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This is Part 1 of the analysis of all Chapter 394 workforce housing deals from the Strategic Housing Finance Corporation of Travis County (SHFC). This report covers deals ranging from May 2025 to March 2024.

SHFC May 8, 2025

MOU April 10, 2025

District: 4 | North Central Austin

MOU January 17, 2025

District: 3 | South Central Austin

MOU December 5, 2024

District: 1 | Northeast Austin

MOU April 23, 2024

District: 1 | Northeast Austin

SHFC 5/8/25

The May 8, 2025 Strategic HFC meeting focused on recent updates on various completed or upcoming projects plus some general administrative information and local market performance. Here are the main points:

Two senior housing properties (Cambridge Villas and Villages at Fiskville) and scheduled for board tours after the meeting. Executive Director Dianna Grey noted that Cambridge Villas is "actively being marketed right now" and might return to the board next month for consideration of a potential transaction.

Tenants of NRP’s Residences at Decker, a 4% LIHTC bond deal, organized with support from BASTA (tenant advocacy group) and submitted concerns to Strategic HFC in early April 2025. The initial meeting was held April 24th between tenants, BASTA, and NRP Group (developer/property manager).

Issues centered on "ongoing management practices" rather than unit conditions in the 4% LIHTC product. Grey clarified to Commissioner Gomez that "we are not talking about issues that are similar to Rosemont in terms of condition of units."

The board did not fully discuss specific tenant concerns because the agenda item about "lease violations" wasn't reached during the first tenant/developer meeting. A follow-up meeting is scheduled for May 23rd, and NRP Group will present to the board in June.

Decker was also noted as having an above-target turnover rate (over 5% monthly).

The sale of the 4% LIHTC bond deal at 12151 North IH35 sale closed in March 2025, bringing over $7 million in revenue to Strategic HFC. Finance Director Katie Adams called this "a windfall" as it wasn't budgeted for 2025.

The property had significant issues before closing:

Alex Radtke, Real Estate Director, attributed these issues to the "very extended timeline" of closing, noting that "property management was really under a lot of strain to keep people in units because occupancy mattered a lot in trying to get to close."

A member of the public reported the city is considering rezoning that would allow the current property to be demolished for a "90 ft building with very very minimal affordable units and none of which are comparable to the affordability levels of the existing property."

The 290-unit naturally occurring affordable housing property in West Austin is facing serious haadwinds.

Residents have formed a tenant association and are working with an affordable developer (Vecino Group) to explore preservation strategies. The representative indicated this could be "the first of many apartment complexes in the Far West area that will be demoed."

The deal’s District Council member Marc Duchen also is "Chasing down a lot of leads," to inject affordability into the new deal in "a conversation with the Austin Housing Finance Corporation to look at HFCs and PFCs."

Ultraground Report on the deal currently stalled in the rezoning process:

Briefly mentioned as coming back to the board in June for "final documents," suggesting this project is moving forward in the development process.

Strategic HFC is implementing a new portfolio tracking tool (Lobby CRE) that integrates with property management software across their 17 properties. Radtke reported this will allow them to automatically access property data without having to manually collect it.

Key metrics being tracked:

Five properties are not yet included in the system, including three Pedcore partnerships and two Rise partnerships.

The Austin area delivered 34,585 new multifamily units in 2024 with approximately 30,000 more projected in 2025. This has caused rising vacancy rates and softening rents—to the point where "restricted rents in affordable housing projects are now effectively above market rent."

New construction starts fell to only 7,500 units in 2024, suggesting a potential return to constrained supply by 2027.

Director Gonzalez Altamirano argued that Strategic HFC should aim for a portfolio of about 14,000 units over the next 10 years to have sufficient market influence. This would require adding approximately 1,400 units annually, or "about five [developments] per year."

He also emphasized the need for geographic diversification, noting that Strategic HFC currently has "real concentration" in certain submarkets and should "find a way to influence more different submarkets."

MOU 4/10/25

This Austin deal proves 50% AMI units can work financially with the right structure. Midtown Highline, a 2024-built, 163-unit multifamily product developed and owned by Urban Genesis, was approved to go tax exempt with a workforce partnership between the Strategic Housing Finance Corporation of Travis County (SHFC) and Civicap Partners. The deal is the first one done under Strategic’s new workforce housing terms.

