JLL Capital Markets officials announced the firm has secured a $25 million Freddie Mac Bridge-to-Resyndication loan for Security Properties to acquire and rehabilitate Heatherstone Apartments, an existing 455-unit affordable housing property located in Kennewick, Wash.
Security Properties simultaneously executed a rate lock on a $34 million Freddie Mac Tax-Exempt Loan (TEL), featuring a 30-month forward-rate lock term.
“The bridge loan, combined with the forward-rate lock TEL, allowed Security Properties to quickly and efficiently acquire much-needed existing affordable housing stock and to cement plans for the preservation and rehabilitation of the affordable housing stock 30 months from now,” said Tim Leonhard, JLL managing director. “Freddie Mac’s new Bridge-to-Resyndication program, which JLL helped develop last fall, is playing a major role in the preservation of affordable housing by allowing dedicated affordable housing developers to compete with traditional cash-on-cash buyers to quickly acquire existing affordable housing stock while eliminating interest rate risk on a future preservation transaction at the time of initial acquisition. We see significant runway and increased demand ahead for this loan product.”
The bridge loan features an 82.5% loan-to-value ratio and has a three-year, interest-only term, and an initial rate of 2.87%. The TEL loan features a fixed rate of 4.63% on a 17-year term, with two years of interest-only followed by a 35-year amortization schedule.
“The preservation of Heatherstone Apartments is at the core of our mission,” said Bryon Gongaware, manager director of affordable housing at Security Properties. “This transaction presented several challenges: With the TEL, we were able to close quickly and compete with conventional buyers, and forward-rate lock the tax-exempt bonds, mitigating a key risk in the transaction. With this financing, Security Properties has a well-defined plan to execute a significant renovation to the property that will improve the apartment community and preserve housing affordability for the long term.”
Additionally, the TEL interest rate lock offered the flexibility of a 10% downward resizing without penalty, should certain loan sizing assumptions change between the time of initial closing and the closing of the TEL. The borrower also has the ability to increase the TEL amount at final closing at a blended rate should income exceed the amount underwritten at initial closing.
JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. It recently acquired Oak Grove Capital.
Security Properties is a national real estate investment, development, and operating company headquartered in Seattle.