Mark-to-Market (M2M) Loans:
Structure and Terms

Eligible Property Types

Properties must be federally assisted housing undergoing restructuring under the Mark-to-Market program.

Eligible Borrowers

Borrowers must be Housing Partnership Network members or associate members, or entities formed and controlled by a member for the purpose of owning the subject property.

Minimum Loan Size

$100,000

Maximum Loan Size

$500,000

Loan Terms

• Interest rate. 30-day LIBOR + 500 bp, variable monthly, minimum 8.0 percent.
• Amortization and term. The scheduled amortization and term of the loan is up to five years.
• Repayment. Annual, from audited surplus cash, incentive performance fee and cash recovery payments made to the borrower. Minimum payments will be established based on the interest rate at the date of loan closing. This minimum payment amount will remain in place throughout the loan. Changes in interest rates will affect how much of each payment is charged to interest, and may result in a slightly shorter or longer amortization of the loan.
  
  Should surplus cash exceed the initial underwriting, a portion of the additional surplus cash will be paid to the Housing Partnership Fund and applied to reduction of principal. Should surplus cash fall short of the initial underwriting, the borrower will be required to make the minimum payment from its own resources.
• Closing. Simultaneous with closing of Mark-to-Market restructuring.
• Commitment fee. Greater of 1.0 percent of principal or $2000, payable in cash or from loan proceeds at origination.
• Application fee. $500 due with application, credited against commitment fee.

Eligible Uses of Funds

• Purchase price cash to the seller.
• Repayment of a predevelopment loan.
• Financing of purchaser's required 20 percent share of rehabilitation, refinancing, and transfer costs.
  

The loan is intended to fill a gap in the array of sources available for property acquisition.

Collateral and Credit

The Fund will usually not seek mortgage security for these loans. The Network member (whether borrower or sponsor of borrower) will guarantee repayment. The Fund will require that the member obtain a specific authorizing resolution from its board of directors with respect to the loan. In addition, the Fund may require an assignment of the member's rights to cash payments from the project, as well as an assignment of property management fees the member or borrower may receive from the project. The Fund will underwrite against the likelihood that the operation of the property will result in cash payments to the borrower sufficient to amortize the loan over a maximum of five years.

The Fund does not intend to secure cash collateral from the member as this would largely defeat the purpose of the loan. However, the Fund must conclude that its loan is likely to be repaid if the project does not generate sufficient surplus cash. Therefore, the Fund will evaluate the borrowing history of the member as well as its financial stability and depth.

Loan Administration

Loans will be fully drawn down at closing. The Fund will require regular reports from the borrower on the operating performance and physical condition of the project throughout the life of the loan.

To Apply for a Loan

Prospective borrowers should submit the following:

• A brief narrative description of the property being purchased, including name, address, number of apartments, existing financing, and any existing subsidy program and use restrictions.
• Evidence of site control in the form of an executed purchase and sales agreement.
• A copy of the restructuring proposal from the participating administrative entity underwriting the M2M restructuring, and/or a commitment and term sheet from OMHAR on the restructuring.
• A development plan timeline.
• Audited financial statements for the past three years, and most recent unaudited interim statement.
• Track record in pursuing and closing similar acquisitions.
• A list of key staff to be involved in the transactions and their resumes.
• $500 application fee.

These materials should be submitted to:

Matt Perrenod
Housing Partnership Fund
160 State Street, 5th floor
Boston, MA 02109
(617) 778-1301
perrenod@housingpartnership.net