAL VOTING ON IT.
NO SELLER OF A REAL ESTATE OF THAT CALIBER WILL AGREE TO THAT KIND OF TURN, THAT KIND OF RISK WITHOUT SOME OVER MARKET PRICE.
SO WHEN I ASKED, EXCUSE ME, WHEN I ASKED KYLE FOR THE, UH, FINANCIALS, I JUST DID MY OWN CALCULATION.
THERE'S JUST SOMETHING WITH, THERE'S SOMETHING CALLED A CAP RATE THAT'S KIND OF USED IN THE, YOU KNOW, REAL ESTATE WORLD, WHICH IS BASICALLY THE PRICE OF THE ASSET DIVIDED BY HOW MUCH MONEY IT MAKES.
SO THAT'S IT, JUST THE N O I, HOW MUCH MONEY IT MAKES.
WHAT'S THE PRICE TYPICALLY IN, UH, THIS IS A CORE ASSET.
THIS IS AN INSTITUTIONAL CALOR ASSET.
[00:45:01]
PROBABLY, YOU KNOW, PREMIER INSTITUTIONS COME AFTER REAL ESTATE INVESTMENT TRUST.THE CAP RATES TEND TO BE PRETTY LOW, BUT THOSE CAP RATES TEND, YOU CAN DISAGREE WITH ME OR NOT, BUT I THINK 4% ISH IN TODAY'S RATE, 4.25, MAYBE IT'S A LITTLE BIT HIGHER.
YOU KNOW, WITH THE RISING INTEREST RATES.
UM, WHEN I DID MY OWN CALCULATION, WELL, I DID MY OWN CALCULATION AND I ADJUSTED FOR WHAT THE TAXES MIGHT BE.
IF A MARKET BUYER WERE TO BUY IT, IT WAS ABOUT 3%.
SO IT WASN'T A BELOW MARKET ON THE T THREE, ON THE TRAILING THREE ANNUALIZED AND THE T 12 EXPENSES, THAT IS HIGHER.
BUT I FELT LIKE THIS MARKET, I MEAN THIS AREA, I'VE TRACKED PRICES IN APARTMENTS.
THESE VALUES GO VERY HIGH VERY QUICKLY IN THIS TYPE OF CORE MARKET.
I DO THINK, YOU KNOW, WITH WHAT THE RENT INCREASES, WHAT THESE TYPE OF PROPERTIES GET ON RENT INCREASES, YOU WOULD GET TO A FOUR CAP ON THIS PRICE PROBABLY IN TH 2, 3, 4 YEARS.
SO, I MEAN, LOOK, WHO KNOWS, BUT I DO THINK IT ISN'T ABOVE MARKET PRICE.
ANY DEAL THAT'S GONNA COME BEFORE US AND THIS PROGRAM IS GONNA HAVE AN ABOVE MARKET PRICE.
AND THAT'S JUST A, I MEAN, THAT IS WHAT'S WE'RE GONNA HAVE TO ACCEPT.
I DIDN'T THINK IT WAS TOO BAD, BUT THAT, YOU KNOW, COULD BE IN THE EYE OF THE BEHOLDER.
YOU KNOW, IT'S SUBJECTIVE, BUT THAT'S JUST WHAT I FELT.
WELL, WHEN WE, I I, I, I WOULD CERTAINLY, UM, UNDERSTAND THOSE ASSUMPTIONS AND I DO THINK THAT TO BE ABLE TO HAVE A CLASS A PROPERTY IN THIS LOCATION MAKES A LOT OF SENSE.
SO, BELIEVE ME, I'M COMING AT THIS FROM BEING VERY SUPPORTIVE OF THE LOCATION, UM, AND VERY SUPPORTIVE OF THE IDEA OF ONE OTHER QUESTION, WHICH ALSO HAS TO DO, I THINK, WITH OUR STAFF.
SO IF WE'RE BUYING THIS, DOES THIS MEAN WE HAVE, AND I'M GONNA SH YOU KNOW, SHOW YOU THAT I'M FAIRLY NEW TO THIS COMMITTEE, BUT DOES THIS MEAN THAT WE NOW HAVE SPENT ALL OF OUR MONEY? OR DO WE, CAN, I MEAN, DOES THIS PRECLUDE US FROM DOING OTHER THINGS THAT WE'RE GONNA PURCHASE? I I'M NOT EXACTLY SURE CLEAR ON THAT MAP.
NO, THIS IS, WE HAVE THE, THE AUTHORITY TO ISSUE BONDS TO PAY FOR THIS EN ENTIRE TRANSACTION THAT DOESN'T USE ANY OF OUR CASH.
