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The Housing Authority of the City of Brownsville’s project to rehabilitate downtown’s derelict El Jardin Hotel seemed to be on greased rails in the summer of 2021.
In July of that year, HACB got the news it was waiting for from the Texas Department of Housing and Community Affairs — that the authority’s proposed $18.5 million El Jardin adaptive-reuse project had been approved for $11.8 million in 9% Housing Tax Credits through TDHCA.
The money was awarded to the Brownsville Housing Opportunity Corporation, HACB’s nonprofit that applies for low-income housing tax credits. The developer, BHOC in this case, offers the credits for sale to investors, who are able to apply them toward their federal liability each year for a decade on a dollar-for-dollar basis in exchange for investing in a property, El Jardin in this case.
El Jardin opened as a hotel overlooking the Rio Grande in 1927 and was the go-to spot for special events and elegant dinners for decades until it fell on hard times and was abandoned in the 1980s. BHOC purchased the building 2019 with a plan to transform it into 42 residential housing units on floors 2-8, and two more units on the first floor. The TDHCA tax credits were making that plan a reality, but then everything changed.
Groundbreaking initially was scheduled for summer 2022, with the project expected to be complete by December 2023. But summer turned to fall, then winter, and still no groundbreaking. The project was on hold, but only temporarily. The long-awaited groundbreaking finally took place last month, on Aug. 31, with many dignitaries in attendance and speeches made for the occasion.
HACB Chief Executive Officer Carla Mancha shared with The Brownsville Herald the reasons for the delay.
“What really impacted not just our project but many other tax credit projects that were awarded in 2021 is, one, interest rates went up,” she said. “The cost of construction went up. Insurance costs also went up.”
The original $18.5 million development cost rose to $29.1 million, Mancha said. Some other projects that received the tax credits in 2021 are still in limbo, developers and investors struggling to close the financial gap created by ballooning costs, though El Jardin managed to find a way, Mancha said.
TDHCA’s governing board chose to give all the 2021 awardees the opportunity to apply for additional funds in the form of supplemental credits, which came through last February and helped HACB get El Jardin to a groundbreaking, Mancha said. BHOC also extended a “gap loan” to the project in the amount of $4.5 million, she said. While a gap loan was always going to be necessary, as of early 2021 it was assumed a mere $450,000 would do the trick, Mancha said.
The “defederalized funds” making up the loan were earned by BHOC from prior tax-credit deals in which HACB had served as developer or general partner, Mancha said.
“It’s important for people to know this is not federal money,” she said. “This is not taxpayer money. That is how we brought the deal to close.”
The contractor, San Antonio based Franklin Construction, started work on June 9. The estimate for completion is March 2025, though the two first-floor units should be ready by Dec. 1, Mancha said.
“And then as the rest of the floors are ready we will be able to move families into the remaining units, and the goal is to complete the moving of the families to El Jardin by March 2025,” she said.
Plans call for roughly 3,000 square feet on the bottom floor to be leased commercially, though no tenant has been decided on yet, Mancha said. And while the idea of a rooftop restaurant or similar amenity was floated early on, that’s not happening anytime soon thanks to the high cost of such a venture — on top of a project that’s already a lot more expensive than originally anticipated. The $29.1 million price tag includes $19.3 million for actual construction.
Mancha said crews have been doing additional interior demolition on the first floor and in the basement and are about to tackle some asbestos-lined pipes that were discovered. All the upper floors have been gutted, with additional interior demolition on floors three to eight under the guidance of the state’s historic preservation office and BHOC’s historic preservation consultant, and — because the project also takes advantage of historic tax credits — the National Park Service, which publishes and oversees the Interior Secretary’s “Standards for Rehabilitation,” Mancha said.
“BHOC incurred all of that expense to make sure that the building was as ready as it could be for when the construction company was selected and started their work,” she said. “If we had not done that prior to starting construction with Franklin, then we would be way behind on the project.”
HACB held a second groundbreaking on Aug. 32, for the second phase of Tangelo Quarters, a public housing project that opened with 18 freestanding cottage homes in 2019, Mancha said. Phase two will entail the addition of five more cottages, to be built with around $780,000 in HACB capital improvement funds from HUD, and the difference to be paid by HACB itself, with a total construction cost of $1 million, Mancha said.
“Since May 2019 when that property opened, it has been 100% occupied,” she said. “Our families love that property. It’s a really nice community. The five homes that are going to be constructed will mirror the architecture and design of those other 18.”
Before the COVID pandemic, HACB had a waiting list for all its properties combined over slightly over 5,000 families. Today the waiting list is over 10,000 families, Mancha said.
“It’s been hovering over 10,000 since, I want to say, February of this year,” she said. “There’s a great need for affordable housing. Those five units, it may not sound like a lot, but families who have been waiting on the waiting list for a long time, once they move into that home that is going to mean everything to them.”
Mancha expressed gratitude to TDHCA’s board and staff in Austin for providing the supplemental credits that allowed the El Jardin deal to get across the finish line, noting that three affordable housing properties were awarded the 9% credits in Brownsville this year.
“We’re very happy to see that, because that will help us with the families who are on the waiting list to find a home,” she said.