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DHFC approves resolutions for Legacy on East; board discusses using DHFC funds as subordinate debt for 80‑unit project
Summary
The board authorized resolutions to support Legacy on East (2621 Sutherland Avenue), and members debated a first‑time use of DHFC funds as a subordinate loan (5% interest) to help close financing for an 80‑unit development.
The City of Dallas Housing Finance Corporation on unanimous recorded votes approved a package of resolutions to support the Legacy on East, an 80‑unit multifamily development proposed at 2621 Sutherland Avenue. Resolutions approved included adoption of a memorandum of understanding with LDG Multifamily LLC (or affiliate) for acquisition, financing, development and operation; transfer and assignment of the Legacy and Peace GP LLC to the corporation and creation of DHFC‑owned limited liability companies to function as owner/developer/landowner entities.
The notable policy and finance discussion: Board members and staff discussed a departure from past practice: the corporation would provide a subordinate loan (recorded in the meeting transcript as using DHFC funds as a debt instrument) to the project rather than only deploying funds as grants or fee deferrals. The transcript records that the proposed subordinate debt would bear about 5% interest; the amount discussed during briefing was described as $1.5 million (the transcript parsing shows a figure stated as "$1.520" then referenced as subordinate debt). Staff described this as the first time DHFC would use its funds in this loan position and said the approach was intended to help projects that are not penciling in the current interest‑rate environment and equity market.
Board questions and concerns: Directors probed loan terms, repayment priority, and the effect on underwriting. Questions included whether the loan would be subordinate to senior construction debt, how the subordinate position would affect developer fees and cash‑flow waterfalls, and whether the borrowing reflected lenders’ stress on operating expense assumptions and tax credit pricing. Developers and staff said the subordinate note was intended as gap financing to get smaller or otherwise challenged deals to close when senior lenders or equity markets constrain the transaction.
Vote and next steps: The board approved the requested resolutions and the record shows unanimous votes in favor; details of loan documentation, intercreditor arrangements and final pro forma were expected to be provided in development loan documents and return to the board for final approval as required. Staff indicated additional diligence and finalization of documentation would happen before closing.
