Oak Grove Capital has originated a $59.5 million Fannie Mae bond credit enhancement loan for the acquisition and renovation of 694 affordable housing units on the Southside of Chicago.
According to insiders the deal is an example of how to generate capital through a creative financing structure that offers incentives for investors and developers whom may otherwise shy away from the affordable housing market.
One of the deal's incentives, Oak Grove Capital said, is its “immediate funding execution” that is different from the more traditional forward capital delivery commitment and helps minimize time lapse related losses and construction lending costs.
The deal will allow the St. Paul, Minnesota-based company—which is specializing in affordable multifamily property mortgage lending and servicing--to renew the expiring Section 8 Use Agreement on these properties in cooperation with “nearly a dozen financing participants and regulatory agencies,” executives said.
The plan is to use Fannie's NIBP Bond Credit Enhancement financing structure to reinvest an average of $55,000 in the extensive renovation of each unit.
Fannie's vice president of affordable multifamily mortgage business, Bob Simpson, stated in a company release that the transaction was made possible by combining bond financing with various tax credit based public and private resources including incentives promoting low income housing and historic property preservation.
Preservation efforts are financed through a 20-year Section 8 contract that is expected to preserve the affordability status of the units in the 11 mid-rise buildings and 24 garden buildings included in the deal for the coming 30 years.
Oak Grove Capital, whose commercial loan portfolio is valued at over $7.5 billion, will also service the new loan.