The product comprises of two five-story podium-style buildings completed in January 2024 after a 25-month construction period. The buildings sit on 1.93 acres at 418 & 604 East Highland Mall Boulevard with a total development cost of $37.1 million (approximately $228,000 per unit).

Unit amenities include stainless steel appliances, quartz countertops, nine-foot ceilings, walk-in closets, and in-unit washer/dryers. Community features include a landscaped courtyard, controlled-access garage, air-conditioned corridors, coworking spaces, rooftop lounge, bike storage, and a dog park. The ground floor includes commercial space for lease, which will be placed in a separate condominium regime from the residential portion.

What makes this product noteworthy is its exclusive one-bedroom unit mix combined with a significant affordability range: The project designates 10% of units at 50% AMI, 30% at 60% AMI, 20% at 80% AMI, 15% at 100% AMI, 15% at 120% AMI, and just 10% as unrestricted market rate. This depth of affordability is notable because it's driven by Strategic HFC's new requirement that 60% of the abated tax value must be returned in reduced rents. The 15-year tax exemption value is approximately $10.96 million, with the public benefit (including reduced rents and fees) calculated at $10.3 million, yielding a 94% ratio before bonus points.

The District 4 North Central Austin area has strong access to transportation (near I-35, US-290, and US-183), proximity to the Austin Community College Highland Campus, and reasonable distance to downtown Austin and the airport.

The partnership structure follows a typical HFC model but with some evolving terms worth noting. Strategic Housing Finance Corporation of Travis County (Strategic HFC) created two single-purpose LLCs: SHFC Midtown Highline GP LLC serves as the general partner in the ownership entity, while SHFC Midtown Highline Land LLC holds the land and ground leases it to the partnership. Civicap Partners, a Houston-based firm with $1B+ in assets under management, serves as the developer partner. This project marks their first partnership with Strategic HFC but their 12th public-private housing partnership in Texas.

The Midtown Highline deal employs a structured cash flow waterfall that prioritizes HFC fees before distributing remaining cash to partners. Annual tax exemption administration fee ($58,820 initially with 3% annual escalator) is paid at the top of the waterfall, followed by the partnership management fee ($16,300 initially with 3% annual escalator) from remaining cash flow. Both fees accrue with 3% interest annually compounding if net cash flow is insufficient in any year, creating a potential deferred payment liability for the partnership. Asset management fees to Civicap Partners are paid in third position from remaining cash flow. After all priority distributions, remaining net cash flow splits with just 4% to Strategic HFC and 96% to Civicap Partners as the Special Limited Partner. The tiered structure creates a relatively conservative position for Strategic HFC, prioritizing fixed fees rather than relying heavily on property performance.

The disposition and exit provisions include mechanisms that balance developer flexibility with HFC oversight and participation. Strategic HFC receives 1% of gross sales price or loan proceeds upon sale or refinancing (estimated at $379,492 over the partnership term). Civicap Partners gains the right to market the project for sale following the 10th anniversary of closing. The Special Limited Partner cannot sell or assign its interests in the partnership without written consent from the General Partner (Strategic HFC), which may be granted or withheld at its sole discretion. The Special LP is further prohibited from selling or assigning its interest during the first five-year period following closing. If Civicap determines to cause the partnership to sell to a third party, Strategic HFC (or its designated affiliate) has a right of first refusal to acquire the project on the same terms as the third-party offer. As of the closing date, Strategic HFC entities have an option to acquire the interests of the Special LP and an option to acquire the project at fair market value. The purchase price must be sufficient to return to the Special LP all capital contributions with an 18% IRR, pay off outstanding loans, and cover all taxes and expenses related to the option exercise.

The total estimated revenue to Strategic HFC over the 15-year partnership period is $2,640,385, consisting of $1,872,655 (71% of total) from the acquisition fee, tax exemption administration fees, and partnership management fees, and $767,730 (29% of total) from the 4% share of net cash flow distributions and 1% participation in sale/refinance proceeds. The first-year revenue to Strategic HFC totals $271,620, comprised of $170,500 origination fee, $16,300 partnership management fee, $58,820 ground lease fee, and $26,000 in cash flow distributions. The emphasis on upfront and annual fees over residual cash flow participation creates a revenue profile for Strategic HFC with approximately 71% of projected returns coming from fixed or escalating fees rather than property performance.

