The San Antonio Housing Trust and developer NRP Group are fielding offers to purchase the Cevallos Lofts, the 252-unit apartment building credited with spearheading growth in that area of Southtown since it was built in 2010.
The housing trust is asking between $37.5-$38 million, and has received offers from about a dozen potential buyers.
The Cevallos Lofts was the first development built in San Antonio using the tax exemption powers of a public facility corporation, or PFC—an incentive tool that was once pitched as a means to build more affordable housing.
In these types agreements, a PFC, which is a type of nonprofit formed by a governmental entity, partners with a developer to build housing. In this case, the San Antonio Housing Trust PFC, an arm of the City of San Antonio, partnered with NRP Group to build the Cevallos Lofts. According to state law, because the PFC owns the land, the partnership does not pay property taxes as long as half of the units are reserved for people making up to 80% of the area median income (AMI).
[ Scroll down for a chart showing AMI levels. ]
However, the PFC tool has been the source of controversy of late. Housing advocates in San Antonio and state lawmakers have begun to question whether the public is getting housing that’s truly affordable in San Antonio in exchange for the savings that developers receive by not paying property taxes.
[ Related: Tax breaks for developers under scrutiny in San Antonio, Texas capitol ]
[ Related: Two bills to reform PFCs make progress in Legislature ]
5 steps to understanding public facility corporations, or PFCs
If sold for $37.5 million, the San Antonio Housing Trust, which has a 51% ownership stake in the development, would yield a profit of $2.7 million, said Pete Alanis, the housing trust’s executive director. NRP Group, whose entities own the other 49%, would receive roughly $2.6 million.
Alanis said the proceeds will aid the trust in funding other affordable housing initiatives. In late April, the Housing Trust, announced $2.73 million toward five affordable housing programs, including $900,000 toward the Roseville Housing Trust, which feeds the rehabilitation of the 88-unit Roseville Apartments on the East Side, and $829,000 toward the formation of a Housing First Community Coalition.
“It allows us to do those type of projects, but those kinds of projects need cash funding,” Alanis said.
The profit estimates are after the property’s current debt are paid, as well as broker fees are paid. Some of the debt includes loans provided by the city: roughly $1 million from the city via the neighborhood stabilization program, and $2.6 million in HOME Investment Partnerships Program dollars.
“The City of San Antonio receive those funds immediately for reinvestment in other eligible projects,” Alanis said.
It cost $38 million to build the Cevallos Lofts, Debra Guerrero, NRP Group’s senior vice president of strategic partnerships and government relations, told the San Antonio Housing Trust board two weeks ago.
Supporters of PFCs argue the tool has helped to revive parts of town that had not seen any investment from the private sector.
“This is a perfect example of a PFC that was structured based on the needs of the city at the time, and really did spur additional development in the area,” Guerrero said of the Cevallos Lofts and Southtown.
Alanis did not disclose where the buyers are located; “it’s safe to say there’s a wide array of interested buyers,” he said.
If sold, the San Antonio Housing Trust will require that the buyer adhere to the trust’s recently-approved tenant protection policy, which holds landlords of Housing Trust PFC-built developments to rent restrictions established by the federal government, among other mandates, for below-market apartments.
Specifically, at the Cevallos Lofts, 25% of the units are reserved for people making 50% AMI or less, 25% at 80% AMI or less. The other half are priced at market rate. Currently, not all of the below-market units adhere to rent restrictions.
Even after the Cevallos Lofts is sold, the San Antonio Housing Trust PFC would still own the property. The buyer would serve as the new tenant of the property, and serve out the remaining 65 years on the lease, Alanis said.
“There’s a lot of interest in multifamily in general, especially here in San Antonio,” Alanis said in a recent interview. “That particular property in the downtown area, it’s a well performing property. It’s well positioned as far as all the appropriate amenities in the neighborhood. It’s proximity to downtown. There’s a lot of reasons why so many people are interested in it, that it’s helping to solidify that price.”
NRP Group approached the housing trust with the idea of selling Cevallos Lofts, Alanis said. On April 27, the housing trust board, which is composed of five City Council members, approved the pursuit of the sale.
When asked why NRP Group decided to float the idea of selling now, Guerrero directed the question to Adam Siegal, the company’s vice president of marketing.
“There are many factors that go into decisions around all lifecycle stages of projects; so many in fact, that one cannot generalize,” Siegal said. “This can include partner and stakeholder considerations, economic and market factors and other qualitative factors. Given the variability and nuances of considered inputs, we steer away from commenting on individual transactions as they occur.”
Alanis gave his own response.
“Collectively, it’s both our idea to sell,” Alanis said of the trust and NRP Group. “There’s a market, a possible opportunity that’s going to benefit our community. That’s going to allow us to place restrictions on it. It’s an idea the NRP Group presented to us, and after a very thoughtful consideration, is this something we want to do. If we want to do it, how are we going to do it?”
One of the buyers dropped out of the running because of the tenant protection policy, Alanis told the housing trust board.
“We can conclude that the inclusion of the (policy) does not appear to have any real negative impact on the sales price of the property,” he said.
At the beginning of the San Antonio Housing Trust PFC meeting on April 27, Rebecca Flores, a housing advocate who’s protested the PFC model, called for greater transparency from the board. The demand included information, including net profits, from the sale of PFC properties. To date, NRP Group has sold its share of four developments it has partnered on with the Housing Trust PFC.
Perhaps the most well-known sale happened in 2019, when NRP Group sold its stake in The Baldwin at St. Paul Square for a projected $10 million profit.
[ Related: NRP Group expects $10M profit from sale of tax-exempt Baldwin apartments ]
The San Antonio Housing Trust PFC board consists of District 1 Councilman Roberto Treviño; District 3 Councilwoman Rebecca J. Viagran; District 4 Councilwoman Dr. Adriana Rocha Garcia; District 5 Councilwoman Shirley Gonzales; and District 9 Councilman John Courage.
2020 Area Median Income
Heron Editor Ben Olivo can be reached at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter
the “buyers” should really contact a previous long term employee of Cevallos. He is a consultant and could save them millions on hidden cost of the property.