UH, SO IT'S, IT'S ESSENTIALLY BONDS THAT ARE BEING ISSUED FOR THE SOLE PURPOSE OF CREATING WORKFORCE HOUSING THAT ARE REPAID BY THE REVENUES OF THE PROJECT.
SO WE'RE EXTREMELY LUCKY IN THAT REGARD THAT WE, WE HAVE THE ABILITY TO DO THIS TYPE OF TYPE OF STRUCTURE WITHOUT, YOU KNOW, USING ANY OF OUR, YOU KNOW, DRY POWDER OR EVEN HAVING TO GET, YOU KNOW, ALLOCATION FROM THE STATE LIKE OUR OTHER, LIKE THE OTHER BONDS THAT WE ISSUE.
SO, UM, YEAH, SO WE DON'T HAVE TO USE ANY OF OUR OWN FUNDS ON THIS AND IT DOESN'T PREVENT US FROM DOING OTHER DEALS AS WELL.
'CAUSE THEY'RE ALL BASED ON A, ON THE, THE FINANCIALS OF THE PROJECT ITSELF.
THANK YOU ALL FOR ANSWERING ALL MY QUESTIONS.
UM, DIRECTOR PHARAOH, DID YOU HAVE A NEW QUESTION BECAUSE YOUR HAND WAS STILL RAISED? I THOUGHT, UH, I DID RAISE MY HAND AGAIN, BUT I THINK I'VE ANSWERED MY QUESTION, UH, READING THROUGH SECTION SIX A, SO I'M GOOD,
ANY OTHER QUESTIONS THAT I DIDN'T? LOOKS LIKE DIRECTOR PAGE HAS ANOTHER HAND UP.
OH, DIRECTOR PAGE IS, ARE YOU HAVING A NEW QUESTION? I DO.
UH, NUMBER ONE, I, I, I WANT TO THANK YOU, DIRECTOR ELLIS.
I THINK HE GAVE A VERY COGENT EXPLANATION AS TO WHY IT WOULD BE JUSTIFIED IN PAYING ABOVE MARKET FOR THIS ASSET.
MY QUESTION, I GUESS IS TO STAFF OR ANYBODY ELSE, DO WE HAVE AN ESTIMATE AS TO WHAT, WHAT THE PREMIUM IS? UM, I UNDERSTAND THE DIFFERENCE IN CAP RATES THAT DIRECTOR ELLIS DISCUSSED, BUT WHAT THAT TRANSLATES INTO AND HOW FAR ROUGHLY WE THINK THIS IS ABOVE, YOU KNOW, MARKET TODAY, IF A THIRD PARTY BUYER'S COME IN AND HAD TO PAY PROPERTY TAXES, ET CETERA.
OH, OH, LOOK, MINE WAS A REAL BACK OF THE NAPKIN.
I DID NOT RUN IT TO A MODEL, BUT I MEAN, THE WAY I CALCULATED IT WAS ABOUT A 10 TO $11 MILLION PREMIUM, WHICH, OKAY, LOOK, I GET IT.
BUT AGAIN, THAT'S JUST KIND OF, NO OWNER IS GOING TO AGREE TO THIS CERTAINLY, AND I CAN'T SEE HOW YOU CAN MARKET A DEAL IF IT'S JUST THROUGH A WHOLE BRO BROKERAGE PROCESS.
YOU KNOW, AND THEY HAVE ALL THESE INSTITUTIONAL INVESTORS THAT ARE DOING 30 DAY LOOKS WITH A, YOU KNOW, 60 DAY CLOSE AND ALL YOU'RE GOING, YOU'RE JUST GETTING A LENDER APPROVAL AND INVESTMENT COMMITTEE APPROVAL AND THEN, YOU KNOW, WHAT'S YOUR COMPANY CALLED AGAIN? OPPORTUNITY.
YOU KNOW, THEY GO AND SAY, HEY, WE GOT THIS SIX MONTH CLOSE PERIOD, BUT OH, BY THE WAY, WE GOTTA GO TO VOLUNTEER BOARDS, WE GOTTA GO TO CITY COUNCILS AND WE GOTTA GO TO, YOU KNOW, TEXAS ATTORNEY GENERAL.
WE DON'T KNOW HOW IT'S GONNA WORK.
AND YOU COULD LOSE ALL THE, YOU KNOW, YOU COULD ALL LOSE ALL THESE BIDS ON YOUR PROPERTY THAT GETS YOU THE RETURN THAT YOU'RE OKAY WITH.
