In November, Sims Mortgage Funding, Inc. (SMF) closed a $5,243,000 HUD-insured refinancing loan for Majestic House, a 74-unit, age-restricted affordable community located in Tamaqua, PA. The loan was insured under the Section 223(f) program and underwritten at 80% of the property’s fair market value, providing cash-out to the borrower, a for-profit limited partnership, and funds for repairs and reserves. As a product of the transaction, the Section 8 Housing Assistance Rental Contract was renewed for 20 additional years, providing the Project with a stable, long-term revenue platform.
Majestic House was initially a hotel and theatre built in the 1920s. The building was substantially rehabilitated and converted to elderly housing in the 1980s with a mortgage loan issued by the Pennsylvania Housing Finance Agency. We were first introduced to the Project in 2013 when we refinanced the PHFA loan with a HUD-insured Section 223(f) insured loan. This loan also enabled the owner to cash-out, and fund repairs and reserves.
The general partner had three basic goals in recapitalizing the Project: (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 improve accessibility and enhance resident comfort; and, (3) providing the partnership’s principals and limited partners with financial incentives to continue to own and operate affordable housing. These goals were met a second time, first through the Section 223(f) loan that closed in 2013 and a second time in November.
The fixed rate, 35-year fully-amortizing loan was underwritten under the Multifamily Accelerated Processing (MAP) program and approved by HUD’s Northeast Region in approximately 115 days. With funds available for capital repairs and reserves, and financial incentives distributed to the ownership, Majestic House will continue to provide affordable housing to low and moderate income elderly for years to come. This is the fourth HUD-insured loan we have closed for the ownership group.
For additional information about Majestic House transaction, please contact us.