ValueXpress obtained a $6.5-million CMBS conduit first-mortgage loan secured by two apartment complexes in Biloxi, MS. Woodlands Apartments is a 118-unit garden-style complex built in 1974 and renovated in 2012. The property was 90% occupied at closing.
The second property, Southwind Apartments, is located on the same street as Woodlands Apartments; Southwind is a 140-unit garden-style apartment complex built in 1974 and also renovated in 2012. The property was 88% occupied at closing.
Since the 1990s the major tourism attraction for Biloxi has been casino gaming, which also draws visitors from more distant markets. Over 10 million people visit casino-based establishments in the Biloxi-Gulfport region annually. In addition to casinos, Biloxi’s major draws include beaches, fishing, other water-based activities, golfing, and the Mississippi Coast Coliseum and Convention Center. The Convention Center hosts concerts and events throughout the year and is expanding to include 400,000 square feet of meeting space.
The transaction was a cash-out refinance of an existing loan that has been utilized to rehabilitate the property. The loan was structured with a 10-year fixed-rate term amortized based on a 25-year schedule.
“The transaction was challenging in that the property recently completed a substantial rehabilitation and neither the income nor the expenses were fully stabilized,” commented Jim Brett, the ValueXpress underwriter on the transaction. “So the loan was structured with an earnout provision for the sponsor to obtain additional loan proceeds based on increasing cash flow expected over the next 3-6 months.”