I MEAN, I, I DON'T SEE ANY OTHER ALTERNATIVE AND IT'S JUST,
[00:50:01]
IT'S JUST MY OPINION.CAN I, CAN I ADD SOMETHING? I WOULD, YEAH, GO AHEAD.
I WOULD ADD, I WOULD ADD TOO, DIRECTOR PAGE.
WE HAVE, YOU KNOW, HILLTOP ON AS A FINANCIAL ADVISOR AS MM-HMM.
THIS IS AN OFF MARKET DEAL, BUT USUALLY WE WIN BY A MUCH SMALLER MARGIN THAN, UM, THAN THAT USUALLY A MILLION OR TWO.
UM, AND THE, UH, THE OTHER THING I WANTED TO MENTION IS THAT WE'LL HAVE AN APPRAISAL AS PART OF THIS DUE DILIGENCE PROCESS.
YEAH, THAT WAS GONNA BE MY NEXT, UH, QUESTION.
AND THEN THIS, THIS IS A QUESTION FOR KYLE, IS WHAT IS THE, UM, HOW DOES WHAT WE'RE DOING HERE DIFFER FROM THE MANDATE OF THE P F C? IT IS, IT'S NOT MUCH DIFFERENT.
UH, I WILL SAY THAT THE, THE P F C COULD, COULD COME IN AND DO THIS SAME STRUCTURE.
UH, I WOULD, THE REASON THIS IS BEFORE THE H F C BOARD IS BECAUSE, UH, I, THE, THE EDUCATION THAT THIS BOARD HAS RECEIVED UPON THIS, THIS FINANCIAL STRUCTURE, UH, IS, HAS BEEN MUCH MORE SUFFICIENT THAN, THAN WHAT I'VE GOTTEN WITH THE P F C BOARD.
WE'VE ACTUALLY BEEN BRIEFED, UH, BY OTHER, BY OTHER PEOPLE PROPOSING ACQUISITION STYLE PROJECTS HERE.
UH, THAT JUST HASN'T COME TO THE P F C BOARD.
UM, BUT WE ALSO CAN REQUIRE, 'CAUSE THIS IS, UH, 90% INCOME RESTRICTED BECAUSE OF THE HOUSING FINANCE CORPORATION RULES, WHEREAS THE P F C, IT, IT MAY ONLY, IT WOULD PROBABLY ONLY BE 50 50, UH, 50% INCOME RESTRICTED AND 50% MARKET BASED ON THE GENERAL TERMS THAT YOU SEE ON THOSE, THOSE DEALS.
SO THE, THERE IS, IT IS KIND OF A GRAY AREA.
I, I'M NOT GONNA GONNA LIE THAT, THAT, BUT IT'S STILL, THIS IS STILL THE MISSION OF, OF THIS, UH, CORPORATION TO PROVIDE AFFORDABLE HOUSING.
SO I THINK THAT, YOU KNOW, WE SHOULD CERTAINLY BE SUPPORTIVE OF IT.
WE HAVE THE CAPACITY TO DO THIS RIGHT NOW.
SO, UM, THAT'S WHY IT IS IN FRONT OF THIS BODY TODAY.
AND SO, YEAH, I GUESS JUST FOLLOWING ON THAT, AND I THINK YOU'RE ANSWERING MY QUESTION, IS THAT FROM A POLICY STANDPOINT, THE CITY COUNCIL HAS BEEN VERY, YOU KNOW, THE P F C WAS, YOU KNOW, PUT TOGETHER BECAUSE CITY WAS SUPPORTIVE OF A POLICY WHEREBY WE WOULD TAKE PRO, YOU KNOW, TAKE PROPERTIES OFF THE TAX ROLL AND PROVIDE AFFORDABLE HOUSING.
SO THIS, IN YOUR OPINION, IS THIS CONSISTENT WITH, UH, CURRENT CITY POLICY COUNCIL POLICY? YEAH, I WOULD.
I MEAN, ANY WAY WITH THAT WE CAN GET SO LONG AS AS COUNCIL, AND OBVIOUSLY THEY'LL BE BRIEFED ON, ON THIS, THIS ITEM AT HOUSING COMMITTEE AND THEN AT FULL COUNCIL.
UM, IF THERE THE IDEA OF PULLING A PROPERTY OFF OF, UH, THE PROPERTY TAX RULES IN ORDER TO CREATE INSTANT AFFORDABILITY, UM, SHOULD BE SUPPORTED ON, ON BOTH, BOTH FROM BOTH CORPORATIONS.
