Company X operates in a wide space providing financing and advisory solutions to owners of Senior Living, Healthcare, Hospitals, and Market-Rate/Affordable Multifamily projects. In today's marketplace much of the financing solutions required to meet clients' needs include some form of agency-insured mortgage (i.e. FNMA, FHLMC, FHA, etc.). The mortgages allow a borrower to receive a non-recourse loan (the only collateral is the property itself), at historically low rates by "borrowing" the credit score of a government-insured entity.
One of Company X's existing clients, Aissi Enterprises, recently heard that FHA is offering attractive interest rates to strong borrowers and has approached an originator at the firm to request an insured loan on a Market-Rate Multifamily Housing property they have owned since late 2017. The property they currently own contains 150 units located in Kansas City, Kansas and has $5,650,000 of existing debt from Bank of Capri. The client feels that the property is under-levered and can afford at least $8,250,000 of debt. The client has a large appetite for multifamily projects and is looking to grow, therefore they would like to refinance the existing debt and take any remaining cash to acquire a new property they are considering purchasing.
The client has been a long-standing client of Company X and has five other loans outstanding totaling approximately $17,000,000. The originator has received the facility's income statement and budget in Excel. Your manager has asked you to determine if the property can afford to take on this debt and if it is a prudent credit decision for Company X to make.
Details
- Assumptions
- Assume that the borrowing entity is a single-purpose entity which only owns the subject property and receives 100% of the net cash-flow.
- The interest rates today are 4.13% for a 30-year loan term with 30-year amortization.
- Company X will charge a fee of 1% to make the loan and there will be another 1% of various costs related to closing the loan. These fees can be included in the new loan.
- Assume property did not request or receive any COVID relief funds.
- Credit Limits
- The program limits the loan to a maximum of 80% of the project's value.
- The program requires that the project can generate cash flow of at least 125% (1.25x) of the projected debt payments.
- Borrower Group
- Aissi Enterprises, the owner of the borrowing entity, currently has $550,000 of liquidity.
- You have the following information on their other loans with Company X.
Please include:
- A PDF summary memo of your assessment and recommendation to proceed with a loan as described below. This memo may include additional tables and charts. In total the memo must not exceed two pages.
- An Excel model of your business case and calculations. Please ensure your excel model references the source excel provided.
