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HOUSTON-The owners of a 117-unit multifamily property in the southwest section of the city have obtained a $2.8-million Fannie Mae mortgage and will take out a second loan of nearly $1.7 million in the next six months to help bring the complex into compliance with fire and safety codes.

William E. Cave in PW Funding Inc.’s local office arranged the Fannie Mae loan for the 92.3%-leased Madison Apartments at 9701 Forum Park Dr. He tells that the borrower, Madison Barnwell Partners of Victoria, TX, had a 65% loan-to-value ratio with the Fannie Mae DUS arm mortgage, but that will jump to 80% with a supplemental loan that will be placed within six months.

Cave says the seven-year Fannie Mae loan, with a 30-year amortization, is based on 90-day LIBOR with a 3% start rate plus a 6% lifetime cap and debt service coverage of 1.11x. The mortgage replaces financing from World Savings of Oakland, CA.

Cave says the glitch in handling the entire refinance in one transaction is the city is holding the certificate of occupancy for the 20-year-old complex pending compliance with fire and safety codes. Cave describes the repairs as “innocuous,” adding many vintage properties are facing similar problems.

City officials now require a “life safety certificate” for inspections of electrical, plumbing and mechanical systems as well as structural stability. A borrower and lender can’t secure a certificate of occupancy until a life safety certificate is issued, a city official explains.

According to Cave, the owner, a long-term holder, is working to clear up the violations and plans to complete additional renovations at the gated, class B property, using $270,000 from the second loan to cover upgrades and satisfy city codes.

Located 15 miles southwest of Downtown, the Madison consists of one- and two-bedroom units in nine two- and three-story buildings. Units average 902 sf and bring in an average monthly rent of $667. In the past year, PW Funding, the Mineola, NY-based subsidiary of Charter Municipal Mortgage Acceptance Co., has completed more than $50 million in financing in the Greater Houston area.

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