Bella Rio is a 180-unit multifamily project located in Phoenix, Arizona. The property was originally built in 1977 and was renovated by the previous ownership in 2013-2014. The community features 90 studio units, 89 1-bedroom units, and one 2-bedroom unit. It offers residents amenities such as a community swimming pool, tennis court, playground, multiple laundry facilities, and covered parking.

Tower Capital secured the non-recourse, 7-year, fixed rate loan through the Freddie Mac Small Balance Loan (SBL) program on behalf of the buyer, a local investor. The Freddie Mac SBL program, which targets loans between $1 and $5 million, offers borrower long term, non-recourse, fixed rate debt with greater prepayment flexibility than the traditional Freddie Mac program by way of a step-down structure as opposed to the traditional yield maintenance. In addition, interest only payments offer investors higher cash flows that many borrowers find attractive.

Challenges:
Due to the $5.45 million purchase price, the in-place cash flows for the property could not support a full leverage acquisition loan (80% for Freddie Mac SBL) because of debt service coverage ratio constraints. In order to secure the most loan dollars possible, Tower Capital worked closely with the appraiser and lender’s underwriter, providing support and data to help maximize underwritten revenues while decreasing underwritten expenses.

Furthermore, 49% of the borrowing entity is a foreign corporation based in China. This structure added another layer of complexity and due diligence required by Freddie Mac, a United States government.