Location: Okanagan, BC
CMHC program: MLI Select - Efficiency (100 pts)
Loan size: $17,040,000
LTC: 94.1%
Lender: Chartered bank
Primary goals achieved: Greater Flexibility, Additional Leverage, Lower Costs
A long-term real estate investor (but first-time developer) acquired a vacant lot in the Okanagan with plans to develop a 48-unit rental apartment with a commercial component. Although this is the client’s first development project, Lakepoint prepared a comprehensive financing request package that effectively mitigated the perceived risks associated with first-time developers.
During Lakepoint's underwriting process, CMHC announced a policy change that necessitated submitting a COI application that, at the time, was not close to being complete. Lakepoint worked fervently to submit the COI application by the policy change deadline, and dis so, which would serve to ultimately save the client over $200,000+ in CMHC premium and allow the client to qualify for $200,000+ in additional leverage.
During the adjudication process, an initial COI amount of $16,393,992 was offered by CMHC, which was a slightly lower amount than what Lakepoint had requested. This didn’t make a lot of sense, considering that rates had decreased about 40 bps since the COI application was submitted. After respectfully asking for a secondary review, the CMHC underwriter realized they had mistakenly used gross rents, rather than net rents, for the commercial component of the project, which led to an artificially low net operating income. CMHC subsequently revised the COI amount upwards to $17,047,394.
As a result, the COI for construction financing was secured at 94% LTV, enabling the project to move forward smoothly.
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