San Antonio Community Gets $50M HUD 223(f) Loan
The loan, originated by Greystone, refinances the 360-unit property The Bascom Group acquired in 2014.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!
The Anthony at Canyon Springs. Image from Google Street View.
The Bascom Group has taken a $49.7 million HUD refinancing loan for The Anthony at Canyon Springs, a 360-unit Class A multifamily asset in San Antonio. The 223(f) financing has a 35-year, fully amortizing term at a fixed interest rate. Greystone originated the HUD-insured note, which includes a 35-basis-point reduction in its mortgage insurance premium, or MIP, because the asset includes a number of green, sustainable features.
Bascom had purchased the asset back in 2014, securing HUD acquisition financing from Greystone to seal the deal, public records show.
The community, located about 20 miles north of downtown San Antonio at 24245 Wilderness Oak, has a mix of one- to four-bedroom units across 37 garden-style buildings. The 2001-built property has a range of high-end amenities, including a sauna, putting green, and movie theater. Bascom plans to invest in capital improvements to both the interior and exterior areas.
Lagging Development Activity
Despite a swiftly growing population, San Antonio has yet to see a significant increase in development activity, Marcus & Millichap’s 2022 outlook on the market states. As a result, vacancy is dropping faster than in any other Texas metro. While this will stimulate rent growth in the near and long term, San Antonio’s rents compare favorably against asking rates in nearby Austin or in Houston or Dallas-Fort Worth.
At the same time, while cap rates have compressed across the state and the country, San Antonio boasts higher yields than its Texan neighbors, which in turn has become a magnet for private investors. The northern reaches of the market — where The Anthony is located — are drawing comparatively more investment dollars, due to the presence of major employers like USAA and the largest portion of population growth. However, some of the market’s best potential yields are in the south, particularly in the areas surrounding the Port San Antonio technology and innovation campus near Lackland Air Force Base.
What are the benefits of a HUD 223(f) loan?
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements.
The terms of HUD 223(f) loans are as follows:
Loan amount $1 million, no set maximum Terms Between 10 and 35 years Leverage Up to 85% LTV for market-rate properties, 87% LTV for affordable properties, 90% LTV for properties using rental assistance. Interest rates Fixed for the life of the loan. Includes a mortgage insurance premium, or MIP. DSCR requirements 1.18x for market-rate properties, 1.15x for affordable properties, and 1.11x for rental assistance properties.
What are the requirements for a HUD 223(f) loan?
HUD 223(f) loans have terms including:
- Loan Amount: Minimum loan amount of $1 million (exceptions can be made on a case by case basis)
- Loan Term: Minimum loan term of 10 years, and a maximum term of 35 years (or 75% of the property's remaining economic life)
- Market rate properties: 83.3% LTV
- Affordable properties: 85% LTV
- Rental assistance properties: 87% LTV, 90% LTV for properties with 90% or more rental assistance
- Interest Rates: Fixed, terms range from 4.10% to 4.75% (including MIP), as of Jan. 2019
- Market rate properties: 1.17x minimum DSCR
- Affordable properties: 1.15x minimum DSCR
- Rental assistance properties: 1.11x minimum DSCR
- MIP: 1% upfront mortgage insurance premium for all property types, then, annual MIP of:
- 0.65% for market rate properties
- 0.45% for affordable properties (typically must be Section 8 or new money LIHTC projects to qualify)
- 0.25% for Energy Star SEDI (Statement of Design Intent) certified properties
- FHA Application Fee: 0.30% of the total loan amount
- Cash Out: For 223f refinances, cash out is allowed under specific conditions. LTV must be at least 80% (including transaction costs in the loan amount). At that point, 50% of funds above 80% adjusted LTV are released, with the remaining 50% to be released after property rehab is complete.
- Repair Limitations: While the 223(f) program is not intended for substantial rehabilitation, loan funds may be used for repairs of up to $6,500/unit (more in high-cost areas), or 15% of the property value, or 20% of the mortgage. If the second or third calculation is used, repairs are limited to $15,000/unit (more in high-cost areas). No more than half of any essential structural component (e.g. roofing, HVAC) may be replaced.
In addition, properties being acquired or refinanced with a HUD 223(f) loan must:
- Be at least three years old (for new properties), or have had the last substantial renovation three years ago or more (for renovated properties)
- Owner/developer must place funds monthly in a replacement reserve account
- Must meet additional HUD requirements and items for consideration
What is the maximum loan amount for a HUD 223(f) loan?
The maximum loan amount for a HUD 223(f) loan is not limited, though exceptions are sometimes made for loans beginning at $1 million. These loans offer some of the longest loan terms in the multifamily industry with a maximum term of 35 years, are non-recourse, fully assumable (with FHA approval), and offer fixed-rate financing at incredibly competitive interest rates with LTVs up to 85% for market-rate properties, and up to 90% for certain subsidized housing properties. Additionally, the overall size of a HUD 223(f) loan cannot go beyond a specific per-unit limit set by HUD (and adjusted by project location).
What is the interest rate for a HUD 223(f) loan?
The interest rate for a HUD 223(f) loan is fixed for the life of the loan and includes a mortgage insurance premium (MIP).
For more information, please see HUD 223(f) Loan Interest Rates: What You Need to Know and Exploring the Benefits of Using HUD 223(f) Loans: What Are the Terms for HUD 223(f) Loans?
How long does it take to get a HUD 223(f) loan?
In general, FHA 223(f) loans take between 100 and 150 days (4 to 5 months) to close. However, in most cases, it will take about 45-60 days after engaging with a lender for the application to be submitted to HUD. This is followed by another 60-90 day waiting period until HUD issues their commitment, and another 30-45 days to closing. In the best case scenario, a HUD 223(f) loan will take about 135 days, or 4.5 months from initial engagement to close. However, if complexities arise, the HUD 223(f) loan process could take 6 months or more.
What are the advantages of a HUD 223(f) loan over other types of financing?
HUD 223(f) loans offer some of the best terms in the industry for the acquisition and refinancing of multifamily and apartment properties. These loans are non-recourse, offer high leverage, low interest rates, and lenient DSCR requirements. Additionally, HUD 232/223(f) loans have the following advantages:
- Low, fixed interest rates
- Loans are fully assumable (with FHA/HUD approval)
- Non-recourse, limiting risks for developers