Sims Mortgage Funding, Inc. (SMF) closed in November a $3,240,000 HUD-insured recapitalization loan for McDade – Chichilla Apartments, a 90-unit, age-restricted rental property located in Olyphant, PA. It has a Section 8 Housing Assistance Rental Contract that runs for 20 years commencing in November 2013. The loan was insured under the Section 223(f) program and underwritten at 80% of the property’s fair market value, providing a cash distribution to the owner, a for-profit limited partnership.
The Project was built in 1983 with a mortgage loan issued by the Pennsylvania Housing Finance Agency. The PHFA loan was recently liquidated, leaving the property with zero debt, but with tax liabilities for the general and limited partners. Moreover, despite a rigorous annual capital expenditure program, the owner was seeking to install significant energy-saving improvements that could best be financed from a recapitalization.
Therefore, the borrower had three basic goals in pursuing the HUD-insured recapitalization: (1) ensuring that affordable housing units would continue to be available on a long-term basis; (2) financing a series of moderate improvements to the property that would enhance resident comfort and provide a more energy-efficient operation; and, (3) providing the partners with financial incentives and liquidity to cover tax liabilities. These goals were met through the Section 223(f) loan.
The fixed rate, 35-year fully-amortizing loan was underwritten under the Multifamily Accelerated Processing (MAP) program and processed by the Philadelphia Multifamily Hub in 45 days. Closing occurred 90 days later. Approximately $570,000 in loan proceeds were available for capital repairs; $328,000 funded an initial deposit to a reserve fund for replacements; and, a substantial amount of loan proceeds were distributed to the ownership group. As a result of the recapitalization, McDade-Chichilla will continue to provide affordable housing to low and moderate income elderly in Northeast Pennsylvania for years to come.
For additional information about the McDade-Chichilla transaction, please contact us.