Debt Platform Meshes Well with Rural America
With the need for affordable housing continuing to grow nationwide, low-income housing tax credit/LIHTC and rural housing programs allow more properties to be developed.
ROYSE CITY, TX—With the need for affordable housing continuing to grow across the country, low-income housing tax credit/LIHTC and rural housing programs allow more properties to be developed. A recent $19.605 million loan for a mixed-income apartment home community does just that.
The loan for Cypress Creek Apartment Homes at Parker Boulevard is the nation’s largest Rural Housing Service Section 538 Guarantee Rural Rental Housing Program/RHS 538 GRRHP deal ever originated and closed, according to Bellwether Enterprise Real Estate Capital LLC. The RHS 538 GRRHP program was enacted in 1996 and became more widely used during 2004 and 2005, GlobeSt.com learns.
Private lenders may apply for and obtain a loan guarantee/mortgage insurance to facilitate the new construction or substantial rehabilitation of multifamily or independent senior rental housing units, or the acquisition, revitalization, repair and transfer costs of existing direct Section 515 housing. This program provides for both construction and permanent financing or permanent financing only. The permanent financing must take out the construction loan.
“It works with qualified private-sector lenders, such as Bellwether Enterprise Real Estate Capital LLC, to provide financing to qualified borrowers to increase the supply of affordable rental housing for low- and moderate-income individuals and families in eligible rural areas and towns,” Bob Morton, director of Rural Housing Services Programs and senior vice president of Bellwether Enterprise, tells GlobeSt.com. “I have been providing the RHS 538 GRRHP debt platform to borrowers and projects across rural America since 2004. This program has grown and expanded in countless positive ways in the last 14 years. It continues to work on new initiatives and always works to improve this valuable debt option to create a better quality of life for families and senior in rural communities.”
The senior permanent loan was arranged by Morton and Kevin Bowen, senior vice president of Bellwether Enterprise, for Cypress Creek Parker Creek North LP using RHS 538 GRRHP as the lender.
“We provided a 24-month forward rate lock at a low interest rate so the project could complete construction and lease up,” Morton tells GlobeSt.com. “We then closed on our perm loan and, along with equity, paid off the construction loan. Our perm loan is a fully amortizing 40-year loan with a fixed interest rate for the entire term of the loan and non-recourse to the borrower.”
As a mixed-income affordable housing property, Cypress Creek Apartment Homes operates under the rent and income restrictions of the RHS 538 GRRHP and 9% low-to-moderate-income housing tax credit programs. The project is also a mixed-income use project of primarily affordable housing via the LIHTC restrictions and provides a portion of the project at market rate rents that fall below the RHS 538 GRRHP restrictions of 115% of area median income, Morton says.
“This represents a significant milestone for our company that will have a lasting and positive impact on families across the Royse City community,” said Ned Huffman, president of Bellwether Enterprise.
Cypress Creek Apartment Homes is a 220-apartment home community with one, two, three and four-bedroom apartment homes. The community was developed, constructed and managed by Bonner Carrington.
“This transaction is significant because it shows the USDA 538 loan program being used in a situation where you would normally see a Fannie Mae or Freddie Mac permanent loan being used,” Bowen tells GlobeSt.com. “This is important because many affordable developers dismiss or are unaware of the RHS 538 GRRHP program when considering their financing options for new construction LIHTC deals. We’re honored that our hard work will translate to more affordable homes for families across the region.”