The project received an enthusiastic reception, particularly regarding its affordability profile. Dianna Grey, Executive Director, highlighted its significance:

Director Julio Gonzalez expressed genuine excitement about the quality of the development.

Jessica Jones from Civicap emphasized their readiness and experience, stating they "have deep experience in the affordable space," having done "10 other deals that either have a PFC or HFC structure." Another recently completed 384-unit HFC acquisition is Civicap’s partnership with the Austin HFC here:

Jones also clarified the property's current status:

This timing detail is significant, showing Civicap approached Strategic HFC with a completed, stabilized property rather than at the pre-development stage.

The operational aspects also received scrutiny, with Vice President Ashley Huddleston inquiring about staffing for a property under 200 units. Jones's response that "There are two people in the office so there is a property manager and a leasing agent and then you have two people on the maintenance team" proved satisfactory, with no follow-up concerns raised. This exchange demonstrates the board's comfort with the operational approach despite the property's smaller size.

President Jan Wenig showed particular interest in understanding Civicap's motivations, asking them to elaborate on "how you came to want to approach us on this deal, what you think about the merits of the particular property, or anything about reaching and exceeding our affordability." This questioning suggests Strategic HFC values partners who are genuinely committed to affordability rather than merely seeking tax benefits.

The absence of any negative comments from any board member, followed by unanimous approval, indicates strong alignment between this project and Strategic HFC's evolving priorities for deeper affordability, quality development, and strategic partnerships.

– Strategic HFC has evolved its workforce housing terms to require deeper affordability but has structured the economics to make the numbers work.

– They're actively seeking to diversify their developer partners.

– They value projects with strong transit access and proximity to employment centers.

Developer: Civicap Partners, Jesse Madigan Phone: (214) 714-2811 Email: [email protected], Jessica Jones Phone: (214) 697-8507 Email: [email protected] LinkedIn, Ellison Mudanza Phone: (832) 434-3261 Email: [email protected] LinkedIn

Public Partner: Strategic Housing Finance Corporation of Travis County (SHFC), Dianna Grey Phone: (512) 926-1298, (512) 228-8785 Email: [email protected] LinkedIn

Original Owner: Urban Genesis, Mehdi "Matt" Shafiezadeh Phone: (281) 501-8864 Email: [email protected] LinkedIn

Staff Report: Midtown Highline

Memorandum of Understanding (MOU): Midtown Highline MOU

MOU 1/17/25

The January 17, 2025 Memorandum of Understanding formalizes the partnership between Strategic Housing Finance Corporation of Travis County and Notional Development Partners (formerly Heartwood Real Estate Group), codifying the development framework for the 118-unit mixed-income workforce housing project at 600 Cumberland in South Austin. This binding contract—explicitly noted as "a contract and not merely an 'agreement to agree'"—delivers on the promise of what Board President Gonzalez previously called a potential "star in the portfolio" during its October 2024 approval.

The ownership structure follows Strategic HFC's established template with a Texas limited partnership as the ownership entity. Strategic HFC's wholly-owned LLC serves as the 0.005% general partner while Notional forms a Delaware LLC as special limited partner, receiving substantial delegated management authority while preserving Strategic HFC's statutory rights. Notably, the MOU confirms PPR Capital Management as the Equity Investor (with Chelsea DeLuca as COO) as the equity provider. Land ownership remains with a Strategic HFC subsidiary under a 75-year ground lease with tenant option to extend to 99 years, while the partnership owns the vertical improvements.

Strategic HFC's careful risk management approach remains intact with explicit language stating "NEITHER STRATEGIC HFC, THE GENERAL PARTNER NOR ANY OF THEIR AFFILIATES SHALL PROVIDE ANY GUARANTEES OR INDEMNITIES IN CONNECTION WITH THE FINANCING OF THE PROJECT." This all-caps declaration underscores the agency's non-negotiable position on risk allocation. Notional must provide all guarantees for construction completion, operating expenses, and equity returns, while fronting all predevelopment costs with potential reimbursement at closing.

