| (a) General. This section applies to LURAs that provided
an incentive for Development Owners to offer a Right of First Refusal
to a Qualified ROFR Organization which is defined as a qualified nonprofit
organization under §42(h)(5)(c) or tenant organizations. The
purpose of this section is to provide administrative procedures and
guidance on the process and valuation of properties under this the
LURA. All requests for Right of First Refusal (ROFR) submitted to
the Department, regardless of existing regulations, must adhere to
this process. A ROFR request must be made in accordance with the LURA
for the Development. If there is a conflict between the Development's
LURA and this subchapter, requirements in the LURA supersede the subchapter.
If a LURA includes a provision creating a ROFR, a Development Owner
may not request a Qualified Contract until the requirements outlined
in this section have been satisfied. The Department reviews and approves
all ownership transfers, including transfers to a nonprofit or tenant
organization through a ROFR. Properties subject to a LURA may not
be transferred to an entity that is considered an ineligible entity
under the Department's most recent Qualified Allocation Plan. In addition,
Department staff will not approve an ownership transfer to an entity
that controls a Property in Material Noncompliance as defined in §10.3
of this chapter (relating to Definitions). However, an entity that
controls a Property in Material Noncompliance that wishes to pursue
the acquisition of a Department-administered Property may follow the
procedures outlined in Subchapter F of this chapter (relating to Compliance
Monitoring). Satisfying the ROFR requirement does not terminate the
LURA.
(b) Right of First Refusal Offer Price. There are two
general expectations of the ROFR offer or sale price identified in
the outstanding LURAs. The descriptions in paragraphs (1) and (2)
of this subsection do not alter the requirements or definitions included
in the LURA but provide further clarification as applicable:
(1) Fair Market Value is established using either a
current appraisal of the Property or an executed purchase offer that
the Development Owner would like to accept. The purchase offer must
contain specific language that the offer is conditioned upon satisfaction
of the ROFR requirement;
(2) the Minimum Purchase Price, pursuant to §42(i)(7)(B)
of the Code, is the sum of:
(A) the principal amount of outstanding indebtedness
secured by the project (other than indebtedness incurred within the
five (5)-year period immediately preceding the date of said notice);
and
(B) all federal, state, and local taxes incurred or
payable by the Development Owner as a consequence of such sale. If
the Property has a minimum Applicable Fraction of less than 1, the
offer must take this into account by multiplying the purchase price
by the applicable fraction and the fair market value of the non-Low-Income
Units.
(c) Required Documentation. Upon establishing the value
of the Property, the ROFR process is the same for all types of LURAs.
The Development Owner may market the Property for sale and sell the
Property to a Qualified ROFR Organization without going through the
ROFR process outlined herein. To proceed with the ROFR request, submit
the notice of intent and all documents listed in paragraphs (1) -
(12) of this subsection:
(1) upon the Development Owner's determination to sell
the Development to a for-profit entity, the Development Owner shall
provide a notice of intent to the Department of said determination
to sell the Development and to such other parties as the Department
may direct at that time. If the LURA identifies a Qualified Nonprofit
Organization or tenant organization that has a limited priority in
exercising a ROFR to purchase the Development, the Development Owner
must first offer the Property to this entity. If the nonprofit entity
does not purchase the Property, this denial of offer must be in writing
and submitted to the Department along with the notice of intent to
sell the Property. The Department will determine from this documentation
whether the ROFR requirement has been met. In the event that this
organization is not operating when the ROFR is to be made, the ROFR
must be provided to another Qualified Nonprofit Organization. Upon
review and approval of the notice of intent and denial of offer letter,
the Department may notify the Development Owner in writing that the
ROFR requirement has been satisfied. Upon receipt of written notice,
the Development Owner may pursue the Qualified Contract process or
proceed with the sale to a for-profit buyer at or above the posted
price;
(2) documentation verifying the ROFR offer price of
the property;
(A) if the Development Owner receives an offer to purchase
the Property from any buyer other than a Qualified Nonprofit Organization
that the Development Owner would like to accept, the Development Owner
may execute a sales contract, conditioned upon satisfaction of the
ROFR requirement, and submit the executed sales contract to establish
fair market value; or
(B) if the Development Owner of the Property chooses
to establish fair market value using an appraisal, the Development
Owner must submit an appraisal of the Property completed during the
last three (3) months from the date of submission of the ROFR request,
establishing a value for the Property in compliance with Subchapter
D of this chapter (regarding Underwriting and Loan Policy) in effect
at the time of the request. The appraisal should take into account
the existing and continuing requirements to operate the Property under
the LURA and any other restrictions that may exist. Department staff
will review all materials within thirty (30) calendar days of receipt.
If, after the review, the Department does not agree with the fair
market value proposed in the Development Owner's appraisal, the Department
may order another appraisal at the Development Owner's expense; or
(C) if the LURA requires valuation through the Minimum
Purchase Price calculation, submit documentation verifying the calculation
of the Minimum Purchase Price as described in subsection (b)(2) of
this section regardless of any existing offer or appraised value;
(3) description of the Property, including all amenities
and current zoning requirements;
(4) copies of all documents imposing income, rental
and other restrictions (non-TDHCA), if any, applicable to the operation
of the Property;
(5) copy of the most current title report, commitment
or policy in the Development Owner's possession;
(6) any recent Physical Needs Assessment conducted
by a Third-Party that is less than one (1) year old from the date
of the submission of the request and in the Development Owner's possession;
(7) copy of the monthly operating statements, including
income statements and balance sheets for the Property for the most
recent twelve (12) consecutive months (financial statements should
identify amounts held in reserves);
(8) the three (3) most recent consecutive audited annual
operating statements, if available;
(9) detailed set of photographs of the Property, including
interior and exterior of representative units and buildings, and the
Property's grounds (including digital photographs that may be easily
displayed on the Department's website);
(10) current and complete rent roll for the entire
Property;
(11) if any portion of the land or improvements is
leased for other than residential purposes, copies of the commercial
leases; and
(12) ROFR fee as identified in §10.901 of this
chapter (relating to Fee Schedule).
