Articles by Joseph Flaherty

Business

Refinancing loan offered for Little Rock’s Madison Heights apartment complex

Southern Bancorp has formally offered to loan up to $5.1 million to end a foreclosure lawsuit against the Madison Heights apartment complex that has bedeviled the Little Rock housing authority. Nadine Jarmon, the housing authority's executive director, circulated Southern Bancorp's commitment letter to board members of the housing authority as well as its nonprofit affiliate, the Central Arkansas Housing Corporation, on Thursday evening via email. She noted the favorable elements of the proposal, including the 6.5% interest rate offered by Southern Bancorp, which is lower than the 9% interest rate on the existing debt. Additionally, Southern Bancorp was able to get the current lender to reduce the amount owed to $4.6 million, Jarmon wrote. The plaintiff in the foreclosure lawsuit was seeking more than $5 million as of February. In addition to the $4.6 million needed to pay off the current lender, Southern Bancorp has agreed to loan up to $500,000 to support making capital improvements to the property. To finance those improvements, capital reserves of $250,000 from Madison Heights will be used first, at which point Southern Bancorp will extend the $500,000, according to the letter. The housing authority then is expected to receive an additional $250,000 from the U.S. Department of Housing and Urban Development to finish renovations to vacant units, the letter says. The offer is due to expire 10 days after Nov. 13, the date the letter was issued. Jarmon told officials in her email that the 10-day period will allow the boards of the housing authority and the Central Arkansas Housing Corporation to discuss the proposal at their upcoming meetings. The proposed loan term is 36 months, with up to two 12-month extensions available at the lender's discretion, with each subject to a fee of 25 basis points. Repayment will be interest-only during the first 24 months. A balloon payment will be due at maturity. The property must be managed by a third party approved by the lender, the letter states. The Madison Heights apartment complex is a three-phase development near Fair Park Boulevard and West 12th Street that contains a mix of market-rate units along with federally assisted affordable-housing units. The foreclosure lawsuit was filed in April 2024 and targeted two of the three components of the complex that are known as Madison Heights I and II, which have a combined total of 241 units. The third component has 60 units. The original lender was Walker & Dunlop, which extended two loans with the original principal amounts of $3 million and $2.6 million in 2019 to two limited partnerships, University Heights Associates, LP and Madison Heights II, LP. The current lender and plaintiff in the foreclosure lawsuit is Delaware-based BP CM Acquisition SPV, LLC. Housing authority officials have been trying to find a solution to the foreclosure case for most of this year. The effort has taken place under the housing authority's reconstituted board as well as Jarmon, who was hired last year to head up the agency for the second time. At one point, the housing authority approached officials at the city of Little Rock for financial assistance. Despite the support of Mayor Frank Scott Jr., a deal never made it through the Little Rock Board of Directors. In June, a motion to list Madison Heights I and II for sale failed when the housing authority's board deadlocked, 2-2, with one commissioner absent. Less than two months later, Southern Bancorp extended a tentative proposal for up to $6 million in new financing, working with the Enterprise Community Loan Fund as an anticipated partner lender.