This is a column of analysis, mostly, with some opinion.
Developments such as The Baldwin that benefit greatly from public subsidies deserve answers to some basic questions: Who’s involved? And how much will they profit?
As its main incentive, The Baldwin, which was built by a group lead by Cleveland-based developer NRP Group, received a property tax exemption for the duration of the 75-year ground lease. That means the development group doesn’t pay taxes to the city, Bexar County, San Antonio Independent School District, Alamo Colleges District, and other governmental entities.
This year, The Baldwin’s estimated property tax bill would have been $1.04 million without the exemption, according to the Bexar Appraisal District. I won’t dare attempt to calculate the tax savings over 75 years, because inflation, but you get the basic idea of how much money those involved don’t have to pay.
The Baldwin, which opened in May 2018, also received $626,202 in SAWS and city fee waivers from the Center City Housing Incentive Policy for adding more housing downtown.
The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development. Here’s how it breaks down for lower-income households:
» 80% – $56,800
» 70% – $49,700
» 60% – $42,600
» 50% – $35,500
» 40% – $28,400
» 30% – $21,300
Editor’s note: For a complete AMI breakdown that shows other household sizes, scroll to the bottom of this article.
In return for these generous offerings, NRP Group must reserve half of The Baldwin’s 271 units for people making 80 percent of the area median income (AMI), which is $56,800 for a family of four in Bexar County and surrounding counties. Whether you consider this rent level “affordable housing” is completely up to you; the state law that allows for the tax exemption characterizes it as such. (There is an entire discussion to be had about AMI, which you can sample here.) The other half are market-rate priced.
The more-affordable apartments are what the public gets, and in return the developer receives the tax exemption and fee waivers. We pay property taxes, they don’t. But we now can afford a downtown apartment made more affordable because of the tax breaks they receive. They don’t pay taxes, which means they can afford to rent half the units at discounted prices, rather than at full-market rents.
Right, but who’s they?
This gets complicated, but stay with me.
I mentioned NRP Group, earlier. NRP Group is the developer in the group that built The Baldwin. Another member of that group is the San Antonio Housing Trust Public Facility Corp. (PFC), a city-created nonprofit entity which is co-chaired by Councilwomen Rebecca Viagran and Shirley Gonzales. The Housing Trust PFC also owns the land on which The Baldwin sits; the state law that grants the tax exemption in exchange for affordable housing applies strictly to PFCs.
The Baldwin group has two other players. One is Austin-based construction company Virtus Real Estate Capital, which provided the equity, or cash money, to help fund the project. (It’s unclear whether NRP Group put any of its own cash into the project). Another is Zachry Corp., which owned the land before it sold it to the Housing Trust PFC in 2016.
Here’s a visual representation of how PFCs work:
Today of all days, the sale of The Baldwin, in which NRP Group will unload its majority ownership to Virtus, is supposed to be final. NRP Group is cashing out just a year after completing The Baldwin. The sale means the Housing Trust PFC is out of the partnership, but it will collect 10 percent of rent proceeds for the remainder of the lease, which is calculated to be $6.3 million in today’s dollars (the actual figure is closer to $37 million), a decision the PFC board made earlier this week. (The PFC board could have also elected to collect a one-time cash out of $949,000, instead of the yearly revenue stream.)
NRP Group takes home $10 million from the $62 million transaction, said attorney Jim Plummer of the law firm Bracewell LLP, who advises the Housing Trust PFC board. (It’s worth noting The Baldwin property this year was appraised at $36.9 million, up from just $3.9 million four years ago.) Again, it’s unclear whether NRP Group put in any of its own money, an element that would help us calculate the sweetness of this deal from NRP Group’s perspective.
We know what we know because of the doggedness of some real estate reporters in San Antonio curious about PFCs and tax exemptions, and also because NRP Group decided to sell the project to Virtus. The sale triggered an open discussion among the PFC board, which is composed of five council members. If it weren’t for that sale, we may have never known all the players involved.
The Heron has asked these questions for The Baldwin and other PFC projects since we launched in June 2018. In interviews and email requests, we get some answers, but not the most important ones. In general, the public release of pro formas (the financial documents that show profit) are almost always challenged to the Texas Attorney General’s office by the governmental entity on behalf of the developer because the documents are proprietary, the developers argue. My argument has always been that of full transparency in exchange for public subsidies.
[ Related: “NRP Group expects $10M profit from sale of tax-exempt Baldwin apartments” ]
Why is this important? Because these deals don’t just materialize out of thin air. They originate from conversations from very powerful and rich people in our city that lead to very lucrative outcomes for some.
I must watch my step here because I don’t want to come off as anti-PFC. I’m simply advocating for full transparency, and I’m articulating how difficult it is sometimes to get that from those involved. Then it’s my journalistic duty to present you with all the facts so you can decide whether incentives like a full property tax exemption are worth it to voters.
To its credit, the San Antonio Housing Trust, the entity associated with the PFC board, is working on making the documents of each PFC and Trust project public on its website. But it likely won’t include pro formas. It’s very similar to the city’s database of downtown housing incentive agreements, which were posted earlier this year—without pro formas.
Last week, through an open records request, the Heron requested agreements and pro formas for all Housing Trust PFC projects. I’ll let you know what happens there.
Maybe the real question is: How much do the people involved want the public to know about how developments are made?
Contact Ben Olivo at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter
If public funds are involved in this case tax exemption, NOTHING should be a secret.
We must never forget that laws are written by wealthy pro-capitalist legislators that seldom have our interests in mind!
Thank you for looking into this.
I’m not surprised that some of the players cash out early, maybe to miss market corrections? I’m always curious about the vacancy rates in the downtown multi-family units. There are many recently completed projects in the Broadways/Pearl area, projects in progress and on the drawing boards, yet I hear little on the vacancy rate. And having been in commercial real estate during the office building mania and subsequent correction in the ‘80s, it’s difficult for me to not see the correlations in the downtown apartment deluge.
The incentives are there to build, build, build. Are there equal incentives to rent, rent, rent, especially when the cost to live in many of these projects is still far out of reach for many San Antonians.
Keep asking, keep questioning. We appreciate you seeking the answers to the baffling queries. NRP. …. things that make you go hmmmm????