Miami Fully Affordable High-Rise Community Lands $61M Financing
The developer locked in the 42-year HUD 221(d)(4) loan at a fixed interest rate of 3%.Start Your Application and Unlock the Power of Choice$5.6M offered by a Bank at 6.1%$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1.4M offered by a Credit Union at 6.1%Click Here to Get Quotes!
UNI Tower. Image courtesy of Walker & Dunlop.
NR Investments has landed $61 million in HUD 221(d)(4) financing for UNI Tower, a fully affordable, 252-unit development in Miami. Walker & Dunlop originated the loan, which carries a fixed interest rate of 3%, according to HUD’s database. The note matures in September 2064.
The non-recourse financing package’s low rate is particularly notable, given the Fed’s 75-basis-point increase last week.
Located at 1642 NE First Ave. in Miami’s Arts & Entertainment District, the project will rise 29 stories upon completion. South Florida Business Journal reported that the development broke ground in early May.
A full 100% of the 252 apartments will be reserved as affordable and workforce housing units. In addition to its residential component, the property will include 10,000 square feet of office and 4,500 square feet of street-level retail space.
An Opportune Development
Beyond the HUD financing package, UNI Tower will also take advantage of its location within a designated opportunity zone. Provided NR Investments holds the completed asset for 10 years, it will not have to pay capital gains taxes on the investment.
Apart from the investment upside for the developer, though, the housing development will prove a timely addition to MIami’s affordable housing inventory. In February, Miami overtook all other major metropolitan areas to become the most unaffordable housing market in the U.S.
While NR’s 252 units will certainly have an impact, however, much more needs to be done by investors and developers within Miami. The presence of HUD financing — which can also typically be applied to properties even without an affordable component — along with opportunity zones offer a significant incentive.
What are the benefits of HUD multifamily loans?
HUD multifamily loans offer many benefits, including 35-year fixed rate terms, full amortization, and leverage up to 83.3% for market-rate apartment buildings or 87% for rental assistance properties. HUD loans also have few restrictions on borrower experience, unless you’re getting a construction loan, and their liquidity and net worth borrower requirements are far more flexible compared to even agency loans. Additionally, HUD multifamily loans include specific benefits for affordable properties, such as increased LTV allowances, reduced DSCR requirements, and lower mortgage insurance premiums, or MIPs. HUD multifamily loans also fit well with the Low-Income Housing Tax Credit (LIHTC) program https://www.hud.loans/hud-loans-blog/lihtc-program-hud-multifamily-loans and the Rental Assistance Demonstration (RAD) program https://www.hud.loans/hud-loans-blog/rental-assistance-demonstration.
What are the requirements for HUD multifamily loans?
HUD multifamily loans require longer than many other loan types to be approved and may require significant documentation. Investors/borrowers likely need one or more professional advisors to guide them through the entire process. While experience is always a plus, it's not generally a hard requirement for HUD financing. The minimum credit score for most programs is just 620, and there are options for borrowers with even lower scores.
What types of properties are eligible for HUD multifamily loans?
Properties eligible for HUD multifamily loans must have 5+ residential units, complete kitchens and bathrooms for each unit, and can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing. Student housing is also eligible, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties. Properties can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202). Assisted living, skilled nursing, or memory care properties are not eligible. All construction and major rehabilitation must be finished three or more years before beginning the HUD loan application process. Source and Source.
How do I apply for a HUD multifamily loan?
Applying for a HUD multifamily loan requires you to first provide your HUD office with a variety of information about your project, including a general description of the project, Form HUD-92013, “Application for Multifamily Housing Project,” the resumes of the owner, key principals of the project, location maps, site plans, photographs, environmental assessments, as well as a variety of other HUD forms and documents.
In addition to getting all your documentation and approval from HUD, you'll need to find an FHA licensed lender, usually before you begin the approval process. It’s important to keep in mind that the FHA/HUD only insures the loan, and is not actually responsible for loaning the borrower any money. Therefore, it's a good idea to discuss your project with multiple FHA licensed lenders, so you can understand more about process and the benefits and drawbacks of potential lenders.
What are the advantages of financing a fully affordable high-rise community?
Financing a fully affordable high-rise community can offer many advantages. One of the main advantages is that it can provide access to lower-cost financing options insured by the U.S. Department of Housing and Urban Development (HUD). These financing options can offer borrowers significantly higher leverage and lower-interest loans. Additionally, investors and developers can often utilize an array of tax credit options, including the Low-Income Housing Tax Credit program. This program can provide investors with a dollar-for-dollar reduction in their federal tax liability in exchange for investing in affordable housing. Furthermore, affordable housing is often in high demand, meaning that investors can expect a steady cash flow coming into the property.
What are the challenges of financing a fully affordable high-rise community?
The main challenge of financing a fully affordable high-rise community is the need for a large amount of capital. This is because the cost of construction and land acquisition is typically higher for high-rise buildings than for other types of housing. Additionally, the cost of financing a high-rise community is often higher than for other types of housing due to the higher risk associated with the project. To address these challenges, developers often rely on a combination of public and private financing sources, such as HUD loans, Low Income Housing Tax Credits (LIHTC), and Opportunity Zone investments.
For example, the Miami Fully Affordable High-Rise Community was able to secure $61 million in financing through a combination of HUD loans, LIHTC, and Opportunity Zone investments. Similarly, the Queens $100M Affordable Housing Project was able to secure $100 million in financing through a combination of public subsidies, tax-exempt bonds, and LIHTC.