Commercial Investment Real Estate May/June 2019 | Page 16

FINANCING
FOCUS
Banks
Loans
Developments
Investments
Government
FHA to the Rescue
Large-scale borrowers can leverage federally insured loan programs.
F
ederal Housing Administration loans are not only for
first-time investors and developers seeking to finance
$5 million acquisitions. In fact, while typical FHA loans
range between the tens of thousands and hundreds of
thousands, many FHA borrowers are also using these programs
to finance projects over $100 million. Many large-scale borrowers
are enticed by FHA’s favorable loan terms. For example, in the
last decade, at least 15 health care loans have topped $100 mil-
lion in places like Charleston, S.C.; Arcadia, Calif.; Rio Rancho,
N.M.; Cayey, Puerto Rico; and New York. In the multifamily
sector, at least eight loans closed in excess of $100 million with
lenders such as Wells Fargo Bank, N.A.; RED Mortgage Capi-
tal LLC; and Dwight Capital LLC for projects in New York;
Washington, D.C.; Miami; and Gaithersburg, Md.
These large FHA loan projects vary in type and amenity offer-
ings. For example, New York’s Co-op City — the largest housing
cooperative in the world, with 43,752 residents — was funded
through grants and other financing including a Department of
Housing and Urban Development loan in excess of $600 million.
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May | June 2019
It is considered a “city within a city,” with its own power plant,
shopping and commercial centers, an educational park, and 35
high-rise buildings alongside seven clusters of townhouses. On
the other end of the spectrum, luxury apartment buildings with
substantial HUD financing in Venice, Calif.; Washington, D.C.;
and Miami feature amenities such as private beaches, pools, hot
tubs, resident lounges, yoga studios, full-time concierge services,
rooftop gathering spaces, waterfalls, and demonstration kitchens.
The fact is, not many conventional lending programs have
terms as attractive as government-backed mortgage options.
Unlike other loan options, the typical FHA-insured loan is non-
recourse and fully amortized (i.e., no balloon) for up to 40 years.
Further, because FHA lenders are supported by a government
guarantee, they can offer low interest rates regardless of loca-
tion, leverage, or property type, as well as the highest leverage
levels (80 percent loan-to-value cash-out, 85 percent LTV with
no cash-out, and up to 90 percent LTV for affordable housing).
It is not hard to see why more and more borrowers are choos-
ing FHA loan programs to finance multifamily developments
COMMERCIAL INVESTMENT REAL ESTATE
by Bonnie Hochman Rothell and Jessica Rodriguez