A prominent agency lender provided an assumption loan to a joint venture vehicle, which provided preferred equity to the deal.  The existing Fannie Mae conventional loan of $6,756,000, with a very attractive interest rate, brought together investor groups from Lynchburg, Virginia, and Chicago, Illinois.  The loan is secured by a 96-mixed-unit multifamily property constructed in 1983 and renovated in 1993. The subject property is part of the Cook County, Illinois Class 9 property tax incentive program which provides property owners with a reduction in their tax assessment levels so long as property owners commit to providing a certain percentage of residential units to meet the Affordable Housing Special Assessment Program, sponsored and administered by Cook County.

The transaction also consisted of a  “drop and swap” mechanism effectuated immediately before the transfer of the property to the new owner to effectuate a 1031 like-kind exchange.  The infused preferred equity by the JV in the form of soft preferred equity under the Fannie Mae guidelines required our RD Agency Lending Group to provide expert guidance to ensure compliance with preferred equity requirements under the Fannie Mae guidelines.

Catherine M. Azevedo, Esq., Senior Associate, worked closely with Carmen I. Pagan, Esq., Head of Agency Lending and Affordable Housing, and other members of the Agency Lending and Affordable Housing Group to close this transaction.