Gateway Apartments Everett, Washington€¦ · • Tax exemption pursuant to Washington Exemption...

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Gateway Apartments

Everett, Washington

Freddie Mac Targeted Affordable Housing Forward TELP execution

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Rendering


Gateway ApartmentsTransaction Summary

Loan Amount: $29,798,000

Loan Term: 15 years

Amortization: 35 years following conversion

Forward commitment period: 24 months + 6 months

Interest rate: 4.625% (locked at construction closing)

Prepayment: 10 year Lock Out, then YM, 6 months prior to maturity

prepayable at 1% for 3 months, then open at par

LTV and DSCR Program: 90%/1.15; Actual: 80%/1.15

Value: $210,000 per unit; 5.5% cap rate


Regulatory Restrictions

• 4% LIHTC

• Rent and income restricted at 60% of AMI or less

• Includes 36 units set aside for large families and 36 units for disabled

• Extended regulatory period of 30 years (15 + 15)

• Tax Credit regulatory agreement terminates three years after foreclosure or deed in lieu of foreclosure.

• Bond regulatory agreement restricts minimum of 40% units earning 60% of AMI or less

• Tax exemption pursuant to Washington Exemption of ownership with non profit status – RCW Section

84.36.560. For full exemption, statute requires at least 75% of units are occupied by very low income

household (50% AMI). If less than 75%, the property receives a partial exemption


Property Description

• 177 units including two, three and four bedroom units.

• Garden and townhouse style units. Two and three stories

• Garages (27)

• On site amenities include clubhouse/rec center with fitness room, indoor basketball,

business center, conference center, activity room, lounge, and leasing.

• No A/C (typical for this market)

• Total construction costs of $283,000 per unit, $150,000 per unit of hard and land

improvements only.


Rent Conclusions


Sources and Uses

SourcesFreddie Mac Loan 29,798,000 Tax credit equity 13,176,643 NOI through stabilization 1,344,462 Deferred developer fee 5,879,412

50,198,517

UsesLand 5,670,000

Hard Costs 30,355,598

Reserves 2,124,896

Soft Cost 5,590,390

Developer Fee 6,457,633 50,198,517


Strengths

• Underwritten restricted rents are discounted to market at 31%

• Strong sponsorship with high net worth and liquidity

• Strong affiliated management company

• Class A asset, new construction

• Strong market fundamentals with significant growth in the market rate rental sector thereby increasing the need for discounted affordable housing.

• Subject’s overall capture rate was 1.7%, and penetration rate was 20.6%.

• Lease up pace of 21 units per month projected


Risks

• Ability to secure 75% of the abatement which was assumed in our underwriting

• Degree of new construction in submarket overall of 1900+ units, but only 450 LIHTC

units proposed.

• Stabilized occupancy within an aggressive timeline (expected to stabilize four months

following completion)

• Underwritten rents are at the maximum restricted rent levels


Unique characteristics

• Freddie Mac allowed the lender to underwrite 75% of the abatement despite fact

restrictions are at 60% of the AMI given the experience of the developer.

• Freddie Mac permitted borrower to have the option to obtain additional loan proceeds

at conversion if the area median income increases prior to stabilization which results in

increase in rents and GPR. Any increase in proceeds cannot exceed 10%, subject to a

new appraisal to support any increase in rents.


Product pictures


Product Pictures


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