GARY TENZER HAS three primary requirements for clients looking to refinance multifamily assets via the HUD 223(f) conventional loan program. “Patience, patience, and more patience,” says Tenzer, principal and managing director of Los Angeles-based real estate investment banking firm George Smith Partners. “Navigating a client through the program can be like having a root canal because you are dealing with a very bureaucratic process. Even with a HUD originator doing the underwriting, it's a very tedious process."

Although HUD says 223(f ) loan applications can be processed in as little as nine months, Tenzer's experience proves otherwise. His firm's recent $112 million refiof the 752-unit Colony Townhomes— the largest loan in the history of the 223(f ) program—took a full 18 months. Tenzer attributes the lengthy timeline to bureaucracy and delays due to underwriting requirements, which mandate an underwriting of both the real estate and the borrower.

To that end, Tenzer says success with the 223(f ) program comes down to owning quality real estate that is impeccably managed. “The team here does a very good job of management,” says Tenzer of the team at The Colony Townhomes, owned by Los Angeles-based G.H. Palmer Associates and managed by Charleston, S.C.-based Greystar Management. “These are great units, all with their own parking spaces, granite countertops, and stainless steel appliances.

The amenities are all a real plus in the market and help with fundamentals."

And since those fundamentals— including occupancy and trailing three-month and 12-month rent rolls—are required for 223(f ) processing, owners should often times be prepared to provide updated property fundamental data to HUD more than twice during the lengthy approval process.

Compounding matters for The Colony Townhomes application was HUD's addition of new qualification procedures imposed for loans more than $50 million. In the end, however, the waiting game can pay off : The loan is non-recourse with a 35-year fixed interest rate of 3.75 percent, fully amortizing with a loan-to-value ratio of 82 percent.

Tenzer's summation: “You need a good quality sponsor, good quality real estate, stable occupancy, and a well-underwritten borrower."