I MEAN, WE DO THIS OR WE WERE TRYING TO DO THIS ON THE, UH, ASH CREEK DEVELOPMENT THAT WE HAD WHERE MM-HMM.
SO, UM, IT'S KIND OF A SIMILAR STRUCTURE, BUT WE'RE NOT PUTTING TAX CREDITS ON THIS, THIS DEVELOPMENT.
IT'S JUST, IT'S ALREADY BUILT, IT'S, IT'S BRAND NEW CONSTRUCTION 2017 AND, UH, READY TO GO.
SO I THINK THAT THE POLICY, SO LONG AS COUNCIL DOES SUPPORT THIS, I MEAN, OBVIOUSLY THEY HAVE TO GIVE THEIR BLESSING.
UM, BUT TO BE ABLE TO, TO BE ABLE TO PROVIDE, LIKE I SAID, WORKFORCE HOUSING INCOME RESTRICTED UNITS IN THIS AREA, I WOULD, I WOULD HOPE THAT WE CAN, UH, GET SUPPORT FOR THAT FOR AN IRREPLACEABLE LOCATION, I GUESS, WELL WITH THIS PROGRAM, WHICH IS KIND OF COOL.
I MEAN, WHEREAS LIKE A LITECH DEAL, I MEAN, I GUESS, YOU KNOW, THE EXCESS CASH FLOW COMES BACK TO A CITY CHARTERED ORGANIZATION, YOU KNOW, I MEAN, YES, YOU GIVE THE REAL ESTATE TAX RELIEF, BUT WE'RE GETTING THE EXCESS CASH FLOW BACK ON THE DEAL.
SO I MEAN, I GUESS, YEAH, NO, I MEAN THERE'S, THAT'S ALSO A POSITIVE OF THIS.
I MEAN, WELL, I MEAN, I GUESS WE DO GET SOME ON THE, I I GUESS WE DO GET SOME ON LITECH DEALS IF WE'RE A PARTNER IN THE DEAL, BUT WE, YEAH, IF WE'RE A PARTNER, IT'S USUALLY, WE GENERALLY GET 25% OF THE SALES PROCEEDS.
SO, BUT WE'RE THIS, WE GET 100% AFTER THAT, THIS, THIS, WE OWN IT DAY ONE, OBVIOUSLY WE HAVE TO WAIT TILL YEAR 15 BEFORE WE CAN DO ANYTHING WITH THE BONDS.
HOWEVER, MOST, MOST OTHER CITIES THAT ARE DOING THIS, LIKE
[00:55:01]
SAN ANTONIO FOR EXAMPLE, IS, IS DOING ESSENTIAL FUNCTION BONDS, UH, IN THE HOPES OF, IN 15 YEARS TO BE ABLE TO ADD EVEN DEEPER AFFORDABILITY AT THE PROPERTY BECAUSE YOU CAN LOWER YOUR, YOUR, YOUR DEBT LOAD, I GUESS, AND, AND CHARGE LOWER RENTS.SO THAT'S KIND OF THE, THE STRATEGY FOR, FOR OTHER AREAS.
I MEAN, WE'LL SEE IT YEAR 15, WHAT'S THE BEST OPPORTUNITY HERE AND WHAT THE, THE WILL OF, I GUESS, COUNCIL AND THE COMMUNITY AND EVERYTHING, SO WE CAN REEVALUATE THEN.
BUT I, I STILL THINK IT'S A, IT'S A TRANSACTION THAT HAS, HAS GREAT MERIT AND SOMETHING WE SHOULD BE SUPPORTING, WHETHER IT'S THE P F C OR THE H F C.
SO MY, I GUESS MY LAST QUESTION, YOU TOUCHED ON THIS, IS IT, MY IMPRESSION IS IN THE LAST COUPLE YEARS, AND I KNOW THIS HAS BEEN DONE A LOT IN CALIFORNIA, BUT IN TEXAS IT WAS A RELATIVELY, IT'S A RELATIVELY NOVEL STRUCTURE, BUT IT HAS BEEN DONE.
CAN YOU CONFIRM IT'S BEEN DONE BY OTHER, UH, IN OTHER JURISDICTIONS IN TEXAS IN THE LAST, UH, 12 TO 18 MONTHS? YEAH, IT HAS AND AND WE'RE FORTUNATE THAT THOSE DEALS WERE CONSUMMATED IN WITH THE GUIDANCE OF, UH, OUR BOND COUNCIL, BRACEWELL AND ALSO, UH, CHAPMAN AND CUTLER, OUR PARTNERSHIP COUNCIL BOTH WORKED ON SIMILAR STYLE DEVELOPMENTS.
