A CMBS loan tied to apartments in Austin was transferred to special servicing in fallout from Texas’ House Bill 21.
The $60 million loan backed by Langdon at Walnut Park was flagged after borrower Langdon Street Capital didn’t make the required principal paydown. The Beverly Hills, California-based firm previously agreed to pay down the loan to a debt service coverage ratio of 1.28 if the affordable housing property tax exemption wasn’t granted by Aug. 29, but did not make the payment after failing to get the exemption. The firm lost its exemption after the passage of HB 21, which took aim at a loophole in an affordable housing law, which Langdon used to acquire the property.
The property was valued at $90.1 million, assuming the exemption. Without the exemption, the property is valued at $67.1 million.
Langdon Street Capital used what’s known as the “traveling” housing finance corporation loophole to get tax credits on the property. The loophole allows multifamily operators to get property tax exemptions by partnering with far-flung affordable housing organizations, thus removing properties in major Texas metros off the tax rolls without the approval of local municipalities.
The firm, which was founded by Adam Daneshgar, purchased the property at 12101 N. Lamar Boulevard in 2021, did a sale-leaseback of the property with Pleasanton Housing Finance Corporation, an affordable housing organization more than 100 miles from Austin. The property reserves some units for people whose household income is less than $78,640.
Daneshgar didn’t respond to a request for comment.
House Bill 21, which was authored by Houston multifamily operator Rep. Gary Gates, took aim at these deals by requiring that apartment owners partner with organizations in the same jurisdiction. It also created additional affordability requirements.
But the law also gives prior deals, including those that used the loophole, until 2027 to come into compliance with new requirements. In this case and others, appraisal districts appear to be exercising their own interpretation and denying property tax exemptions for these deals now.
Gates said some appraisal districts filed temporary restraining orders against the organizations often used in traveling HFC deals, including Pleasanton, but Travis Central Appraisal District didn’t take that route.
When asked if the district was denying exemptions for deals that used the loophole, chief strategy officer Cynthia Martinez only said property owners “must submit an application and meet the requirements outlined by Chapter 394 of the Local Government Code” to receive the exemption.
That’s the crux of a lawsuit challenging HB 21, filed by the Texas Workforce Housing Commission and the ground lease tenant of Willowbend Apartments in San Antonio. The apartment complex is a traveling housing finance corporation deal where Los Angeles-based Post Investment Group partnered with a housing finance corporation in Brownsville.
The lawsuit claims the passage of HB 21 has emboldened appraisal districts to go after the properties that used this loophole by denying their exemptions before the new law goes into effect in 2027, putting 2025 and 2026 exemptions “in jeopardy.” Specifically, the Bexar Appraisal District required Post Investment Group to submit a renewal request to maintain its exemption and has, so far, failed to make a determination.
“I could see where an appraisal district would take the position: we think your deal is a scam, and we’re not going to give a tax exemption until you have a court determine that it’s a valid HFC,” Gates said.
“I think they have every right to deny it.”
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