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SHFC Board August 22, 2024

District: 8 | Southwest Austin

Countywide

The Strategic Housing Finance Corporation of Travis County (SHFC) and Copper Real Estate (Ben Breunig) partnership terms center on a 15-year tax abatement valued at $20,049,489 for the 23-acre, 281-unit deal.

The deal marks Copper's first partnership with the Strategic HFC, though they have existing Public Facility Corporation partnerships in Dallas (Bishop 8th) and Mansfield (Wisteria).

The public benefit structure captures 89% of the abatement value through a carefully orchestrated combination of reduced rents, fees, and participation rights.

An initial $281,000 participation fee establishes SHFC's position while preserving development capital. Fixed revenue streams include annual lease payments starting at $62,087 in Year 3 (5% of estimated tax abatement value) with 3% annual escalators. The general contractor arrangement leverages Texas' sales tax exemption framework, generating $600,000 in value through strategic cost segregation (25% GC sales tax savings ). $80,866,969 is the Total Development Cost ($287,783 per unit).

The partnership management fee of $185,989 places SHFC squarely in market for comparable services while reinforcing alignment. SHFC's 5% share of distributable cash flow is projected to yield $1,550,431 over the compliance period, structured through a typical three-tier waterfall that balances predictability with performance incentives. Hilltop Securities' analysis validates the underwriting assumptions: 2% revenue growth, 3% expense inflation, starting rents at 92-93% of AMI for 120% and unrestricted units, and 93% stabilized occupancy.

SHFC's 1% participation in gross sale or refinancing proceeds creates natural alignment while preserving sponsor economics. Current modeling shows proceeds between $1,489,515 (5% exit cap) and $1,063,939 (7% exit cap), generating total 15-year SHFC revenue ranging from $4,651,027 to $5,076,603. The debt coverage ratio starts at 1.58 in Year 3, improving to 1.87 by Year 15, though Hilltop notes coverage would drop below 1.15 in Years 4-7 without the abatement - empirically justifying the structure.

Tiered affordability (20% at 60% AMI, 30% at 80% AMI, 50% at 100-120% AMI) generates $904,944 in annual rental subsidy at stabilization. The unit mix is evenly split between one and two bedrooms, ranging from 713 to 936 square feet and 1,040 to 1,330 square feet respectively. High-end finishes match market comparables: stainless appliances, plank flooring, recessed lighting, and stone countertops.

Distinctive features define this site plan: a 50-foot elevation change creating a hill country aesthetic, extensive green space (approximately 8-10 acres), and dedicated parkland for the city. The amenity package includes co-working spaces, a two-level fitness center, and what the landscape architect terms a "beer garden."

The site plan approval (Final Plan #2021-039876 SP) highlights key environmental considerations that influenced the development's design. Located within the Barton Springs Zone and aquifer recharge area, the project maintains a modest 32.73% impervious cover while accommodating all planned structures. The development secured comprehensive city approvals between March 2021 and February 2023, including specialized environmental and infrastructure reviews. The City of Austin will provide all utility services, ensuring seamless integration with existing urban infrastructure.

The public benefit analysis showed an 89% ratio based on a 15-year estimated tax abatement value exceeding $20 million. The structure gained Public Benefit Ratio bonus points through architectural design commitments, public worker preference, decarbonization initiatives, and service access - pushing the public benefit ratio to 95%.

SHFC 8/22/24

The development's location on Highway 71 near Southwest Parkway emerged as a significant advantage, with President Gonzalez noting:

The 23-acre site's proximity to the Travis County Community Center and CommUnityCare Health Center (FQHC) strengthens the workforce housing alignment.

Construction quality dominated the Board's scrutiny, with Director Becker leading extensive questioning about oversight and quality control measures. When discussing waterproofing consultants and reports, she pressed, "Can we put it in our MOU?" This emphasis on construction quality culminated in her underlying concern.

The development team outlined their approach: Rampart Construction under a GMP contract with a 4.5% hard cost contingency, third-party waterproofing and ADA compliance consultants, and oversight from in-house construction consultant Jay Graham (LinkedIn)'s "40 years of multifamily experience."

The board's focus on tenant protections revealed gaps in Copper's experience with Section 8 vouchers and eviction prevention. Director Jan Wenig, drawing from her background in social work and Section 8 VA supportive housing, emphasized its importance to SHFC.

Her note that "fully half of the members of this board are under 50 percent AMI" underscored the board's perspective on affordability. Board President Gonzalez provided context about their philosophy.

The development team's decision to use third-party property management (likely Willow Bridge, formerly Lincoln Property) aligned with the board's preferences, with Director Becker explicitly stating:

No community opposition was recorded during the meeting. The Board unanimously approved the preliminary resolution, with Gonzalez concluding:

On August 22, 2024, the Strategic Housing Finance Corporation of Travis County (SHFC) standardized their framework for workforce housing partnerships. This framework explains exactly what developers can expect when partnering with SHFC for Chapter 394 tax-exempt workforce deals.

The core financial structure works as follows: SHFC provides a full property tax exemption through their ownership of the project. In exchange, developers pay both one-time and ongoing fees to SHFC. At the start of a project, developers pay $15,000 to apply, which later gets credited toward the origination fee at closing. The origination fee equals 0.5% of either total development cost for new construction or purchase price for acquisitions. Developers should also budget approximately $290,000 for required third-party costs - $125,000 for SHFC's financial advisor and $165,000 for legal fees.

The ongoing payments to SHFC come in several forms. First, there's an annual land lease payment equal to 10% of the property tax savings, which increases by 3% each year. Second, developers pay an annual partnership management fee of $100 per unit, which also increases 3% annually. Third, SHFC receives at least 15% of any sales tax savings during construction. Fourth, after paying operating expenses and debt service, SHFC receives a minimum of 4% of remaining cash flow. Finally, if the property is sold or refinanced, SHFC receives at least 1% of the proceeds.

In exchange for the tax exemption and these fees, developers must restrict rents on most units. No more than 10% of units can charge unrestricted market rents. At least 20% of units must be affordable to residents earning 60% of area median income or less. The total value of rent restrictions across all units must equal at least 60% of the property tax savings. These restrictions must remain in place for at least 10 years.

SHFC uses a 90-point scoring system to evaluate deals. At least 80 points must come from the financial benefits described above. The remaining points can come from features like serving public sector workers, high-quality architecture, green building features, or accepting housing vouchers as a source of income.

The underwriting must use standard assumptions: 5% capitalization rate, 2% annual revenue growth, and 3% annual expense growth, analyzed over 15 years. New construction projects must provide comparable properties within 3 miles. Acquisitions of properties over 5 years old require third-party market studies.

This standardized approach creates predictability for private partners while ensuring SHFC achieves its public benefit goals.

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