SO THEY'VE, THEY'VE ALREADY, THE OTHER, OTHER CORPORATIONS AND AUTHORITIES HAVE RUN ALL THE TRAPS WITH THE ATTORNEY GENERAL.
SO, UH, WE CAN COME IN AND KIND OF JUST, YOU KNOW, BUILD OFF OF OFF OF THAT PROGRAM.
SO IT SHOULD BE A LITTLE BIT EASIER FOR US.
AND WE HAVE CONFIRMATION THAT THIS IS, DOESN'T RUN AFOUL OF STATE LAW OR THIS THE FINANCE CORPORATION STATUTE.
SORRY,
UH, SO IT GOES TO THE, THE BOND INVESTORS WOULD SEE IT THROUGH THE BOND REPORTING PORTAL, UM, AND WE PROVIDE IT TO YOU.
THERE'S NO, THERE'S NO OTHER, THERE WILL BE.
SO I, I MEAN, AS WE NEGOTIATE THE DEFINITIVE DOCUMENTS, SO THIS MIGHT BE JUST THROWING STUFF ON THERE, BUT THE WAY WE, WE DO IT WITH THE P F C BECAUSE THERE IS NO STATE AGENCY THERE, BUT WE HAVE THE REGULATORY AGREEMENT WHICH OUTLINES WHAT INCOME VERIFICATION IS AND HOW THAT WORKS AND, AND HOW THAT LOOKS.
UH, WE ANTICIPATE WE WILL HAVE, I'M ASSUMING THIS WILL BE OKAY, BUT, UH, WE'LL, WE'LL HAVE A THIRD PARTY AUDITOR COME IN AND LOOK AT TENANT FILES TO MAKE SURE THAT THERE'RE THERE ARE IN COMPLIANCE.
BECAUSE IF THEY'RE NOT IN COMPLIANCE, THEN WE'RE NOT ACTUALLY DOING THE AFFORDABLE HOUSING, PUBLIC PURPOSE, GOVERNMENT PURPOSE THINGS WE'RE, WE'RE SUPPOSED TO BE DOING.
SO, SO THERE IS SOMEONE AT THE CITY LOOKING AT THE COMPLIANCE, CORRECT.
AND HOPEFULLY WE HAVE SOMEONE JOIN US ON OUR STAFF.
THIS IS A PUBLIC MEETING, SO IF ANYBODY WOULD LIKE TO, TO JOIN, UH, WORKING FOR THE CITY, UH, WE WOULD LOVE TO HAVE SOMEONE COME JOIN US TO DO, UH, INCOME VERIFICATION JUST ON OUR, OUR OWN OWN SIDE.
WE WILL BE DOING THAT, WE'LL, WE'LL HAVE STAFF HELP US OUT ON THAT, BUT, UM, THAT'LL BE PART OF THE, THE PROGRAM AS WELL, BUT LIKE A THIRD PARTY AUDIT FOR US TO HAVE AND PROVIDE TO D AD AS WELL TO MAKE SURE THAT THEY ARE COOL WITH GIVING US THE PROPERTY TAX EXEMPTION.
WE'RE DOING WHAT WE SAY WE'RE DOING, WHAT WE SAY WE'RE DOING, UH, THAT'S ALSO THERE TOO.
AND SO THERE'S A LOT OF INCENTIVE TO YEAH, NO, I, I, I GET IT BY THE WAY.
SO, YOU KNOW, LIKE IN A LITECH DEAL, YOU KNOW, YOU'VE GOT T H C A UNDERWRITING IT, BOND TAX, CREDIT INVESTOR UNDERWRITING IT.
UM, THERE'S JUST A LOT OF EYES FROM, I REMEMBER WHO HAS UNDERWRITTEN THE DEAL? IS IT JUST BEEN THE BOND, UH, THE BOND UNDERWRITER? OR IS THERE ANY OTHER PARTIES THAT HAVE KIND OF BEEN LOOKING AT THE FINANCIALS AND, YOU KNOW, SURE THERE IS.
IT'S, UH, I, WE HAD IN INTERNAL CALLS PRIOR TO THIS AND WE THOUGHT THAT IT, IT WOULD, UM, BECAUSE OF THAT FACT THAT WE CAN, YOU KNOW, HAVE OUR OWN UNDER UNDERWRITE DONE OF THE PROPERTY TO MAKE SURE THAT EVERYTHING CHECKS OUT AND MA IS, IS MAKES SENSE SO THAT WE JUST HAVE THAT EXTRA LAYER OF COMFORT, UH, SIMILAR TO WHAT WE DO WITH OUR NOTICE OF FUNDING AVAILABILITY HOME AND C D B G PROJECTS.
