PHOENIX-Patience and planning paid off for a local owner and developer who received two FHA-insured mortgages totaling $29.9 million to refinance existing portfolio loans.
Charles Heers obtained a $17.3 million loan for Avante Apartments, a 428-unit, class A- property here, and a $12.6 million for Pala Mesa Apartments, a 256-unit, class A- property in Mesa, AZ. Barry Petro, senior vice president of CBRE Capital Markets in San Diego, originated the loans.
The loans for the garden-style apartment properties were funded through HUD's Section 223(f) program. The non-recourse mortgages are fixed at 4.6% for a 35 years with 35-year amortization.
“We looked to the agencies, Freddie or Fannie, or FHA for the loans,” Petro says. “We ended up with FHA because it offered a higher LTV and debt coverage.” FHA also offered a more competitive interest rate.
Petro tells GlobeSt. it took 12 months, start-to-finish, to fund the loans. “The advantage of a FHA loan is that it offers more loan proceeds and a better rate, but the disadvantage is that it takes a long time close,” he says.
Petro says Heers got started on the refinancings with plenty of time to space before the existing loans matured. “The existing loans didn’t have pre-payment penalties, and we knew it might take a while, so we got started early,” he notes.
Heers built the properties in the late 1990s. They were more than 90% occupied when the loans closed.
“Mr. Heers and his family trust plan to own these properties for a long, long time, so that’s why FHA’s 35-year term was so attractive,” Petro explains. “Other borrowers with short-term plans usually choose agency loans, which have five or seven-year terms.”
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