Sims Mortgage Funding Closes $6.4M HUD Loan for Affordable Community in New Jersey
MARGATE, N.J. — Sims Mortgage Funding, a subsidiary of HJ Sims, has arranged a $6.4 million HUD loan for Margate Terrace, an affordable seniors housing community in Margate, a beach community near Atlantic City.
The financing will provide cash for improvements and reserves. Margate Terrace Corp., which owns the property, can now preserve the Section 8 designation on the property. Community Realty Management is the operator.
Margate Terrace Apartments was developed in the early 1990s under the HUD Section 202 Direct Loan Program. Its primary source of income is a Section 8 Housing Assistance Payment (HAP) Contract, which has a remaining term of approximately 16 years. The Section 8 subsidy is sufficient to fund operations and debt service obligations, but the project had growing capital needs that could not be financed from operations and current reserve balances.
The project benefited from a PILOT (Pilot in Lieu of Taxes) and ground lease agreements from the City of Margate. The existing agreements did not meet HUD’s current loan program requirements and needed to be amended to recapitalize the project.
Approximately $1.4 million in loan proceeds are escrowed for capital repairs, $350,000 was deposited into a replacement reserve fund and a 15 percent developer fee was distributed to the owner.
The new loan reduces the project’s interest rate by nearly 60 percent and amortizes over a 35-year term. HUD and the borrower entered into a 20-year renewal of its Section 8 contract.