The financial structure closely mirrors the framework outlined in the October 2024 board presentation, with precise numbers now attached. Ground lease payments will start at $105,789 annually after stabilization with 3% annual escalations. Strategic HFC receives 25% GC sales tax savings, $165,000, for its general contractor role (split between closing and completion), a $10,000 annual partnership management fee with 3% escalations, 5% of operational cash flow, and 5% of net sales proceeds or refinance distributions if occurring 6+ months after GP admission. These terms align with the projections in the earlier public benefit analysis, but the MOU adds clarity that these fees will accrue with 3% interest compounding annually if net cash flow proves insufficient in any year.

The affordability structure shows meaningful evolution from earlier documents, with more precise language and slightly deeper affordability. While previous documents showed 19.5% of units at 60% AMI, 30.5% at 80% AMI, and 40.7% at 120% AMI, the MOU specifies cumulative minimums: at least 23 units (19.5%) at 60% AMI, at least 59 units (50%) at or below 80% AMI (including the 60% units), and at least 107 units (90.7%) at or below 120% AMI. This cascading structure ensures deeper income targeting than initially presented. The MOU also adds methodological specificity around income verification through federal tax returns and the use of the Novogradac Rent and Income Limit Calculator for determining appropriate rents.

The construction approach maintains Strategic HFC as general contractor to secure sales tax exemption, with detailed provisions for engagement of a construction monitor at a cost not to exceed $3,500 monthly. Material change orders now have explicit thresholds: any change costing over $100,000 for a single change or exceeding the hard cost contingency representing five percent of total estimated hard costs requires Strategic HFC approval. This creates a clear framework for construction oversight while maintaining efficiency.

Property management terms reveal new specificity around asset management succession planning. Notional Development Partners LLC will serve as initial asset manager, but the MOU contains extensive provisions for potential replacement, including detailed qualification criteria should replacement become necessary. Any replacement must possess at least three years of institutional quality asset management experience, currently manage at least three Class A or B multifamily properties with 500+ total units, maintain presence in Travis County, secure lender approval, carry professional liability insurance of at least $5 million, provide three years of audited financials, and have a clean regulatory record. This rigorous framework addresses Director Becker's previous concerns about developer experience and construction oversight.

The exit strategy grants Strategic HFC both a right of first refusal against any third-party offer and a purchase option to acquire the special limited partner's interests. The purchase price formula is now explicitly defined as the greater of the "As-Stabilized Fair Market Value" (determined by an independent USPAP-compliant appraiser) or an amount sufficient to return all capital contributions with an 18% IRR, pay off all project loans, and cover all option exercise expenses except taxes. The 18% IRR hurdle represents a developer-favorable term compared to the 15-16% typical in similar deals.

The MOU incorporates strong tax exemption protection with balanced consequences. If the exemption is lost, Strategic HFC and the general partner forfeit rights to fees, lease payments, and cash flow during the tax exemption loss period. For permanent loss, the land can be conveyed to the special limited partner at nominal cost to establish a new exempt structure. This "circuit breaker" approach protects the developer while maintaining accountability for Strategic HFC.

Product amenities receive renewed commitment with specific enumeration of gated structured parking, business centers, pool, pool-level patio, lounge, rooftop terrace, and fitness center. Unit interiors will feature luxury vinyl tile floors and granite/quartz countertops. The MOU adds a new requirement for tenant programs and services at no cost to residents, subject to Strategic HFC approval—a tenant benefit not explicitly mentioned in earlier documents.

The MOU confirms the 6.5% public benefit bonus structure previously discussed: Architecture Bonus (2.0%), Lease Addendum Bonus (2.5%), Local Public Sector Workers Bonus (1.0%), and Decarbonization Bonus (1.0%). These elements solidify the project's record-setting public benefit ratio that so impressed the board during initial presentations.

Clear termination provisions establish reasonable progression timelines: financing must close within one year, and either party can exit if the other breaches obligations with a 15-day cure period. The MOU specifically addresses attorney representation with fee caps: $50,000 for Naman Howell Smith & Lee PLLC as Strategic HFC counsel, $115,000 for Chapman and Cutler LLP as partnership counsel, and $125,000 for Hilltop Securities Inc. as financial advisor.

