$7,035,000
June 2021
Brooklyn, NY
PARTNERED RIGHT
In 2012 we originated an $8,313,000 FHA-insured Section 223(f) loan that refinanced its Section 202 Direct Loan, funded capital reserves and repairs, earned the Sponsor a development fee and generated annual debt service savings.
Interest rates had declined since the original refinancing, providing Marien-Heim with the opportunity to generate additional debt service savings. We advised them of this positive development in the market and suggested a refinancing structured under HUD’s Mortgage Note Modification/Interest Rate Reduction (IRR) protocol.
STRUCTURED RIGHT
Acting as Financial Advisor, we developed the initial financial modeling of the transaction and coordinated the development of the formal IRR proposal with the existing loan servicer, whom we brought into the 2012 refinancing. HUD approved the IRR proposal in about 75 days and the loan closed 29 days later.
EXECUTED RIGHT
The IRR reduced Marien-Heim’s interest rate by 28% and will generate debt service savings of approximately $48,000 through the remaining term of the loan. The net present value of debt service savings exceeded the
transaction costs by 7.5 times and was 12.1% of the unpaid principal balance of the existing loan.
FINANCED RIGHT®
Debt service savings will be used to increase deposits to the existing reserve fund for replacements, ensuring that future capital needs will be adequately met. The Marien-Heim IRR, completed 9 years after our initial refinancing, is another example of SMF maintaining long-term relationships with our clients and delivering to them ongoing value.