(d) Process. Within five (5) business days of receipt
of all required documentation, the Department will review the submitted
documents and notify the Development Owner of any deficiencies. Once
the deficiencies are resolved and the Development Owner and Department
come to an agreement on the ROFR offer price of the Property, the
Department will list the Property for sale on the Department's website
and contact entities on the nonprofit buyer list maintained by the
Department to inform them of the availability of the Property for
the agreed upon ROFR offer price as determined under this section.
The Department will notify the Development Owner when the Property
has been listed and of any inquiries or offers generated by such listing.
If the Department or Development Owner receives offers to purchase
the Property from more than one Qualified ROFR Organization, the Development
Owner may accept back up offers. To satisfy the ROFR requirement,
the Development Owner may sell the Property to the organization selected
by the Development Owner on such basis as it shall determine appropriate
and approved by the Department. The period of time required for offering
the property at the ROFR offer price is based upon the period identified
in the LURA and clarified in paragraphs (1) and (2) of this subsection:
(1) if the LURA requires a ninety (90) day ROFR posting
period, within ninety (90) days from the date listed on the website,
the process as identified in subparagraphs (A) - (D) of this paragraph
shall be followed:
(A) if an bona fide offer from a qualified ROFR organization
is received at or above the posted ROFR offer price, and the Development
Owner does not accept the offer, the ROFR requirement will not be
satisfied;
(B) if an bona fide offer from a qualified ROFR organization
is received at or above the posted ROFR offer price and the Development
Owner accepts the offer, and the nonprofit fails to consummate the
purchase, the ROFR requirement will be deemed met;
(C) if an offer from a nonprofit is received at a price
below the posted ROFR offer price, the Development Owner is not required
to accept the offer, and the ROFR requirement will be deemed met if
no other offers at or above the price are received during the ninety
(90) day period;
(D) if no bona fide offers are received during the
ninety (90) day period, the Department will notify the Development
Owner in writing that the ROFR requirement has been met. Upon receipt
of written notice, the Development Owner may pursue the Qualified
Contract process or proceed with the sale to a for-profit buyer at
or above the posted price;
(2) if the LURA requires a two year ROFR posting period,
and the Development Owner intends to sell the Property upon expiration
of the Compliance Period, the notice of intent described in this section
shall be given within two (2) years before the expiration as required
by Texas Government Code, §2306.6726. If the Development Owner
determines that it will sell the Development at some point later than
the end of the Compliance Period, the notice of intent shall be given
within two (2) years before the date upon which the Development Owner
intends to sell the Development. The two (2) year period referenced
in this paragraph begins when the Department has received and approved
all documentation required under subsection (c)(1) - (12) of this
section. During the two (2) years following the notice of intent and
in order to satisfy the ROFR requirement of the LURA, the Development
Owner may enter into an agreement to sell the Development only with
the parties listed, and in order of priority:
(A) during the first six (6) month period after notice
of intent, only with a Qualified Nonprofit Organization that is also
a Community Housing Development Organization, as defined in the HOME
Final Rule and is approved by the Department;
(B) during the second six (6) month period after notice
of intent, only with a Qualified Nonprofit Organization or a tenant
organization;
(C) during the second year after notice of intent,
only with the Department or with a Qualified Nonprofit Organization
approved by the Department or a tenant organization approved by the
Department; and
(D) if, during the two (2) year period, the Development
Owner shall receive an offer to purchase the Development at the Minimum
Purchase Price from one of the organizations designated in subparagraphs
(A) - (C) of this paragraph (within the period(s) appropriate to such
organization), the Development Owner may sell the Development at the
Minimum Purchase Price to such organization. If, during such period,
the Development Owner shall receive more than one offer to purchase
the Development at the Minimum Purchase Price from one or more of
the organizations designated in subparagraphs (A) - (C) of this paragraph
(within the period(s) appropriate to such organizations), the Development
Owner may sell the Development at the Minimum Purchase Price to whichever
of such organizations it shall choose;
(E) upon expiration of the two (2) year period, if
no Minimum Purchase Price offers were received from a Qualified Nonprofit
Organization, tenant organization or the Department, the Department
will notify the Development Owner in writing that the ROFR requirement
has been met. Upon receipt of written notice, the Development Owner
may pursue the Qualified Contract process or proceed with the sale
to a for-profit buyer at or above the minimum purchase price.
(e) Closing the Transaction. The Department shall have
the right to enforce the Development Owner's obligation to sell the
Development as herein contemplated by obtaining a power-of-attorney
from the Development Owner to execute such a sale or by obtaining
an order for specific performance of such obligation or by such other
means or remedy as shall be, in the Department's discretion, appropriate.
Cont'd... |
