The Madison Group (TMG), a leading source of multifamily financing
nationwide, arranged the $2,553,500 purchase of a 32-unit
apartment complex in Taylorsville, Utah. The
borrower’s goal was to maximize the amount of dollars available. TMG secured the financing with a FNMA 15-year fixed rate loan at 4.60% and a 30-year
amortization.
The apartment complex, in a tucked away location south of Salt Lake
City, consists of two 16-unit multi-plexes with 24 two-bedroom units and 8
three-bedroom units. Residents generally
pay a premium for these open townhome style units with upstairs bedrooms and
basement garages. The townhomes feature light, open design with skylights, and each
unit has a laundry room and three bathrooms. Attached garages have 14-foot and
21-foot deep parking spaces that allow one short and one long vehicle.
Additionally 21 parking stalls are onsite. A condominium plat has already been recorded
for the option of future condo conversion. Although the complex is in a secluded
location, it offers quick access to freeways, the Salt Lake International Airport
and shopping.
Owner managed
units have kept great tenants but at very low rents. Unit square footage has
been approximated in market study at 1,200 sq. ft. per two-bedroom unit and 1,450
sq. ft. per three-bedroom unit. The complex is located right off 5400 South
with easy access to Bangerter Highway. Nearby shopping includes Jordan Landing,
Smiths grocery and Walmart.
“The borrower came to us to figure out a way
to purchase the property with maximum leverage,” said Loan Officer Angela
Kesselman. “The challenge was that the
rents were much below market, which restricted the cash flow on the
project. We typically underwrite
multifamily at a 1.25:1 debt service coverage which did not qualify the property
for a full loan amount.
“This purchase is a long term hold for the
buyer so we put them into a Fannie Mae 15-year loan with a 30-year amortization
through FNMA financing. This particular
loan allows the borrower to pull cash out of the project once the project is at
market rents. They had the cash to
close, but decided not to take the rate risk now, and instead lock in a low
rate, 15-year fixed term on the purchase. They can advance additional funds as
the debt service coverage increases over time, therefore hedging their long-term
rate.
“This specific type of loan worked well
for the borrower’s needs. They were able
to purchase a nice multifamily project that was in excellent condition and they
locked into a great long-term rate on a property that had below market
rents. It should perform well for them
moving forward,” said Kesselman, TMG’s Associate Director of Finance.
The financing was arranged by Angela Kesselman at The Madison Group.