Monthly Operating Report: MealTime Enterprises The following information is fictional. The recipient should not share this with any other individuals, including current or future candidates. ACCOUNT: Operating and Maintenance Checking Account JUNE JULY AUG. DEC. YTD Occupancy % 96.00% 100.00% 100.00% 100.00% 100.00% 96.00% 92.00% 92.00% 96.00% 100.00% 100.00% # of Units Vacant 20 #4010-Rent 211,573.33 204, 193.33 207,520.00 213,000.00 2,501,420.00 #4150-Laundry 5,786.73 2,610.00 2,641.67 1,885.87 3,441.67 4,840.00 2,250.07 2,450.87 3,211.67 2,575.87 36,357.00 #4580-SD Fee Income 0.00 0.00 42.93 0.00 350.00 44.60 0.00 0.00 0.00 0.00 521.471 #4385-Tenant Damages 0.00 0.00 213,454.73 215,268. 219,111.27 209,970.87 #5180-Maint. Payroll 22,606.60 22,097.60 29, 104.40 19,311.87 22,646.73 22, 135.13 21, 130.53 32,936.73 21, 177.07 26,384.53 169,759.26 #504X-Maint. Supplies 7,759.47 19,362.67 7,409.07 22,985.93 5,918.87 1 15,268.13 61, 111.11 2,483.27 0.00 10,722.471 7,407.41 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6,296.30 #548X-Snow Removal 0.00 0.00 0.00 0.00 9, 195.13 #508X-Grounds 341.33 0.00 17,594.07 0.00 493.33 460.00 8,518.52 0.00 0.00 0.00 14, 121.73 0.00 0.00 38, 138.67 12, 198.53 0.00 230,694.44 Sub-Tot Oper. & Maint. 53,453.33 33,966.40 45, 125.00 26, 194.87 82,365.33 45,441.53 40,005.07 520,824.07 #501X-Electric Utility 3,227.40 3,710.73 2,718.40 1,749.40 1,500.33 2, 129.00 1,702.53 #5030-Water Utility 7,501.47 7,215.07 8,426.33 7,485.40 6,929.27 7,212.40 7,292.13 7,001.40 7,911.27 7,517.47 89,547.071 #5031-Sewer Utility 6,894.00 7,436.13 6,870.20 6,637.73 6,705.60 6,458.07 7,232.80 6,897.53 80,000.00 #502X-Gas Utility #551X-Trash Utility 4,370.73 55,050.201 45,413.33 Sub-Total Utility 22,471.67 23,324.47 21,203.40 19,238.93 19,877.93 19,959.20 21,216.27 20,938.40 254,944.331 93,993.601 93,993.33 #5430-Management Fee 21,653.33 22,026.67 22,026.67 21,653.33 21,280.00 21,653.33 22,026.67 22,026.67 264,320.00 #5365-Project Auditing 13,666.67 13,666.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13,666.67 13,666.67 #5364-Project Bkping. 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 123, 126.67 #5366-Project Legal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 #529X-Advertising 0.00 0.00 0.00 0.00 0.00 1,674.671 8,333.33 #546X-Project Phones 1,351.73 1,316.20 11,933.33 #540X-Office Supplies 858.60 2,011.0 1,869.33 #545X-Training 0.00 6,666.67 #525X-Emplenefits 3,598.87 5,398.20 3,598.93 3,598.87 #5182-Maint. Payrl. Taxes 2,212.93 1,966.47 2,060.53 1,096.20 2,873.87 1,528.87 1,921.87 2, 153.07 2,082.07 3,243.67 2,080.00 2,269.27 30,086.67 #5220-Maint. Wkrs. Comp. 1, 177.20 1,046.20 1, 144.00 1,022.40 1,145.40 1,107.67 1,754.80 1, 125.27 1,633.87 16,226.67 #541X-Other Admin. Exp. 413.27 2,029.67 413.27 413.27 413.27 413.27 413.27 18,518.67 779.53 28,979.271 61, 143.20 61,023.07 47,050.67 50,792.53 45,443.93 49,213.73 50,594.27 64,411.47 66,221.87 75,326.80 0.00 0.00 89,588.53 0.00 62,084.07 0.00 0.00 0.00 226,999.40 #5455-Property Insurance 9,966.97 9,966.97 9,966.97 9,966.97 119,603.60 123, 100.00#504X-Maint. Supplies 7,759.47 19,362.67 9,035.60 1,654.20 7,409.07 3,548.13 19,691.33 22,985.93 3,965.40 #506X-Maint. Contract 2,483.27 810.00 714.60 115,268.131 61, 111.11 10.00 6,000.00 10,722.471 #510X-Painting 0.00 0.00 0.00 0.001 #548X-Snow Removal 4,320.00 0.00 0.00 32,274.401 37,037.04 #508X-Grounds 534.27 17,594.07 1,685.60 493.33 460.00 23,906.071 8,518.52 #11XX-Cap. Exp. Oper. 0.00 14, 121.73 12,198.53 0.00 230,694.44 48,294.60 82,365.33 57,838.80 45,441.53 520,824.07 #501X-Electric Utility 3,599.53 3,710.73 2,718.40 1,928.73 1,004.80 1,500.33 2, 129.00 1,702.53 2, 152.67 50,066.67 #5030-Water Utility 7,281.27 8,426.33 7,773.60 7,001.40 #5031-Sewer Utility 6,894.00 7,925.07 7,436.13 6,396.60 6,637.73 6,458.07 7,232.80 #502X-Gas Utility 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 #551X-Trash Utility 4,232.87 4,244.27 4,384.00 4,379.87 4,370.73 4,370.73 45,413.33 Sub-Total Utility 21,203.40 19,973.27 21,216.27 284,406.67 #5181-Site Office Payroll 7,832.80 7,832.80 #5430-Management Fee 21,653.33 22,026.67 22,026.67 22,026.67 21,653.33 21,280.00 21,653.33 22,026.67 264,320.00 #5365-Project Auditing 13,666.67 0.00 0.00 0.00 13,666.67 #5364-Project Bkping. 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 10,260.53 123, 126.401 #5366-Project Legal 0.00 0.00 0.00 0.00 #529X-Advertising 8,333.33 #546X-Project Phones 11,933.33 #540X-Office Supplies 1,331.53 1,349.93 2,428.27 1, 104.33 906.53 1,351.73 1,351.73 1,356.53 2,011.07 1,316.20 592.67 995.00 2,667.27 1,908.27 1,869.33 16,666.67 0.00 3,600.00 0.00 0.00 0.00 0.00 4,533.331 6,666.67 #525X-Emplenefits 0.00 0.00 0.00 0.00 0.00 0.00 #5182-Maint. Payrl. Taxes 2,212.93 2,873.87 3,598.87 19,793.80 2, 153.07 2,082.07 2,269.27 #5220-Maint. Wkrs. Comp. 1,177.20 1,046.20 1,528.87 1, 145.40 1,754.80 1,633.87 14,941.53 413.27 2,029.67 413.27 2,827.80 413.27 413.27 413.27 596.33 1,107.67 413.27 18,518.67 1,747.67 Sub-Total Administration 61, 143.20 61,023.07 47,050.67 49,586.93 50,792.53 49,213.73 50,594.27 71,926.80 64,411.47 664,967.871 666,020.00 #547X-Real Estate Taxes 75,326.80 0.00 89,588.53 0.00 62,084.07 0.00 0.00 #5455-Property Insurance 9,966.97 9,966.97 9,966.97 ,966.97 66.97 1 19,603.60 123, 100.00 Sub-Total R.E. Tax & Ins. 9,966.97 9,966.97 99,555.50 9,966.97 72,051.03 346,603.00: 350, 153.33 Tenant Utility & Overage 346.67 346.67 86.67 86.67 86.67 122,833.30 132,892.10 160,784.97 #1308-Capital expenditures 7,433.33 7,433.33 7,433.33 7,433.33 7,433.33 7,433.33 89,200.00 4,476.43 79,336.23 90,644.03 73,690.83 38,225.10 12,007.10 39, 182.50 67,019.63 74,441.10 628,375.93 #7009 Principal Payment 12,000.00 12, 123.56 12,247.12 12,370.68 12,494.24 12,617.80 12,741.36 12,864.92 12,988.48 13, 1 12.04 13,235.60 13,359.16 152, 154.96 #7010 Interest Payment 6,959.07 6,835.51 6,711.95 6,588.39 6,464.83 6,341.27 6,217.71 6,094.15 5,970.59 5,847.03 75,353.84 #6536 Depreciation & Amortization 3,526.36 3,526.36 3,526.36 3,526.36 3,526.36 4,528.58 67,497.94 56,850.81 68, 158.61 51,205.41 -30,574.95 84,269.47 14,737.45 15,694.85 44,534.21 50,953.45 357,298.77REO Schedule The following information is fictional. The recipient should not share this with any other individuals, including current or future candidates. Aissi Enterprises Real Estate Owned Property Name Property Location Property Type Occupancy % Units 2019 NOI/Cash Flow Est. Value Value/Unit Current Loan Loan-To-Value Mike Scott Tower Shiloh, IL Conventional 85% 15 $ 46, 125 $ 562,500 $ 37,500 $ 438,750 78.0% St. Luke Apartments Waterloo, IA Affordable Housing 100% 10 27,625 $ 425,000 $ 42,500 $ 306,000 72.0% Beakas Nest Cleveland, OH Senior Living 80% 120 $ 1,950,000 $ 15,000,000 $ 125,000 12,300,000 82.0% Hobbs Cape Yellow Springs, OH Conventional 70% 30 $ 77,760 $ 1,080,000 $ 36,000 $ 1, 188,000 110.0% Kansas Walls St. Charles, MO Conventional 100% 5| $ 16,400 $ 200,000 $ 4 40,000 $ 100,000 50.0%
