By Opportunity Zone Magazine Staff
Walker & Dunlop Inc. has provided a $21,086,700 construction loan for the Kodak Crossing project in Kodak, Tennessee.
The new multifamily property will be developed by VITA Development Group, Inc. in Sevier County, a designated Opportunity Zone census tract.
“Vita Development had been looking for sites in Sevier County prior to the Opportunity Zone census track announcement and was fortunate to find a site that both accommodated the project economics and was located in an Opportunity Zone,” says Keith Melton, managing director at Walker & Dunlop and lead originator on the transaction.
The property is located 15 miles east of Knoxville amid the foothills of Great Smoky Mountains National Park. Kodak recently suffered a series of forest fires, causing significant destruction of the local infrastructure and housing. Kodak Crossing will offer 192 affordably priced units containing from one to three bedrooms. The pet-friendly workforce housing complex will be located behind local retailer and employer Bass Pro Shops. “Sevier County has been in need of additional quality workforce housing for several years due to increased job growth and the loss of housing related to the Great Smoky Mountains National Park 2016 wildfires,” says Melton.
The project is one of the first Opportunity Zone properties financed with the U.S. Department of Housing and Urban Development. Walker & Dunlop arranged the loan through HUD's 221(d)(4) new construction program, which includes both construction and permanent financing in a single loan and mitigates interest rate risk for the developer. The team worked with VITA Development to ensure the terms of the financing were consistent with Opportunity Zone guidelines, securing a two-year construction term followed by a 40-year, fully amortizing, fixed-rate loan.
“Regardless of whether a project is located in an Opportunity Zone, the real estate fundamentals support the economics of the Kodak Crossing project, which creates a win-win situation for the equity provider,” says Melton. “The project will generate a healthy cash-on-cash and internal rate of return while additionally giving the equity provider a capital gains tax benefit.”