Midland TX: Multi-Family Loan Modification
PROPERTY SITUATION
A 200+ unit Class-B, garden style multi-family community located in the Midland-Odessa market, the heart of the Permian Basin oil producing region. Prior to Covid and the steep increase in unemployment, the property had been operating at 97% occupancy. In December of 2020, post Covid lockdown, the occupancy had dropped to ~70%, and net rental income had decreased 30% from February of 2020 to December of 2020. Concurrently, the property real estate tax rates were being increased based on assessment and the loan was going from Interest Only to an Amortizing schedule. These reductions resulted in the debt service coverage ratio falling substantially below 1.0X, and the sponsor having to come out-of-pocket to cover a substantial monthly shortfall.
BCA RESOLUTION
Borrower retained BCA to negotiate on their behalf with Servicer and Special Servicer, develop a loan modification strategy and to review/provide input to: Property Operations, Financial Analysis, Multi-year Budget projections and Market analysis. Upon finalizing the review, BCA prepared a proposal detailing market conditions, property financials and budget projections for submittal to the Special Servicer. Based on the information available and sponsor’s inability to continue covering the debt service shortfall BCA requested relief from the Servicer until the property could stabilize.
Concurrently with BCA’s preparation and submittal of the proposal to the Special Servicer, Borrower utilized BCA analysis and, undertook a comprehensive program to lower expenses and increase occupancy at the property, which was accompanied by an uptick in oil prices, which impacted the market in a positive manner. Based on the improvements at property and in the market, the debt service coverage ratio improved, such that it was projected to be at or near 1.0X amortizing. As the Loan became performing, the Special Servicer waived the cash sweep that was triggered by the low debt service coverage ratio and further, advised the Borrower that if there was any future decline at the property, they would consider other options to bridge the shortfall.
LOCATION:
Midland, TXPROPERTY:
Garden-Style Multi-FamilyProperty Details
PROPERTY TYPE | Garden-Style Multi-Family |
CITY | Midland |
STATE | TX |
BUILT | 2014 |
UNITS | 210 |
LOAN AMOUNT | $22.2M |
MASTER SERVICER | Midland |
SPECIAL SERVICER | Argentic |
DATE COMPLETED | Mar 2021 |