Board Book June 2025

Ashley Huddleston

Hi all,

Thanks for putting together this comprehensive packet — I appreciate the effort that goes into compiling and analyzing the data across operations, finance, and policy. It’s helpful to have everything in one place to track where we’re headed.

Here’s what I had questions and comments on after reviewing the materials:

Request: Monthly Budget Variance Report
Going forward, I’d like to see two monthly variance reports with:

Month actuals vs Month budget
YTD actuals vs. YTD budget
Dollar and % variance per category
Narrative explanations for any line item with a variance >5%

This will help us identify emerging issues and opportunities in real time.

Flat Budget Allocation
The annual budget is divided evenly across the year. Given how expenses and revenue are hitting can
we implement a reforecasting process that accounts for revenue and expense timing and one-time events?

Legislative Update – Affordability & Compliance

Modeling HB21 Impacts
Can someone model the financial impact of the 50% rent reduction requirement? It would be helpful to see a few sample projects with and without the new rules.

Tenant Protections Summary
What specific tenant protections are now required under HB21? A short list of new statutory obligations at the lease level would be useful.

Strategic Opportunity in Travis County
Are there any developments in Travis County where another HFC exited or failed to meet compliance, and Strategic HFC could step in?

April Portfolio Review Comments

PM Accountability
Please include the property management and developer for each asset. This helps us correlate performance issues with management.
Clarify Aged Receivables
Is this unpaid tenant rent? Something else? And how aged is “aged”? A breakdown by aging bucket (30/60/90+) would be ideal.
OpEx Insights
What’s driving unusually low OpEx at some properties? Temporary variance, underreporting, or cost-saving strategies?
Budget Variance Definitions
Please clarify: are the variance figures based on monthly or YTD budgets? That distinction affects how we interpret performance.
Low Occupancy Drivers
What’s driving persistently low occupancy at Forest Park, Fiskville, and Heights at Parmer? Are there specific location, leasing, or reputation issues?
Turnover Metric Correction
Current reporting of “turnover” is unclear. Industry standard is renewal rate (e.g., 5 of 10 leases renewed = 50% retention). Please adopt this format.
Wildhorse Performance Plan
Wildhorse is underperforming across several KPIs: aged receivables, variance, turnover. What’s the intervention plan?

Thank you! Looking forward to seeing everyone in person this week!

Dianna Grey

Director Huddleston,

Thank you for these thoughtful questions and comments! Staff is working on responses. Since some may take longer than others, we will likely separate the posts into the three main categories: Financial Reports, HB21 Analysis, and Portfolio Reporting.

Regards,

Dianna Grey

Executive Director

Dianna Grey

Staff Response on Financial Reports:

Request: Monthly Budget Variance Report

Going forward, I’d like to see two monthly variance reports with:

Month actuals vs Month budget
YTD actuals vs. YTD budget
Dollar and % variance per category
Narrative explanations for any line item with a variance >5%

This will help us identify emerging issues and opportunities in real time.

Staff Response:

Staff have been planning improvements to our monthly financial reports, and the following statements/updates will be added to the next financial packet:

· Month actuals vs Month budget

· YTD actuals vs. YTD budget

· Dollar and % variance per category

Regarding the inclusion of narrative explanations for any line item with a variance [from budget] that is greater than 5%

· Staff currently prepares a financial narrative each month, highlighting lines that show a variance from budget identified as note-worthy and providing associated narrative explanations.

· Given the flat budget allocation, many lines will flag with this metric. For example, some budget lines are $2500 for the entire year – in any given month a spend of $11 over budget in such a line would trigger this 5% flag. We may wish to consider a combined threshold of 5% AND greater than $1000, against the year-to-date budget.

Flat Budget Allocation
The annual budget is divided evenly across the year. Given how expenses and revenue are hitting can we implement a reforecasting process that accounts for revenue and expense timing and one-time events?

Staff Response:

Staff is engaged in a forecasting process for the 2026 budget that should improve the ability to predict timing of revenue/expenses. Due to modest availability of detailed historical revenue and expense data (HATC accounting reports were considerably less granular than our current approach), this process is likely to be iterative and ongoing.

Thank you.

Dianna Grey

Executive Director

Dianna Grey

Staff Response re: Impacts of HB21

Modeling HB21 Impacts
Can someone model the financial impact of the 50% rent reduction requirement? It would be helpful to see a few sample projects with and without the new rules.

At this time, staff believe that the requirement that reduced rents be at least 50% of the abated value is not likely to have a material impact on the financial model of most of Strategic HFC’s deals, since our current deal terms (approved last year) require that rent reductions equal at least 60% of the projected abated taxes – greater than the state’s minimum requirement. That said, there will be some differences in how the calculation must be completed; we will have a better sense of this once the Texas Department of Housing and Community Affairs (TDHCA) issues its rules - slated for January 2026. The primary impact of the legislation on our pipeline is that there is now a state compliance process and potential compensatory payment to taxing jurisdictions if the projected rent reduction ratio is not met, increasing risk from the standpoint of developers, investors and lenders – which may have a chilling effect on deal flow.

