Fident Capital secured a $4.0MM HUD loan for the refinance of an 11-unit multifamily project in Encinitas, a desirable coastal community of North San Diego County. The borrower is a local developer who has built numerous residential, commercial, and mixed-use projects of various scale across San Diego County. The loan allowed the borrower to refinance their costly bridge debt, lock in an exceptionally low financing rate of 3.64% for the next 35 years, and fully cash out their original equity investment.
Fident’s deep knowledge of the intricacies of HUD financing paid dividends for the borrower by achieving maximum loan proceeds for the project. Fident conducted a comprehensive analysis of HUD stat limits by meticulously assessing the development’s Costs Not Attributable (CNA) and warranted land value – two of the most important inputs in the stat limit calculation. Our thorough knowledge of the nuanced HUD process, in addition to our expert grasp of the San Diego multifamily market, gave the borrower’s HUD application a competitive edge and presented the project’s financials in the best possible light to the lender. This legwork paid off, contributing to an extra $1MM in loan proceeds beyond what was originally underwritten and allowing the borrower to fully extract their original equity investment from the deal.
The financing’s primary challenge was the lengthy timeline inherent to the HUD closing process, which far exceeds that of non-HUD closings. An extreme volume of new clients and interest in its product offerings caused a backlog with the HUD lender itself, further compounding delays to the loan’s close and contributing to a small drift in rate between the time of application and close. Fident stepped in to advocate for the borrower wherever possible by expediently handling paperwork and processing requests to reduce the closing timeline as much as possible and keep the close moving forward, despite the lender’s slow processing times and backlog.
Despite the closing’s lengthy timeline, the terms achieved for the borrower were attractive and highly accretive to the project’s overall returns. The borrower’s HUD loan enables them to retain a very low, fixed cost of capital for a 35-year period. The strength of the underlying real estate, coupled with Fident’s tenacity pushing the loan towards closing, provided our client with a long-term financing solution that will benefit the project for years to come.
