Background

Grandridge Apartments are located in a rural area in the middle of Washington State. The project was developed under the USDA 515 program and was converted out of the program by the current owner who acquired it in September of 2012. The market is stable with low vacancies and slowly rising rents. Renter demand is growing by about one percent per annum.

The Challenge

The property was encumbered with onerous USDA 515 program restrictions that limited annual distributions to 8% of original development equity investment. The restrictions on the property reduced the project’s market value. After purchasing the project, the owners were able to get the USDA covenants removed, completed repairs and obtained project-based Section 8 for the project. The partnership required financing that provides a low fixed rate and high leverage, which would allow them to recoup their equity and time invested in the project.

Outcome

The partnership contacted Rockhall’s Kathryn Thompson to utilize FHA’s 223(f) program to meet the project’s objectives.  The loan funded repairs, reserves and cash out to the owners at 80% of appraised value.