SMF Closes HUD-Insured Loan for Affordable Housing
Sims Mortgage Funding (SMF) recently closed an FHA-insured loan for the Shalom House, a 151-unit elderly project located in Ventnor, NJ.
Shalom House was constructed in the early 1980s and financed with a HUD Section 202 Direct Loan. Its primary source of income is a Section 8 Housing Assistance Payment (HAP) Contract that had a remaining term of approximately 17 years. The Section 8 subsidy is sufficient to fund operations and debt service, but the Project has growing capital needs that could not be financed from operations and current reserves.
- Sims underwrote a new $8,672,800 loan insured under the Section 223(f) program that was approved by HUD in approximately 100 days under the Multifamily Accelerated Processing (MAP) program.
- Approximately $2,270,000 in loan proceeds were escrowed for capital repairs; $900,000 funded an initial deposit to a reserve fund for replacements; and, $1,300,000 in a Developer Fee will be distributed to the Sponsor.
- The new loan reduced the Project’s interest rate by approximately 50% and will amortize over a 35 year period. Concurrent with the closing of the loan, HUD awarded the Project a 20 year renewal of its Section 8 HAP Contract; when the remaining term of the prior contract is added, the Project will have Section 8 funding in place for approximately 37 years.
As a result of the SMF loan, the Project has a significant source of new capital for repairs and reserves, and a long-term Section 8 funding platform. The Sponsor will continue to provide affordable housing to low and moderate income elderly in the greater Atlantic City area for years to come.
This is the third affordable housing recapitalization that SMF has completed for the Project’s management agent, which operates approximately 7,500 units of rental housing.