Northwood Apartments
Glencoe, MN; 39 Units, Multifamily Affordable Housing


Northwood Apartments is an affordable, 39-unit multifamily housing project located in Glencoe, Minnesota.  The project was developed in the mid 1970’s under HUD’s non-insured State HFA Section 236 interest rate subsidy program.  The Section 236 Interest Rate Payment and Rental Assistance Payment contracts (RAP) were set to expire.  The project was in need of capital to finance capital repairs and improvements.


This project faced several significant challenges. Terms of the Section 236 Mortgage Note prohibited prepayment prior to loan maturity without the prior written approval of HUD and State Housing Finance Agency. The project struggled to break-even with the existing project-based rental and debt service payment subsidies. Limited cash flow forced the Owner to contribute personal equity into the project to keep the project afloat.  The project struggled to reach occupancy levels achieved in the market as an older project with no significant prior renovations. With the project-based subsidies set to expire, the project’s affordable housing status was in jeopardy.


Rockhall leaned on its expertise in the Section 236 and RAD programs to navigate the 236 prepayment process and to obtain approval to convert expiring project-based subsidies to a PBRA Section 8 HAP contract.  The number of eligible units receiving project-based rental subsidies increased 25% as contract rents increased 78% under the RAD conversion. With the improved cash flow, Rockhall provided an FHA insured loan that paid off all existing debt, funded $22k per unit in capital repairs and improvements, and provided cash-out to the Owner. 

The 236 prepayment/223(f) refinance is a win-win for the Owner and the affordable housing community.  The new Section 8 HAP contract ensures the long-term affordability of the project.  The upgraded interior and exterior finishes funded with loan proceeds improve the quality of housing for the affordable tenants. The Owner benefits from cash-out, increased rents, and a more valuable real estate asset.