SO WE CAN UNDERTAKE THE SAME TYPE OF OF UNDERWRITING HERE.
SO LOOK, I'M, I'M REALLY SUPPORTIVE OF THIS.
I REALLY THINK LITECH HAS KIND OF MAXED OUT, UH, AND ITS ABILITY TO HELP THE GROWING DEMANDS OF, YOU KNOW, RENTERS IN THE STATE OF TEXAS.
WE DESPERATELY NEEDED AN ALTERNATIVE.
I THINK THIS PROGRAM THAT JUST CAME ON IN THE NEXT 12 MONTHS, IN THE LAST 12 MONTHS, UH, IS, I MEAN, IT'S A GODSEND.
UH, NOT SAYING THE STRUCTURE, I WOULD SAY IS PERFECT, BUT IT CER LITECH CERTAINLY ISN'T EITHER.
SO, UH, YOU KNOW, I, I JUST WANNA MAKE SURE
[01:00:01]
THAT EVERYBODY KNOWS THAT LITECH IS, IS AN EXTREMELY IMPORTANT TOOL.AND WE STILL NEED TO RE I AM, I'M VERY SUPPORTIVE OF
I'M NOT FASHION LITECH, BUT I MEAN, IT'S JUST LIKE BOND RESERVATIONS CAPPED OUT.
YOU, YOU KNOW, IT'S JUST LIKE, AND NOT THAT THE WHOLE MISSING MIDDLE, I MEAN THAT IT JUST LIKE, IT'S DEEP AFFORDABILITY WITH LITECH AND YOU KNOW, THERE'S JUST CAPS, YOU KNOW, THERE'S ONLY SO MUCH WE CAN DO WHERE THIS SEEMS MORE UNLIMITED AND IT DEFINITELY COVERS JUST A, AN ENORMOUS NEED.
SO I THINK, UH, IT'S A GREAT PROGRAM.
THANK YOU FOR BRINGING THIS BEFORE US.
UH, SO YEAH, LOOKING FORWARD TO MORE.
UM, OH, DIRECTOR LEWIS, WAS THAT A NEW QUESTION? YES.
UM, YOU KNOW, AS I'M STILL LEARNING, SO I, I GUESS THIS IS FOR, UH, KYLE OR AARON OR WHOEVER ELSE.
SO IN REGARDS TO, I SEE AS WE RECEIVE, UM, KIND OF THE NET, UM, PROCEEDS THAT WE HAVE THE OPTION EITHER TO, UH, USE THAT TO HUNDRED PERCENT TO PAY OFF THE BONDS OR NOT.
SO MY QUESTION IS, UH, REGARDING THE A H O C, WHEN IS THERE A, I GUESS WE COULD, WHEN, WHEN, UM, ARE, WHEN ARE THERE SITUATIONS WHERE YOU'LL NOT USE A HUNDRED PERCENT OF THE, UM, PROCEEDS TO PAY OFF THE BOND? JUST OUTTA CURIOSITY.
WAS THAT A A, IT'S A QUESTION FOR US.
I, I THINK HE'S TALKING ABOUT, YOU KNOW, WHETHER WE'LL USE A HUNDRED PERCENT OR 85%.
I THINK IT'S WHEN DO WE DECIDE THAT, I THINK IT'S THE CONCEPT OF HEY, MAYBE NOT USING ALL A HUNDRED PERCENT THE EXCESS CASHFLOW TO PAY DOWN THE BONDS.
IT RETAINS SOME OF IT AND WE CAN MAYBE DEDICATE SOME OF THOSE FUNDS TO OTHER PROGRAMS FOR THE H F C.
IS IT DIRECTOR LEWIS? DID I GET THAT? MAYBE RIGHT.
YOU DEFINITELY SIMPLIFIED A, UH, QUESTION.
AND I THINK THAT WAS SORT OF ON THE LINES OF WHAT HE WAS ASKING EARLIER AS WELL IS MAYBE EXCESS CASHFLOW WITH THE D H F C, YOU KNOW, OUR MONEY AND OTHER PROGRAMS THAT WE HAVE OUTSIDE OF THIS PROJECT.
THAT'S KIND OF WHAT CAN WE DO THAT, UM, CAN I MAKE A COMMENT ABOUT THAT? YEAH.
UM, SO THAT, UM, I WASN'T AWARE OF THAT, UH, THAT CONSIDERATION BEING CONSIDERED BY D H F C.
