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SPECIAL REPORT: Commercial Loans Still Out There -- If You Look Hard Enough
(ORLANDO, FL) -- 'Follow the money' has been a legendary private investigator's mantra, but now commercial real estate brokers are also copying the technique -- and closing deals around the country, according to an informal market survey by Real Estate Channel.
Aaron Johnson, a principal broker in the Louisville, KY office of Marcus & Millichap, finds "there are still tremendous real estate investment opportunities, even as the capital markets continue to tighten."
He believes apartment properties "offer the most stability out of all the major property sectors to private investors in the current economic climate."
Johnson recently sold the 312-unit, 38-year-old Pegasus Place Apartments in Lexington, KY for $13.6 million or $43,590 per unit, a record per-unit price in Lexington. The cap rate was 6.9%.
He also sold the 66-unit, 40-year-old Worthington Apartments in Louisville, KY for $3.8 million or $57,576 per unit, again a record high per-unit price for an older multifamily property in Louisville. The cap rate was 7.6%.
In the Southwest, Marcus & Millichap brokers Al Silva and Kelley Sparkman closed a 1031 Exchange deal in Duncanville, TX. They sold the 122-unit Wexford Townhomes for a Florida-based private investment group to an out-of-state private investor. The brokers didn't disclose the price but said the buyer assumed an interest-only loan at 6.18%.
"Many owners have capitalized on the appreciation of their holdings and moved into other markets across the country to leverage their returns and fulfill the requirements of the 1031 Exchange," says Sparkman.
"This transaction illustrates that capital is still flowing into the 1031 Exchange market, despite continued tightening of the credit markets," he adds.
Margolin, a director in Arbor's Deerfield, IL office, brokered a $1.4 million loan to finance the 85-unit Meadow Estates in Madrid, IA. The 10-year-loan amortized on a 25-year scheduled and carried a note rate of 6.85%.
Also in Iowa, Michael Jehle, a director in Arbor's Bloomfield Hills, MI office, closed an $8.4 million loan to finance the 144-unit Wheatland Club Apartments in Cedar Rapids. The new financing took out the construction loan on the recently-completed project.
Kelly, a vice president in Arbor's Boston office, funded an $8.3 million loan for the 94-unit Marian Gardens in Lynn, MA. The 10-year loan, amortized over 30 years, closed at an interest rate of 6.42%.
In Glendale, AZ, Geoffrey Harris, a senior director in the Phoenix office of Mark One Capital, and Farham Kabani, a senior associate in the firm's Dallas office, found a $5.5 million loan at a commercial bank to refinance the 57,1776-square-foot Brittany Square retail center.
The 10-year loan is being amortized over 30 years at a 6.45% interest rate. The loan-to-value was 63%.
"Many of our clients are becoming aware of just how drastically the commercial lending market has shifted," notes Harris. "In today's market, it is essential to work with a financial intermediary that has a proven track record and comprehends the intricacies of a given deal."
Neal Churney, also a director in the Phoenix office of Mark One Capital, arranged a $2.58 million loan for the acquisition of the 45-unit Brittany Place Apartments in Portland, OR. An agency lender provided the loan at a fixed rate of 5.74% for five years, amortized over 30 years. The loan-to-value was 70%.
Glenn Gioseffi, a director in the Seattle office of Marcus & Millichap Capital Corp., created a $3 million, fixed-rate loan package to refinance the 50-unit Roosevelt Apartments.
The loan package includes a 5.85% interest rate for the first five years, followed by a five-year rollover to 280 basis points over the five-year Treasury. The loan is being amortized over 30 years with a loan-to-value of 40%.
In Miami, Stephen Wechsler, a vice president at Thomas D. Wood and Co., closed a $2.4 million loan for the 92,200-square-foot, 62-year-old Palm Bay Studios industrial building. The five-year, community bank loan carried a fixed-rate of 6.25%, amortized over 25 years with a loan-to-value of 35%. Thomas D. Wood is a member of Strategic Alliance Mortgage LLC.