Read the Full Analysis: 1/17/25 – 10/17/24 | 600 Cumberland | Product | Entitlements

Developer/Owner: Notional Development Partners (Previously Heartwood), Chris Affinito Phone: (973) 220-3055 Email: [email protected] LinkedIn

Capital Partner: PPR Capital Management (Equity Investor d.b.a Reliant Income Austin, LLC (Equity Investor), Chelsea DeLuca Phone: (877) 395-1290 Email: [email protected] LinkedIn

Developer Counsel: Ybarra pllc, Michael Ybarra Phone: (212) 804-8064 Email: [email protected] LinkedIn

Public Partner: Strategic Housing Finance Corporation of Travis County (SHFC), Dianna Grey Phone: (512) 926-1298, (512) 228-8785 Email: [email protected] LinkedIn

SHFC Counsel: Naman Howell Smith & Lee PLLC, Cliff Blount Phone: (512) 479-0300 Email: [email protected] LinkedIn

Partnership Counsel: Chapman and Cutler LLP, Ryan J. Bowen Phone: (312) 845.3277 Email: [email protected] LinkedIn

Financial Advisor: Hilltop Securities Inc., Braxton Parsons Phone: (833) 444-5586 Email: [email protected] LinkedIn

Staff Report: 600 Cumberland

Memorandum of Understanding (MOU): 600 Cumberland MOU

MOU 12/5/24

The December 5, 2024 draft MOU between Strategic HFC and Ledgestone Development Group provides a the current structure and areas still under negotiation for this this workforce housing partnership. Tracking the redlines and comments throughout the document reveals the evolution of key terms since the initial approval on September 26, 2024.

The ownership structure follows Strategic HFC's established model, with their subsidiary serving as the 0.1% General Partner and Ledgestone operating through a Special Limited Partner.

On the financial side, several key numbers remain consistent with earlier documents: the 25% developer fee share (estimated at $420,132), the 15% annual lease payment structure, 5% cash flow participation, and 3.29% of sale/refinance proceeds. The draft reveals that the annual ground lease payment will start with a partial payment of $106,194 in the first year before increasing to $218,761 in year two with 3% annual escalations thereafter - specific payment structuring not disclosed in the September board materials.

The construction oversight provisions show substantial negotiation has occurred. The threshold for Strategic HFC's approval of change orders has been significantly increased - from $25,000 to $100,000 for single changes and from $100,000 to $500,000 in aggregate. This represents a material shift in operational flexibility for the developer, reducing potential approval bottlenecks during construction while still protecting against major scope changes.

The draft reveals ongoing discussions around the public benefit requirements. Section J.2 contains bracketed placeholder text stating "[Insert additional terms required to achieve 90%-100% Public Benefit Ratio, if any.]" which has been replaced with specific commitments to Architecture, Local Public Sector Workforce Preference, Decarbonization, and Service Access.

One particularly interesting negotiation point appears in the Fee and Expenses section. Strategic HFC's expected costs for third-party consultants has been stricken in its entirety. This removed language had specified anticipated costs for SHFC Counsel ($50,000), Partnership Counsel ($115,000), and Hilltop Securities ($125,000). The removal suggests the parties may be renegotiating these cost allocations or have determined to handle them in a separate agreement.

The MOU clarifies several operational areas that weren't detailed in the September board materials. The property management provisions now explicitly state that a developer-designated affiliate will serve as property manager under an agreement with industry-standard terms, including replacement provisions in case of default. The annual budget approval process is formalized, requiring submission by December 1 for the following calendar year and written approval from both the General Partner and Limited Partners.

The detailed Partnership Agreement terms exhibit provides unprecedented insight into Strategic HFC's non-negotiable partnership requirements. This 7-page exhibit covers representations, covenants, indemnities, administrative duties, and tax allocations - far exceeding the level of detail typically disclosed in preliminary term sheets. The comprehensive nature of this exhibit suggests Strategic HFC is implementing their "off-the-shelf" MOU approach referenced by Executive Director Dianna Grey during the September 26 board meeting.

The affordability commitments maintain the deeper targeting discussed at the September board meeting: 20% of units at 50% AMI (exceeding the typical 60% baseline), 30% at 80% AMI, 40% at 120% AMI, and 10% market rate. The draft now explicitly requires income verification through federal tax returns or another commercially reasonable method acceptable to Strategic HFC, with a Regulatory Agreement to be recorded in Travis County land records - adding enforcement mechanisms not previously detailed.

