Multifamily Construction Loan
The Madison Group (TMG), a leading source of multifamily loans nationwide, arranged a $6,770,000 loan for the construction of an 80-unit multifamily project in Twin Falls, Idaho. The borrower needed to secure construction funds for a project that had already been started. TMG was able to secure the financing with an 18-month interest only loan at a rate of 6% and 75% loan to cost.
The borrower is a builder that has built multiple properties of this same design in the Boise area and is now building in the Twin Falls area. There is a 1 percent vacancy in this market with no new product available. Due to the strong jobs market and lack of housing, the owners expect to lease up the project in a 4-month time frame.
The owner has finished horizontal development and has started framing 12 units. This loan will complete the vertical construction of this project, which is approximately 50 percent complete at this time. A private money loan is currently in place but didn’t provide adequate funds to complete the project.
The project consists of 20 four-plex buildings that will operate as an 80-unit multifamily development when completed. It is a design that is very popular with tenants. This is a long-term hold for the client.
Among the challenges TMG faced in arranging this loan, was the fact that financing a partially completed construction project can be difficult for lenders and title companies. Also, there are no real comps in Twin Falls, as new product has not been built in this market for several years. Furthermore, the borrower needed quick funds to keep the project moving forward.
In order to make the loan successful, TMG was able to find a lender that felt comfortable with the builder and the type of product he has been developing for many years. Low vacancy in the market, combined with the preleasing of 50 percent of the project were mitigants for the lender to approve the loan at a high loan to cost. We were also able to use a title company that has a preferred relationship with the builder, so the lender could get comfortable with title.
“The borrower was able to secure the financing he needed so he could finish the project and get the first building completed in time for the first wave of tenants to move in by the end of July,” said Angela Kesselman, TMG’s Associate Director of Finance. “I feel confident that this property will perform well for the client long term.”
The financing was arranged by Angela Kesselman at The Madison Group.