Sims Mortgage Funding (SMF) recently closed a $19,642,600 FHA-insured loan to finance the construction of multifamily rental housing in metropolitan Lake Charles, LA.
Belle Savanne Apartment Homes will be a 208-unit market-rate rental property oriented towards a growing workforce in the construction, petrochemical, transportation and energy sectors. The Project will contain a mix of 96 one-bedroom/one bath units and 112 two-bedroom/two bath units arrayed in 13 two-story buildings on a 13.6 acre site. Amenities will include a clubhouse and business office, and a swimming pool and deck.
The loan was insured under the Section 221(d)(4) program and underwritten at 83.3% of the estimated replacement cost. Debt service coverage at stabilized occupancy is projected at 1.32. Working capital, construction contingency and operating deficit escrows totaled approximately $1.6 million.
The application and approval process was reflective of two key elements of HUD’s ongoing transformation of the Multifamily Accelerated Processing (MAP) program. Initially sent to Ft. Worth, the application was processed in Chicago based on workload conditions; moreover, FHA’s review utilized a standard underwriting template and narrative format similar to the successful Lean healthcare programs. As a result, an application for a Louisiana project that was filed in Texas was processed in Illinois in 90 days.
SMF was able to navigate a complex Development Agreement among the City, Parish (County) and related
party to the owner and to develop a structure acceptable to FHA and the title company that enabled loan closing to occur before the Project will have access to water, sewer and a public street. Otherwise, the closing could have been delayed for months until this infrastructure was brought into place, exposing the developer to construction cost escalations and interest rate risk.
Because SMF was able to get HUD to uncouple the loan closing from the completion of infrastructure, the developer was able to lock in an interest rate under very favorable conditions before the recent spike in rates resulting from an increase in the yield on US Treasuries. This rate enhanced the overall feasibility of the Project.