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NEW ORLEANS-An historic apartment complex here has received $9.9 million in financing through Freddie Mac’s Bond Credit Enhancement program.

The Woodward Wight Building is a 192-unit, 211,000-sf apartment building on approximately 1.5 acres in the city’s Warehouse and Arts District. It was originally completed in the early 1900s as a plumbing supply warehouse and remained a working warehouse for several decades until the building was left vacant from the late 70s through early 80s. The building was put to use soon after the 1984 World’s Fair in the city and subsequently renovated into apartments in 1986.

CharterMac subsidiary PW Funding funded the loan. The deal was structured as a combination refinancing of tax-exempt bonds and a small taxable loan totaling $9.9M broken down as follows: an A-Piece totaling nearly $9 million of variable tax-exempt bonds and a taxable fixed-rate permanent loan B-Piece totaling $945,000 with a 5.44% interest rate, 10-year term, 30-year amortization, debt service coverage of 1.50x, and loan to value of 77%.

PW Funding says it employed a “hyper-amortization” loan structure in the financing with the goal being to keep advantages of the tax-exempt bond principal outstanding as long as possible. Under this structure, principal on the tax-exempt loan is redirected toward redemption of principal of the taxable loan prior to redeeming any outstanding tax-exempt principle, with the taxable loan not subject to a prepayment penalty. Although the taxable loan has a 30-year amortization with a 10-year term, it is expected that the loan will be repaid in 6.5 years prior to expiration, due to the hyper-amortization feature. By maximizing the amount of outstanding tax-exempt bond principal, PW Funding estimates the property would be valued at a capitalization rate some 1% below market upon sale or refinance.

PW Funding vice president Timothy Leonhard says part of the impetus for providing the loan was the preservation of apartment stock in the Warehouse and Arts District which over the last 15 years has seen about one-quarter of its apartment stock converted to condominiums. “Land is at a tremendous premium in New Orleans, even more so in the Warehouse and Arts District, which has become the hot spot over the years for new construction and redevelopment of existing historic buildings,” says Leonhard. “It is increasingly important to preserve what little apartment rental stock the Warehouse District has left, especially as we lose units to conversion.”

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