Dealmaker: Sims Mortgage Funding Recapitalizes Minnesota, New Jersey Affordable Housing
Sims Mortgage Funding, Montvale, N.J. closed $8.8 million in FHA-insured loans for four affordable developments in Minnesota and New Jersey using the Section 223(f)/202 mortgage insurance program.
In Sauk Rapids, Minn., 58-unit elderly housing community Good Shepherd Apartments received a $2.3 million Section 202 Direct Loan.
Two other Section 202 projects occupy the same campus. The related communities needed improvements, but because of their capital structure as Section 202 PRAC projects they had no viable funding options on their own. So in addition to recapitalizing Good Shepherd Apartments, the $2.3 million FHA loan generated sufficient proceeds provided capital funding for the two PRAC projects. In addition, the sponsor earned a 15 percent developer fee.
Sims Mortgage Funding Senior Vice President Andrew Patykula served as and Multifamily Accelerated Processing program underwriter for the deal. He said Good Shepherd was one of first Section 223(f)/202 refinancings for a project with an Assisted Living Conversion Program grant. “By underwriting the loan based on 80 percent of market value, we generated enough loan to recapitalize three affordable projects in a single transaction,” he said.
The Southwest Regional HUD Office approved the loan in 71 days under the Multifamily Accelerated Processing program.
In Margate, N.J., Margate Terrace Apartments received a new $6.4 million HUD Section 202 direct loan. Its primary source of income is a Section 8 contract with 16 years remaining. The Section 8 subsidy funds operations and debt service obligations, but the project had growing capital needs that could not be financed from operations and current reserve balances, so Sims underwrote the new loan.
The Northeast Regional HUD office approved the $2.3 million Section 223(f)/202 loan under the MAP Program in less than 45 days. Nearly $1.4 million in loan proceeds were escrowed for capital repairs; $350,000 was deposited into the Replacement Reserve Fund and a 15 percent developer fee went to the sponsor.
“Margate Terrace now has a significant source of new capital for improvements and reserves and a long-term Section 8 funding platform, enabling the sponsor to continue to provide affordable housing to low and moderate-income elderly for years to come,” said Sims Mortgage Funding Senior Consultant Joseph Windels, who originated the loan.
