Dealmaker: Eastern Mortgage Capital Closes $69M in FHA Loans

January 7, 2019

Eastern Mortgage Capital, Burlington, Mass., closed $69 million in first mortgage loans secured by multifamily assets in three states.

All three transactions used the HUD-insured 223(f) program.

In Georgetown, Mass., Eastern Mortgage Capital Senior Vice President Peter Panagako originated a $31.8 million refinance loan secured by 186-unit apartment community Longview at Georgetown.

“The Longview at Georgetown refinance was located in a low cap rate area and was looking for max proceeds,” Panagako said. “Coupling a 35-year term and 35-year amortization loan with a minimum DSCR and cost of capital materially below that of the agencies provided a significant proceeds advantage.”

The firm also closed a direct $15.3 acquisition loan for 312-unit Rio at Santa Fe in Yuma, Ariz. and a $21.9 million refinance for Evergreen at Magnolia Commons, a 194-unit community in Hiram, Ga.

“The Arizona financing was a direct acquisition loan with no bridge, and despite occupancy dropping below 80 percent within 90 days of closing, we were able to underwrite it as if stable,” Panagako said.

Panagako noted the 2002-vintage Evergreen at Magnolia Commons property in Georgia was partially through a light-rehab repositioning. “Because the 223(f) program allows for valuation inclusive of any upgrades that can be completed within 12 months of closing and utilizes market rents (not trailing rents or current rent roll), the 223(f) program was able to provide both a proceeds and a timing advantage compared to the alternatives,” he said.

All three transactions locked in a 35-year fixed-rate mortgage at rates below alternative 10-year fixed-rate programs in a rising-rate environment, Panagako said. “The FHA-insured financing provides a loan that amortizes fully over its 35-year term, so there’s no interest rate risk and no ‘balloon risk,’ ever,” he said. “As with all of our loans, this is non-recourse and assumable and has a prepayment structure that avoids yield maintenance or defeasance.”