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SAHA to provide Lynd Company property tax exemption for Josephine Street development

by Ben OlivoAug 13, 2020
Rendering shows apartment building by the Lynd Company and the San Antonio Housing Authority.
The Lynd Company and the San Antonio Housing Authority are teaming up to build these apartments at 120 W. Josephine St. Courtesy Lynd Company

The Lynd Company is partnering with the San Antonio Housing Authority (SAHA) on a mixed-income 259-apartment development in Tobin Hill near the Pearl. SAHA's involvement means the partnership, which San Antonio-based Lynd initiated, will receive a full property tax exemption for the duration of the 75-year lease.

The $58.3 million project will provide 129 market-rate apartments, 104 units priced for people making 80% or less of the area median income (AMI), and 26 for households making 60% AMI or less.

For a breakdown of AMI levels in the San Antonio-New Braunfels region by household size, scroll to the bottom of the article.

It's unclear how exactly the partnership formed, other than that Lynd approached SAHA, which was mentioned in a recent SAHA board meeting agenda. Last week, the SAHA board of commissioners discussed the West Josephine deal, but did so in closed session.

Across San Antonio, more and more developers are partnering with public facility corporations, or PFCs, which are publicly-owned nonprofits that grant property tax exemptions in development deals under state law. In exchange for the incentive, half the units must be priced at 80% AMI or lower, which in San Antonio is $46,100 for a couple, for example.

Hemisfair's PFC, for example, resulted in The '68; the City of San Antonio's PFC resulted in The Baldwin next to St. Paul Square in east downtown, among about 20 others throughout the city either completed or under construction.

From SAHA's end, we recently wrote about a development on the West Side on Tampico Street, in which SAHA is partnering with locally-based developer Mission DG. SAHA has also partnered with Austin developer Dennis McDaniel on St. John's Square near La Villita.

SAHA is starting to hear more criticism from housing observers about its role in partnering with for-profit developers who are providing predominately market-rate and 80% AMI housing, which many experts, including a few local developers such as Victor Miramontes of Mission DG and Mitch McManus, have said aren't really affordable in the context of San Antonio's true median income. Critics say the strategy moves the agency further away from its mission of providing housing to San Antonio's most vulnerable families.

For its part, SAHA has defended its recent development partnerships. During a Housing Commission meeting last month, SAHA CEO David Nisivoccia said the agency's strategy is to boost its reserves as partners in these higher-rent type developments so it can apply the profits toward building more deeply-affordable housing in the future. Normally, additional funding, or subsidies, are inserted into the cost of a development to lower prices below market-rate and into more affordable price ranges.

"If SAHA was dependent upon its (current) reserves only to underwrite these deals with deep subsidy dives, I'd do one project a year," Nisivoccia said. "What we are doing now, I can do much more deals and provide much more money and provide much more needed affordable housing at the lower end of the spectrum."

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At the West Josephine development, rents for the "affordable" units, or those under market-rate, will be priced in accordance with federal guidelines adopted by the state. Under the 2020 guidelines, developers can charge a tenant making 80% AMI or less up to $1,080 for a one-bedroom apartment, for example. For someone making 60% AMI or less, they can charge up to $810 for a one-bedroom. For a breakdown of the 2020 rent limits, scroll to the bottom of this article.

Of the 259 units, 220 will be one-bedrooms, 39 two bedroom.

It's unclear if there's a third partner in the partnership involving SAHA and Lynd, a national developer based in San Antonio, or how the ownership stake is being divided up percentage-wise. In an article in March, the San Antonio Express-News reported Fulcrum Development, also based locally, was a partner. At the time, there was no mention of SAHA's involvement. Fulcrum didn't respond to a request for comment.

Lorraine Robles, SAHA’s director of development services and neighborhood revitalization, told the Heron she was unavailable for an interview Thursday afternoon. Jarrad Thierath, Lynd's vice president of Development, did not immediately respond to an interview request Thursday.

According to the agenda item for SAHA's meeting, Lynd will build the mixed-use building, and will also market, lease and manage the apartments. SAHA's is only role is to contribute the property tax exemption.

Ultimately, SAHA's PFC—known as the San Antonio Housing Facility Corporation—will purchase the property, currently occupied by Materials Marketing, a stone and tile company, and lease it back to the partnership, according to the agenda item.

[ To view the agenda item, click here and scroll to Page 19. ]

According to the agenda, Lynd will sell its ownership share five years after the building opens, in which case the partnership will receive 25% net profit from the sale.

SAHA will receive either 25% of cash flow after debt is paid or 25% of the tax savings from the exemption—which ever is greater. The partnership is estimated to collect $7.7 million during the first five years the building is completed.

Ben Olivo, Heron editor

Map of development planned for 120 W. Josephine St.

Josephine Street Development

» Address: 120 W. Josephine St.
» Developer: Lynd Company, San Antonio Housing Authority
» Property Owner: Materials Marketing
» Status: Under development
» Occupancy: N/A
» Rent or Buy: Rent
» Council District: 1
» Height: 7-8 stories
» Land size: 2.4 acres
» Total units: 259
     » Market rate: 129
     » 80% AMI: 104
     » 70% AMI: 0
     » 60% AMI: 26
     » 50% AMI: 0
     » 40% AMI: 0
     » 30% AMI: 0
     » » Student Units: 0
» Section 8: Unknown
» Retail (s.f.): Unknown
» Office (s.f.): Unknown
» Parking: Unknown
» Construction start date: Unknown
» End date: Unknown
» Architect: Unknown
» Cost: $58,316,534
» Investors: Unknown
» Financing: Unknown
» San Antonio Incentives: Unknown
     » SAWS Fee Waivers: Unknown
     » City Fee Waivers: Unknown
     » City Loans: Unknown
     » Est. City Property Tax Rebate: Unknown
» Bexar County Incentives: Unknown
» State incentives: Developer to receive full property tax exemption via Las Vargas Public Facility Corporation (SAHA PFC entity) for the duration of 75-year lease; under state law. Estimated property tax is $104,389.45 for 2020.
» Federal incentives: Unknown
» Other: Unknown
» Return on investment: $7.79 million estimated return for Lynd-SAHA partnership first five years. Profit split unknown.

5 Steps to Understanding Public Facility Corporations, or PFCs

2020 Area Median Income

Here are the latest area median income (AMI) levels for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development. Want to know more about how AMI works? Click here.
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2020 Rent Limits

Below are rent limits for affordable apartments in housing properties in the San Antonio-New Braunfels region that received financing or subsidies from the U.S. Department of Housing and Urban Development.
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Heron Editor Ben Olivo can be reached at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

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