Fident Capital secured $30.4MM of HUD 223(f) permanent financing for a 140-unit, ten-building multifamily development in Carson City, Nevada. The cash-neutral refinance provided the client a 35-year, fixed-rate, non-recourse loan at a spread of 108 over the 10-year treasury.
The primary challenge was navigating a $1.343MM general contractor lien that recorded on title two weeks before the proposed close date, stopping the financing in its tracks. Fident coordinated multiple closing extensions while the borrower worked on bonding and other mechanisms to resolve the lien.
Another challenge was maintaining compliance with the Fair Housing Act (FHA), a requirement that’s separate from and more restrictive than the Americans with Disabilities Act (ADA). The property was developed in a known flood plain and a letter of map revision (LOMR) was utilized to elevate the buildings above the flood plain. FHA measures the elevation change from the unit entry to initial building ingress and requires ramps when that slope is sufficiently shallow. At first, HUD requested 24 wheelchair ramps to be added to the project. This condition would have killed the financing. Fident, the borrower, and civil engineers went through a lengthy and nuanced process with HUD to remove this requirement.
The final challenge was simply printing a few months of clean property financials. Having taken out their construction loan with bridge debt just after C of O, the borrower needed to record several months of post-concession, normalized operations for the appraiser and HUD to review. With a bit of finesse, underwritten NOI matched the lender’s initial term sheet and proceeds were limited only by the 1.15 DSCR requirement proposed by HUD, not LTV or LTC.
The cash neutral loan, facilitated by the rate buydown, gives this qualified opportunity zone deal the duration to complete a 10-year hold along with the free optionality to own the as with fixed-rate debt for an additional 25-years, or assign the debt to a buyer for 5 basis points at the time of sale.