The only workforce deal Strategic HFC has that closed before the law went into effect was Banyan Braker, which was closed under older Strategic HFC deal terms. At the time of underwriting, the projected rental savings were 43% of projected abated property taxes by year 10. This project will have ten years to come into compliance with the new law, unless it is sold or refinanced before that time. Additional clarity is needed from TDCHA on how such deals will be treated. Staff can provide comparative analysis to the Real Estate Committee or the full board as additional information becomes available.

Note that there are questions about the constitutionality of this retroactive provision that industry experts expect may be challenged in court in the coming months.

Tenant Protections Summary
What specific tenant protections are now required under HB21? A short list of new statutory obligations at the lease level would be useful.

Tenant protections required at all HFC owned properties by January 1, 2026 include the following:

Source of Income Protections: Projects cannot deny tenant applications based solely on a tenant having a Housing Choice Voucher as a source of income. In other words, Housing Choice Vouchers must be accepted. The development must affirmatively market to Housing Choice Voucher holders, the website must post policies on voucher acceptance, and local public housing authorities must be notified of the project. Projects are also prohibited from setting minimum financial standards that require voucher holders to make more than 250% of the tenant's portion of the rent.

Non-Retaliation: Property management may not retaliate against tenants for organizing.

Limitations on Non-Renewals: Non-renewal can only occur in certain situations, including substantial or repeated minor lease violations, failure to provide information needed to certify eligibility and income level. At least 30 days’ notice of non-renewal must be provided.

Strategic Opportunity in Travis County
Are there any developments in Travis County where another HFC exited or failed to meet compliance, and Strategic HFC could step in?

Since the legislation has just been enacted, such instances of noncompliance or exit due to the new rules have not yet occurred. However, the new law does eliminate property tax exemptions for so-called “Traveling HFCs” beginning January 1^st, 2027, unless approvals are obtained from local taxing jurisdictions and certain HFCs. We anticipate there may be existing projects seeking a new tax-exempt partner and have received some very preliminary inquiries. For such projects, Strategic HFC would presumably need to underwrite the transaction structure (including affordability), quality, and development team like any other new project. Staff will keep Real Estate Committee updated on any prospective deals.

Thank you,

Dianna Grey

Executive Director

Dianna Grey

April Portfolio Review

PM Accountability
Please include the property management and developer for each asset. This helps us correlate performance issues with management.

Staff have been working with Lobby CRE (our portfolio data system software provider) to develop a format for regular portfolio reports (with updated versions slated to be presented to the Board in August) , and will take this into consideration.

Clarify Aged Receivables
Is this unpaid tenant rent? Something else? And how aged is “aged”? A breakdown by aging bucket (30/60/90+) would be ideal.

Aged Receivables represents unpaid rent and other amounts owed by tenants. At present, we are viewing this as a cumulative total. A clearer way to assess this would be to calculate the percentage of tenant debt that remains unpaid for a given month relative to the total rent that should have been collected. Staff are still working with Lobby CRE (our portfolio data system software provider) to have aged receivables broken down into the 30/60/90 day buckets.

OpEx Insights
What’s driving unusually low OpEx at some properties? Temporary variance, underreporting, or cost-saving strategies?

The single property with unusually low OpEx comes from a pdf report provided by the managing partner Rise Residential Management. Communication with property managers for these properties has been very limited so staff are not currently clear as to why OpEx was so low.

Budget Variance Definitions
Please clarify: are the variance figures based on monthly or YTD budgets? That distinction affects how we interpret performance.

In most of these cases, it is on a monthly basis, however the two Rise Residential properties (Creekview and Colorado Creek) have provided staff with April data in a pdf format that did not detail how budget variance was being calculated. Staff will reach out to confirm how the property is calculating budget variance in their monthly reports.

Low Occupancy Drivers
What’s driving persistently low occupancy at Forest Park, Fiskville, and Heights at Parmer? Are there specific location, leasing, or reputation issues?

Villages at Fiskville’s location has been considered a challenge since it opened and it has consistently had lower occupancy than the rest of the portfolio. Forest Park and Heights at Parmer Staff have had recent downticks in occupancy. Staff will be working with management at these properties to better understand what may be driving occupancy challenges there.

Turnover Metric Correction
Current reporting of “turnover” is unclear. Industry standard is renewal rate (e.g., 5 of 10 leases renewed = 50% retention). Please adopt this format.

Selection of this metric as one of the five KPIs was vetted through Real Estate Committee. Staff has purposefully chosen to track the number of move outs monthly, divided by the number of units. This helps us better understand the combined impact of evictions, skips, and non-renewals.

Wildhorse Performance Plan
Wildhorse is underperforming across several KPIs: aged receivables, variance, turnover. What’s the intervention plan?

For the first part of this year, staff time has been focused on selecting and implementing the new portfolio data system – ensuring that property management information is pulled reliably into the system and confirming the accuracy of platform data. This work is ongoing. In Q4, the Portfolio Manager will likely be able to dedicate more time to discussing intervention plans with partner properties. We do understand that on-site staffing has been an issue for Wildhorse, with an extended vacancy in their onsite Property Manager position.

Thank you,

Dianna Grey

Executive Director