Sauk Rapids, MN
Sims Mortgage Funding (SMF) recently closed a $2,358,000 HUD-insured loan for Good Shepherd Apartments, a 58-unit elderly housing community located in Sauk Rapids, MN. The Project was built in 1979 and financed with a Section 202 Direct Loan. All units are covered with a Section 8 Contract. Located on the same campus as are two additional Section 202 projects which were financed by HUD under the Capital Advance program. Good Shepherd Community is the common Sponsor.
In addition to the Project, the related communities needed improvements; however, because of their capital structure as “Section 202 PRAC Projects”, they had no viable funding options on their own.
SMF identified a financing solution based on the Sponsor’s dual goals of providing capital for Good Shepherd Apartments and the PRAC communities. A refinancing loan based on a market-value underwriting would generate sufficient loan proceeds to recapitalize Good Shepherd Apartments, and provide funding for the other buildings.
SMF originated a $2,358,000 loan insured under the Section 223(f) program that was processed by the Fort Worth HUD Office under the Multifamily Accelerated Processing (MAP) program and approved in 71 days.
New loan proceeds were used to prepay the Project’s Section 202 Direct Loan; fund $343,600 in an initial deposit to the Reserve Fund for Replacements; and, establish a repair escrow of $482,700. The Sponsor also received a 15% Developer Fee that was fully disbursed at closing. Our underwriting also generated enough additional loan proceeds to fund $594,000 in capital improvements for the PRAC communities. The escrow established at closing for this purpose provided the Sponsor with flexibility in determining the scope of work for each building.
SMF’s financing enabled Good Shepherd Community to recapitalize three affordable communities in a single transaction. In addition, the Sponsor benefits from the transaction by earning a Developer Fee and the release of its Residual Receipts account.