After the team arranged the construction debt on the planned senior apartment community in Shawnee, Kansas, Sean McNee and Robert Black of Kidder Mathews then secured a JV equity partner for the project on behalf of the developer, JC Mulligan Development Group, and the sponsor, Omega Senior Living. Featuring 228 apartments and 60 attached, for-sale villas (starting at $345,000 per villa), the developer commenced site improvements before the pandemic set in, which caused a six-month delay in any work. Completion is now expected by winter of 2022-2023, at a total cost near $45 million, or $196,000 per unit for the apartments. Monthly rents will range from $1,450 for a studio to $2,050 for two-bedroom units, which would result in over $4.8 million of annual rental revenues. So far, 98% of the villas have been pre-reserved, so the demand is clearly there.
The project originally had bank debt under contract in the first quarter of 2020 at 75% loan-to-cost, but the pandemic led to delays and ultimately forced ownership to look for a new debt partner. A local bank stepped in to provide $31.4 million of total debt at 70% loan-to-cost. The loan came with an interest rate of LIBOR+275, with a floor of 3.25% and a three-year LIBOR cap of one point purchased for $60,000. There were also 30 months of interest-only payments, and upon completion of the project, the loan will roll into a mini-perm loan with the same interest rate and a 25-year amortization schedule.
To cover the required equity for the project, Kidder Mathews brought it a JV equity partner that is experienced in the seniors housing industry but will be entering the senior apartment business with this deal. At a projected stabilized value of nearly $60 million, or $260,000 per unit, this should be quite a lucrative investment for the JV equity partner.
The developer is also working on another project that already has construction debt in place. This debt was secured at 70% loan-to-cost and a rate of LIBOR+250 that comes with a floor of half a point. The developer has yet to select an equity partner for this additional project (give the Kidder Mathews team a call, if interested). There are likely more deals to come too, with JC Mulligan targeting about three senior apartment projects a year.