UM, I WOULD HAVE TO RUN IT THROUGH OUR MODEL BECAUSE DIVERTING 15% OF THE CASHFLOW AWAY FROM REPAYING THE PRINCIPAL ON THE BONDS WILL PUSH OUT THE REPAYMENT DURATION.
AND THAT MAY THEN NOT UNDERWRITE.
SO WE MAY NOT, ACTUALLY, MAY NOT, I, I WOULD SAY PRETTY LIKELY 'CAUSE I, I'VE TRIED THAT IN MODELS BEFORE.
UM, THAT WILL PROBABLY NOT WORK FROM AN UNDERWRITING PERSPECTIVE.
BUT I GUESS WE COULD SEE IF THERE IS ANY PERCENT THAT WOULD WORK, RIGHT? UM, I, YES, I CAN, I CAN TRY.
I EXPECT YOU, THE WAY THESE DEALS WORK IS PUTTING, SO YOU'RE, YOU'RE BASICALLY TAKING OUT OF ONE OF YOUR POCKETS OF REPAYING YOUR PRINCIPLE INTO, UM, TAKING THE CASH OUT OF THE DEAL.
AND THE PROBLEM WITH THAT IS IT THEN COMPOUND HAS A COMPOUNDING EFFECT.
'CAUSE YOU'RE CONTINUING TO GENERATE INTEREST ON THE PRINCIPLE YOU'RE NOT REPAYING.
UM, AND IT, IT HAS A, A VERY PROBLEMATIC IMPACT ON THE END OF THE MODEL.
SO YOU DON'T GET PAID OUT BY YEAR 34, YEAR 35, OR IT DOESN'T RIGHT.
AND THE BOND INVESTORS WON'T, THEN THE BOND INVESTORS WON'T ACCEPT IT AND SO THEY WON'T BUY THE DEAL.
AND THEN WE HAVEN'T DONE ANYTHING REALLY.
YEAH, THAT, I MEAN, THAT WAS INCLUDED BECAUSE WE WANT, BECAUSE IT IS TECHNICALLY AN OPTION IF THERE'S NOTHING AGAINST THE RULES, STATUTORY RULES, THAT YOU COULD DO THIS.
BUT IF IT DOESN'T PENCIL, THEN IT DOESN'T.
SO IT'S HOW IT MODELED OUT IS THE REASON WHY.
AND I THINK WE CAN CERTAINLY RUN THAT AND THEN SEE WHAT WE CAN HAVE.
AND THEN IF IT NEEDS TO BE, YOU KNOW, SOME SORT OF FINANCE COMMITTEE TYPE MEETING WHERE WE, WE GET TOGETHER AND, AND REVIEW WHAT THAT IS AND MAKE A RECOMMENDATION TO THE BOARD OR WHATEVER COMING INTO THIS MEETING.
I WAS HOPING THAT WAS AN OPTION.
THAT'S KINDA WHY I MENTIONED IT EARLIER.
IF IT DOESN'T FOOT, IT DOESN'T FOOT.
SO, UM, WE CAN PROBABLY DISCUSS THAT AT A LATER.
I MEAN THAT'S, I MEAN THIS IS WHY, WE'LL, LIKE, THERE'S STILL DUE DILIGENCE TO BE DONE.
UH, WE CAN RUN THE MODELS AND THEN WE CAN ALSO GET CON CONFIRMATION FROM AN UNDERWRITE THAT SAYS, YEAH, YOU GUYS CAN'T TAKE 15% OF THE CASH FLOW TO, I MEAN, AND THE ONLY REASON I'M, I WAS SUPPORTIVE OF SOMETHING LIKE THAT IS 'CAUSE LOOK, I MEAN, WE ARE TAKING OWNERSHIP OF THE ASSET, THE DH F C YOU KNOW, AND THERE'S JUST CERTAIN RISKS TO, THIS COULD GO WRONG.
I DON'T KNOW WHAT WOULD, BUT I MEAN IT COULD AND IT WOULD BE, YOU KNOW, WE'RE THE OWNERS AND SO THE ONLY REAL MONEY, 'CAUSE WE CAN'T TAKE A FEE BECAUSE OF, I FORGOT WHAT THE REASON TOLD ME, BECAUSE WE'RE THE ISSUER, WE'RE THE ISSUANT.
SO WE CAN'T PAY OURSELVES A FEE PER THE RULES, GET IT.
YOU KNOW, IT'S JUST THIS LITTLE, IT'S KINDA A MARGINAL ASSET MANAGEMENT FEE WE'RE GETTING.
