Hotel Grim project to get more funding
Developer to manage all city Housing Authority apartments
TEXARKANA, Texas — The development company renovating the Hotel Grim is increasing funding for the project by millions of dollars.
New funds will come via the federal Low Income Housing Tax Credit (LIHTC) program and $6.5 million in tax-exempt bonds, both common ways to finance new construction or rehabilitation of affordable housing.
Developer Cohen-esrey needs additional funds to finish reviving the building, a tougher task than the company first predicted.
“It required more extensive work than we initially anticipated when we looked at the project for the first time, back in 2017, 2018. So with the additional work that was required to complete the building, we needed some additional financing,” said Jon Atlas, managing director of Cohen-esrey Development Group.
HOW LOW INCOME HOUSING TAX CREDITS WORK
To take advantage of the LIHTC program, developers apply to state agencies for allotments of tax credits. Investors then buy the credits to get a tax break, providing developers cash to spend on their projects.
The program is meant to increase available affordable housing. So to qualify for LIHTC, developers must commit to reserving at least a portion of housing units for tenants whose incomes are below a certain threshold.
The specific kind of tax credits used for the Grim — known as 4% non-competitive tax credits — require at least 40% of its apartments to be occupied by tenants with an income of 60% or less of area median income, adjusted for family size. To maximize tax credit eligibility, Cohen-esrey will lease 100% of Grim units only to tenants below the 60% income cap.
Developers can use this type of tax credit to fund up to 30% of an affordable housing project’s cost.
Tenancy in 23 of the Grim’s 93 units will be partially paid for with project-based vouchers (PBVS), said Antonio Williams, CEO of the local Public Housing Authority, Village Communities of
Texarkana, Texas.
Families in units with PBVS contribute 30% of their income for rent and utilities or a minimum rent of up to $50 per month, and the voucher pays the difference between the tenant contribution and the unit’s total rent and utility costs, according to a summary of the program published by the Center on Budget and Policy Priorities.
“What that means is that you have 23 vouchers assigned to the unit, not the person. The manager of the community will go through their product management techniques and procedures and processes to vet a qualified person that fits the criteria to move into those project-based units, and also provide critical oversight and property management and lease enforcement,” Williams said.
TAX-EXEMPT BOND REQUIREMENT
Another requirement to get 4% tax credits is that at least 50% of the project must be financed through tax-exempt bonds. A new $6.5 million bond issue will increase the total of bond funding for the Grim to $21.5 million.
Through an entity called Premier Texarkana Development and Management Facility Corp., Village Communities is facilitating the new bond issue for Cohen-esrey. The ability to issue bonds is an important part of what Housing Authorities are set up by statute to do, Williams said.
“All over the United States, the Housing Authority was provided to build affordable housing, to provide a pathway back to recovery from all of the things that they went through in the Depression.
“Some of the things that the Housing Authority can do today, they can also do easements. They can do bond inducements to allow bond financing. They can provide avenues to tax incentives and things like that,” he said.
Village Communities will have no involvement in any transactions involving the bonds.
“The bonds aren’t outstanding,” Atlas said. They’re really just used for construction. The bonds essentially get paid off with the tax credits.”
SEPARATE PROPERTY MANAGEMENT CONTRACT
Effective last month, Cohen-esrey Communities assumed management of 12 Texarkana, Texas, apartment communities, totaling 914 units, owned by Village Communities, according to the company’s website.
The portfolio includes market-rate and affordable workforce housing. CEC was already managing two additional properties in Texarkana, including the Grim, and now manages 1,157 units here.
Both Williams and Atlas said the deal is unrelated to the Grim project.
“We’ve been working with that Housing Authority for a number of years. We developed a good relationship with them. They were looking for a new management partner, and through ongoing conversations we decided mutually it was a good match,” Atlas said.