Red Oak Capital Holdings, LLC has provided $7.70 million in financing for Ocean Shores Apartments, a 128-unit garden-style apartment community in D’Iberville, Mississippi.
The debt was written under the firm’s CorePlus Bridge Loan Program, a fixed-rate program for institutional-quality assets in transition. The funds will be used to acquire and complete renovations on the Gulf Coast property, which currently operates under the Low-Income Housing Tax Credit program (LIHTC).
The interest-only loan has a two-year term with two extension options of six months each. The non-recourse loan also carries an all-in rate of 9.50% and represents a loan-to-stabilized-value of 62.6%. The sponsor, Ocean Shores Property Owner LLC, consists of experienced multifamily operators with more than 1,600 units under management across the Southeast, 479 of which are LIHTC units. It plans to continue the renovation program initiated by the seller last year as tenants are cycled through, while using housing voucher programs to increase rents beyond the LIHTC maximums.
“We’re confident in the ability of these borrowers, which have more than two decades’ worth of residential investment expertise, to complete their business plan with Ocean Shores,” said Jeff Joyner, Red Oak’s Regional Manager-Southeast. “It’s a strategy they’ve executed on other LIHTC properties in the past with much success.”
Joyner, along with Hermann Wendorff, Senior Underwriter, and Jesus Martinez, Senior Loan Administrator, originated and underwrote the loan. Craig Hall, an Executive Vice President with CBRE Business Lending, brought the opportunity to Red Oak.
Renovation plans include new flooring and paint, as well as HVAC maintenance, re-glazing existing kitchen countertops and replacing appliances in a majority of the units. The property, which is 94% occupied, operates under a land use restrictive agreement (LURA) through 2047 that requires the units to be rented to households earning less than the area median income. In line with the upgrades, the sponsors plan to increase rents by charging new tenants for utilities as well as utilizing voucher programs that allow for rents greater than the limits imposed by the LURA.
“While it’s smaller than a lot of the major Southeast markets, the Gulfport-Biloxi MSA is a strong market in terms of multifamily performance and has solid prospects for future growth,” commented Gary Bechtel, Red Oak’s CEO. “With no new apartments under construction, an unemployment rate of less than 3%, and strong economic drivers, we expect multifamily occupancy to remain high for quite some time.”
Also referred to as Coastal Mississippi, Metro Gulfport-Biloxi is the second-largest region by population in the state, which itself was ranks among the top 10 Best States for Manufacturing, according to Site Selection Group. With 62 miles of beaches and several casinos, the area’s $2-billion tourism industry is also performing well. Notably, a joint venture of Universal Music Group and investment group Dakia U-Ventures is under way on a $1.2-billion hotel and casino project that is estimated to bring more than 2,500 permanent jobs and 1,000 construction jobs to the region.
