Dwight Capital Provides $27M HUD Refi on South Carolina Rental Development

The deal refinanced debt on the residential portion of Drayton Mills Lofts and Marketplace, a mixed-use site that had been redeveloped from its former use hosting textile mills.

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Dwight Capital has originated and funded just under $27.4 million in U.S. Department of Housing and Urban Development (HUD)-backed debt to refinance the multifamily component of Drayton Mills Lofts and Marketplace, a recently-redeveloped, mixed-use rental complex in Spartanburg, S.C., Commercial Observer has learned. 

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The HUD Section 223(a)(7) financing, a program that allows for the refinancing of existing Federal Housing Administration and HUD-insured loans, was provided to the developer TMS Development & Management, which is led by CEO Tara Sherbert, Spartanburg County public records show; TMS is a subsidiary of The Sherbert Group of companies. The financing closed in late September. 

Tara Sherbert said that her firm had previously had in place a HUD Section 221(d)(4) loan, which is reserved for construction or sizable rehabilitation jobs, that it closed in 2014, and “with interest rates decreasing considerably since that time, certainly the refinance made a lot of sense. We really couldn’t find a lower interest rate taking it out of the HUD product to institutional debt.” 

Dwight Capital managing director Brandon Baksh, together with Brian Yee, originated this financing. 

The Drayton Mills property has existed for more than a century and was previously a collection of textile mills. TMS redeveloped the site into the $50 million mixed-use rental and commercial development it is today, featuring 289 residences and around 60,000 square feet of commercial space, which were completed in 2018. Sherbert said she had originally bought the site from Greenville, S.C.-based Pacolet Milliken Enterprises.

The asset is located at 1800 Drayton Road in Spartanburg. The rental development includes a 60-foot saltwater lap pool, a two-story fitness center, a community room and walking trails, as per information from the property’s website and details from Dwight. Its historical use as textile mills has allowed for the preservation of its large mill windows, 17-foot-high natural wood ceilings and original wood flooring from 1902, as per information from the property’s website.

In addition to the multifamily portion of the development, the site sports a range of other commercial shops, including a craft beer brewery, a pizza shop, a chiropractic office, a coffee shop, a caterer and a fitness tenant, among a range of others. The community has won awards for being one of the largest and most comprehensive historic preservation redevelopments in the state. 

“When we developed Drayton, we knew we needed to build a community, not just apartments,” Sherbert said. “We truly had to build a community that would work for and support each other. We had to get the right mix of tenants.” 

Since COVID-19, Sherbert said her company, as a hands-on landlord, has worked to maintain that sense of community since COVID-19 gripped the country in March. 

“We have had no problems at all with collections on the retail side and have had no one vacate yet, which is somewhat unheard of since COVID-19,” Sherbert told CO. “We’re very involved. We’ve worked with all tenants to get [PPP] loans directly for them or educate them if they wanted to go through banks. A lot of retail tenants [in South Carolina] had to close under mandate because of COVID, but we partnered with our tenants. We wanted to be able to come out of this stronger than when we went into it. 

“We worked with all the companies to think outside the box and give them more support, [like] providing for more outdoor seating, and because of that, the property is coming out very strong from this,” she added. “In essence, we’ve created a micro economy here … our own perfect storm of success. We can’t and won’t and don’t approach Drayton as a passive landlord.”

The site has a mix of one-, two- and three-bedroom units, as per its website. Monthly apartment rents range from roughly $1,100 for one-bedrooms to around $1,900 for three-bedroom residences.