This draft MOU reflects Strategic HFC's evolution as a sophisticated public partner that balances mission objectives with strong financial and operational protections. The redlines and comments throughout the document reveal an active negotiation process, with particular focus on construction oversight flexibility, public benefit specifics, and third-party cost allocations. As these remaining items are resolved, the partnership will be positioned to move forward with what Board President Julio Gonzalez described as the standardized approach that makes Strategic HFC "the best HFC in Texas."

The core revenue streams include a $30,000 annual management fee with 3% escalator (totaling $450,000), a 25% share of the development fee ($413,201), and a substantial 15% annual lease payment based on property tax value escalating 3% ($3,210,851 million over term). The general contractor fee, structured as 25% of sales tax savings, adds $442,126. Additionally, SHFC secured a 3.29% share of net sale proceeds, projected at $2,323,049, and a 5% cash flow participation estimated at $1,502,576.

A key financial innovation is the project's debt coverage ratio (DCR) structure. Without property tax abatement, the DCR would fall below the industry minimum 1.15 through year 7, making the deal unfeasible. The tax abatement allows the DCR to start at 1.32 in year 4 and rise to 1.83 by year 15, creating a sufficient cushion for investor comfort while maintaining affordability.

Notably absent from board discussion were significant concerns about the financial structure, suggesting comfort with the standardized approach.

The public benefit analysis demonstrates strong efficiency in tax abatement utilization. Of the $22.2 million in abated taxes over 15 years, 49% ($10.97 million) returns directly through rental discounts.

When combined with fees and other benefits, the project achieves an 87% public benefit ratio before bonus points, rising to 91.9% with adjustments for architectural design, public worker preference, decarbonization, and service access features.

The development achieves a density of 86 units/acre on 4 acres. The $92.21M project ($268,834/unit) incorporates podium-style construction with ground-floor commercial space and extensive community amenities, including a clubroom with outdoor cooking facilities, pool and cabanas, courtyard, fitness center, yoga lawn, bike storage, and electric vehicle charging stations.

The unit mix emphasizes family-sized units with 65% two-beds (224 units), 22% one-beds (77 units), and 12% three-beds (42 units). This aligns with the project's goal of providing deeper affordability options for families.

Read the Full Analysis: 1/30/25 – 9/26/24 | FiveOne | Zoning | Product

Developer/Owner: Ledgestone Development Group, Craig Alter Phone: (512) 956-5432 Email: [email protected] LinkedIn

Developer Counsel: Fritz Byrne, PLLC (Developer Counsel), Philip W. Rodgers Phone: (512) 322-4725 Email: [email protected]

Public Partner: Strategic Housing Finance Corporation of Travis County (SHFC), Dianna Grey Phone: (512) 926-1298, (512) 228-8785 Email: [email protected] LinkedIn

SHFC Counsel: Naman Howell Smith & Lee PLLC, Cliff Blount Phone: (512) 479-0300 Email: [email protected] LinkedIn

Partnership Counsel: Chapman and Cutler LLP, Ryan J. Bowen Phone: (312) 845.3277 Email: [email protected] LinkedIn

Financial Advisor: Hilltop Securities Inc., Braxton Parsons Phone: (833) 444-5586 Email: [email protected] LinkedIn

Zoning Staff Report: C14-2024-0149

Staff Report: FiveOne

Memorandum of Understanding (MOU): FiveOne MOU Draft

MOU 4/23/24

This deal harnesses Qualified Opportunity Zone benefits to attract equity. SHFC maintains control through two distinct but complementary entities: a wholly-owned subsidiary serving as the 0.1% Managing Member of the ownership company, while a separate SHFC affiliate holds fee title to the land itself. This dual-control mechanism ensures SHFC's interests remain protected while still providing the governance structure necessary for Opportunity Zone investors to realize their tax benefits.

The Opportunity Zone aspects of the deal add layers of complexity. The capital stack flows through a multi-tiered entity structure with Braker QOZ Business LLC serving as the special member, backed by Braker QOF LLC as sponsor member, with Banyan SFR Manager LLC managing the investment. This creates a compliant pathway for investors seeking to defer capital gains taxes through Opportunity Zone investments while simultaneously allowing SHFC to maintain its statutory role as the controlling entity. For Opportunity Zone compliance, the underlying company must qualify as a "qualified opportunity zone business" under Section 1400z-2(d)(3) of the Internal Revenue Code, requiring substantial business activity within the designated Opportunity Zone.

