BOSTON and RICHMOND, VA, December 10, 2018 – Berkadia Commercial Mortgage, Jefferies and Riverside Capital announced today the financing of Fairwood Apartments, a garden-style multifamily property in Carmichael, California (Sacramento County). The deal consists of a $12.6 million Tax Exempt Fannie Mae Mortgage Backed (M-TEBS) bond transaction with four percent low-income housing tax credits (LIHTC), which funded approximately $6.4 million in equity. As part of the deal, the project will have a new 20-year HUD rental assistance contract, meaning that none of the 86 households will have to pay more than 30 percent of their income towards rent. The closing of this financing preserves Fairwood Apartments as an affordable housing asset for the long-term.
The financing is the first such transaction involving all three affiliated firms, each playing a critical role in their respective specialty areas. The bonds were issued through the California Housing Finance Agency (CalHFA) for affordable housing developer Orbach Affordable Housing Solutions, LLC (OAHS). A single-purpose corporation controlled by OAHS, called OAHS Fairwood LP, is the owner. The deal closed on November 29.
Berkadia’s Senior Director Gemma Geldmacher and Managing Director Richard Price originated the financing, teaming up with Managing Director Lloyd Griffin, Senior Director Frank Brown and Senior Underwriter Mark Field to underwrite the Fannie Mae M-TEBS DUS loan. Alan Jaffe and Robert Foggio were the lead investment bankers for Jefferies, and Riverside Capital’s team syndicated the tax credits.
The combination of debt and equity raised by the Berkadia-led team will provide sufficient funds to acquire the project and allow for approximately $3.4 million in rehabilitation – including updates to residential units and system upgrades.
“The Fairwood financing was an ‘all hands-on deck’ deal,” said Price. “The team worked hand-in-glove with CalHFA, which demonstrated unwavering support in further fulfilling its preservation of the affordable housing mission. HUD also played a key role in approving the long-term subsidy contract and assigning it to the project.”
“In California, homeowners spend the highest amount of their annual income on housing and continually struggle to pay their rent,” said Jay Reinhard, President of OAHS. “This is why we are committed to improving the housing market so that Americans can live without the fear of losing their homes. We are honored to be involved in this great project.”
The pass-thru fixed rate on the bonds was 3.75 percent with a loan term of 15 years underwritten and a 35-year amortization. Fannie Mae yield maintenance premium from closing is through May 31, 2033. Thereafter, a one percent prepayment penalty will apply through August 31, 2033. After this, no prepayment premium will apply. The loan was debt service constrained at 1.15 times the debt service coverage ratio.
Located in the Fair Oaks neighborhood of Carmichael, the project was originally developed in 1981 and has a mixture of one-, two- and three-bedroom units. Carmichael is less than ten miles away from downtown Sacramento in an area that has seen tremendous growth in the past decade.