AND SO IT'S LIKE FOR THE RISK WE'RE TAKING OF TAKING OWNERSHIP OF THE DEAL, NO REAL MONEY FOR A LITTLE WHILE IS COMING IN, YOU KNOW, AND THAT JUST SEEMED A LITTLE BIT DISJOINTED.
BUT LOOK, I'M, IN NO WAY DO I THINK THAT SHOULD PREVENT US FROM DOING THIS DEAL WHATSOEVER.
BUT THAT'S WHY THE RETENTION OF SOME CASH FLOW SHOP MIGHT BE NICE.
BUT IF, AGAIN, IF IT DOESN'T MODEL, I'M, I DON'T WANT THAT JEOPARDIZING THE DEAL.
SO, SO I'M, I'M HAPPY TO RUN IT AND I WILL, AND I'LL GET BACK TO KYLE.
[01:05:01]
UM, I'LL ADD THOUGH, SO MOST OF THE PRINCIPLE AMORTIZATION HAPPENS AFTER A YEAR 15 ANYWAYS.SO IF YOU WERE TO ADD THAT, YOU WOULDN'T REALLY SEE MUCH THROUGH YOUR 15.
AND THEN AFTER 15 YOU HAVE THE RIGHT TO REFINANCE OR TAKE CASH OUT ANYWAYS.
UM, SO I'D LIKE TO PUT A MOTION ON THE FLOOR IF I COULD GET A MOTION IN A SECOND.
DIRECTOR ELLIS MAKES THE MOTION.
SO WE HAVE A MOTION ON THE FLOOR.
UM, SO I'M GONNA GO THROUGH, UH, EACH PERSON, UM, I VOTE IN FAVOR, VICE PRESIDENT NISHKE IN FAVOR, SECRETARY GARCIA IN FAVOR, UH, TREASURER MARTINEZ, DIRECTOR PAGE IN FAVOR, UH, DIRECTOR VERNON.
IN FAVOR, DIRECTOR ELLIS FAVOR, UH, DIRECTOR PHARAOH.
I'M ALSO IN FAVOR, DIRECTOR LEWIS IN FAVOR, DIRECTOR DOER.
WELL PASSES, RIGHT?
UM, SO THAT, UH, CONCLUDES, UH, WHAT'S ON THE AGENDA.
UM, AND, UH, I, I NEVER KEEP TRACK OF WHEN OUR NEXT MEETING IS, BUT THE SECOND TUESDAY IN AUGUST, UH, WILL BE OUR NEXT MEETING.
AND, UM, AND I THINK THAT, UH, THAT WE CAN GET SOME INFORMATION THEN KYLE ON THE SINGLE FAMILY.
YEAH, THAT'S OUR, THAT'S OUR HOPE.
UM, I KNOW THAT CERTAIN, UH, BOARD MEMBERS MAY OR MAY NOT BE IN TOWN THERE, SO IF WE NEED TO MOVE IT A WEEK LATER, UH, PLEASE BE ON THE LOOKOUT FOR THAT.
WE'LL CERTAINLY LET THE PUBLIC KNOW.
BUT, UM, AS IT STANDS NOW, WE ARE HOPING TO HAVE, UH, THAT INFORMATION READY TO GO AND, AND, AND HOPEFULLY APPROVED OR AT LEAST DISCUSSED AND GET SOME TWEAKS AND WE'LL COME BACK WITH, WITH THE PROGRAM.
UH, BUT THAT'LL BE AT THE AUGUST 9TH MEETING.
SO, UM, AND THEN WE ALSO HAVE JUST, I THINK WE'RE, WE'RE GOING, WE'RE LOOKING FAIRLY WELL TO RECEIVE A, UH, UH, PRIVATE ACTIVITY BOND RESERVATION FOR THE PAR MOORE UNIVERSITY HILLS DEVELOPMENT.
SO IN ORDER TO HAVE THAT MOVE FORWARD, WE'LL, WE'LL BE RECEIVING, UH, AN M O U FROM J P I, WHICH IS THE SPONSOR ON THAT DEAL.
SO I'M HOPING THAT HOPEFULLY WE CAN GET CONFIRMATION OF THE BONDS IN JULY AND THEN, UH, TAKE SOME ACTION IN AUGUST TO HOPEFULLY CLOSE BY THE END OF THE YEAR.
AND I WILL CALL THIS MEETING ADJOURNED AT ONE 11.
AND YOU KNOW, I KNOW WE, WE WERE COMPETING WITH, UH, WITH ANOTHER HEARING.
I THINK THAT, UH, MAYBE SOME PEOPLE ARE TUNED INTO.
ANYWAY,