With Opportunity Zone (OZ), investors receive no housing tax credits but instead benefit from significant capital gains tax deferral, reduction, and potential elimination on appreciation. The MOU explicitly acknowledges the OZ arrangement, noting that the Operating Agreement may include "certain provisions intended to cause the Investor Member's investment in the Company to be treated as a qualified investment under Sections 1400z-1 and 1400z-2 of the Internal Revenue Code."

The MOU has these affordability requirements:

The MOU further enhances affordability through a dual constraint system – rents must not exceed both 30% of the applicable AMI adjusted for family size and 90% of market rents for comparable units.

The Memorandum of Understanding (MOU) dated April 23, 2024, establishes a specific fee structure that differs in some respects from what was discussed in other documents and board meetings. Regarding construction-related fees, the MOU specifies a Construction Administration Fee of $781,492, with 50% payable at closing and 50% upon issuance of the final certificate of occupancy (Section D.4). It also allows for a Construction Monitor Fee not to exceed $3,500 per month during construction, if engaged. Notably, the January 24, 2024 board meeting and September 26, 2024 resolution both mention a General Contractor Fee of $193,202, which is not explicitly included in the MOU. The MOU more clearly specifies the payment timing of the Construction Administration Fee and includes provisions for a Construction Monitor that weren't highlighted in board presentations.

For annual fees, the MOU establishes a Ground Lease Payment of $248,971 annually beginning January 1, 2026, with a 3% annual escalator (Section H.2). It also includes a Company Management Fee of $10,000 per year with a 3% annual escalator, and a G/A Fee of $300 per unit per year with a 3% annual escalator, both beginning in the year the project is placed in service (Section H.4). The September 26, 2024 staff report combines the Company Management Fee and G/A Fee, stating "Annual management fees of 74,200 beginning the year the project is placed in service (2026 or 2027), with a 3% annual escalator, totaling $1.16M over 15 years." The January board meeting presentation refers to a "Partnership Management Fee" rather than a "Company Management Fee" though the amount is the same. The MOU explicitly states that these fees accrue without interest if cash flow is insufficient, a detail that wasn't emphasized in the board presentations.

Regarding sale and refinance participation, the MOU establishes that the Managing Member shall receive 1.5% of gross sales price upon sale of the Project and 1.5% of net refinance proceeds available for distribution after various payments (Section H.3). The board meeting presentation from January 24, 2024 estimated this "Sale/Refi Participation" would total approximately $1.72M, projecting the potential value of this fee. The September 26, 2024 resolution uses identical language about the 1.5% fee structure.

An important distinction appears in cash flow participation. The MOU does not explicitly mention a specific percentage of cash flow beyond the fixed fees described above. However, the January 24, 2024 board meeting discussion mentioned "5 percent of the projected cash flow would be 773,000" as part of the public benefit analysis. This 5% cash flow participation appears in the meeting discussion but is not explicitly outlined in the MOU's fee structure.

Read The Full Analysis: 9/26/24 – 1/24/24| Banyan Braker Lane | Term Changes

Developer: Banyan Residential, Ben Brosseau Email: [email protected]

Public Partner: Strategic Housing Finance Corporation of Travis County (SHFC), Dianna Grey Phone: (512) 926-1298, (512) 228-8785 Email: [email protected] LinkedIn

Capital Partner: Arbor Realty (Construction Loan) Jonathan Mendes Phone: (631) 707-2730 Email: [email protected] LinkedIn; Braker QOZ Business LLC (Equity)

Developer Counsel: Locke Lord (Developer Counsel), Raj Bandla (now at BakerHosteller) Phone: (216) 621-0200 Email: [email protected]

SHFC Counsel: Naman Howell Smith & Lee PLLC, Cliff Blount Phone: (512) 479-0300 Email: [email protected] LinkedIn

Partnership Counsel: Chapman and Cutler LLP, Ryan J. Bowen Phone: (312) 845.3277 Email: [email protected] LinkedIn

Financial Advisor: Hilltop Securities Inc., Braxton Parsons Phone: (833) 444-5586 Email: [email protected] LinkedIn

Staff Report: Banyan Braker Lane

Memorandum of Understanding (MOU): Banyan Braker Lane MOU

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