Boardwalk Place Apartments

Sims Mortgage Funding Closes Refinancing for Louisiana Apartment Complex

In late July, Sims Mortgage Funding, Inc. closed a $16.455 million FHA-insured loan for Boardwalk Place Apartments, an existing 264-unit multifamily market-rate rental housing property located in Denham Springs, LA. The loan is insured under the Section 223(a)(7) program, which is designed to refinance existing, high-interest rate loans that are in HUD's portfolio, thereby decreasing risk to the mortgage insurance fund.

Boardwalk Place Apartments – Denham Springs, LA

The Project obtained construction and permanent financing in 2004 under the FHA Section 221(d)(4) program. That loan had a prepayment penalty of 5% on the outstanding principal balance, resulting in a total cost to refinance that exceeded the statutory limit of the Section 223(a)(7) loan amount. Since the refinancing loan could not be increased to include the full 5% redemption penalty, the borrower was facing a significant equity contribution to complete the transaction. As an alternative, we priced the Section 223(a)(7) loan at an interest rate slightly above the market; the rate generated a premium at closing to cover the portion of the prepayment penalty that could not be financed in the loan.

Further, by extending the Section 223(a)(7) loan's maturity to 40 years, we maximized the Project's debt service savings, which will be $219,000 per year. The refinancing will free up needed cash flow that will help Boardwalk Place meet the competitive challenge of new multifamily units coming on line in its market area over the next six to twelve months.

The Section 223(a)(7) loan application was processed by the New Orleans Multifamily Program Center under the Traditional Application Processing protocol in 88 days, with the closing occurring 38 days later.