Janet Krolman, a director in the Boston office of Holliday Fenoglio Fowler LP, arranged the financing for the developers, Abrams Properties and VinCo Properties.
On the hotel development and investment fronts, Lee Hunter, chief operating officer at Atlanta-based Hunter Realty, is confident that "despite the flood of negative economic news, transactions are and will continue to close, especially in the under-$15 million-sized deals."
Aaron Johnson, a principal broker in the Louisville, KY office of Marcus & Millichap, finds "there are still tremendous real estate investment opportunities, even as the capital markets continue to tighten."
He believes apartment properties "offer the most stability out of all the major property sectors to private investors in the current economic climate."
Johnson recently sold the 312-unit, 38-year-old Pegasus Place Apartments in Lexington, KY for $13.6 million or $43,590 per unit, a record per-unit price in Lexington. The cap rate was 6.9%.
He also sold the 66-unit, 40-year-old Worthington Apartments in Louisville, KY for $3.8 million or $57,576 per unit, again a record high per-unit price for an older multifamily property in Louisville. The cap rate was 7.6%.
In the Southwest, Marcus & Millichap brokers Al Silva and Kelley Sparkman closed a 1031 Exchange deal in Duncanville, TX. They sold the 122-unit Wexford Townhomes for a Florida-based private investment group to an out-of-state private investor. The brokers didn't disclose the price but said the buyer assumed an interest-only loan at 6.18%.
Peter Margolin
The loan assumption at the favorable interest rate "resulted in a cash-on-cash return that was considerably higher than the average return for such a high-quality asset," says Silva."Many owners have capitalized on the appreciation of their holdings and moved into other markets across the country to leverage their returns and fulfill the requirements of the 1031 Exchange," says Sparkman.
"This transaction illustrates that capital is still flowing into the 1031 Exchange market, despite continued tightening of the credit markets," he adds.
Michael Jehle
Uniondale, NY-based Arbor Commercial Funding brokers Peter Margolin, Michael Jehle and John Kelly are closing deals regularly, using Fannie Mae loan products.Margolin, a director in Arbor's Deerfield, IL office, brokered a $1.4 million loan to finance the 85-unit Meadow Estates in Madrid, IA. The 10-year-loan amortized on a 25-year scheduled and carried a note rate of 6.85%.
Also in Iowa, Michael Jehle, a director in Arbor's Bloomfield Hills, MI office, closed an $8.4 million loan to finance the 144-unit Wheatland Club Apartments in Cedar Rapids. The new financing took out the construction loan on the recently-completed project.
Kelly, a vice president in Arbor's Boston office, funded an $8.3 million loan for the 94-unit Marian Gardens in Lynn, MA. The 10-year loan, amortized over 30 years, closed at an interest rate of 6.42%.
John Kelly
"This transaction demonstrated our ability to deliver excellent financing terms in a very uncertain market," says Kelly.In Glendale, AZ, Geoffrey Harris, a senior director in the Phoenix office of Mark One Capital, and Farham Kabani, a senior associate in the firm's Dallas office, found a $5.5 million loan at a commercial bank to refinance the 57,1776-square-foot Brittany Square retail center.
The 10-year loan is being amortized over 30 years at a 6.45% interest rate. The loan-to-value was 63%.
"Many of our clients are becoming aware of just how drastically the commercial lending market has shifted," notes Harris. "In today's market, it is essential to work with a financial intermediary that has a proven track record and comprehends the intricacies of a given deal."
Neal Churney, also a director in the Phoenix office of Mark One Capital, arranged a $2.58 million loan for the acquisition of the 45-unit Brittany Place Apartments in Portland, OR. An agency lender provided the loan at a fixed rate of 5.74% for five years, amortized over 30 years. The loan-to-value was 70%.
Glenn Gioseffi, a director in the Seattle office of Marcus & Millichap Capital Corp., created a $3 million, fixed-rate loan package to refinance the 50-unit Roosevelt Apartments.
Stephen Wechsler
"The property had multiple challenges with construction, zoning and usage issues," says Gioseffi. "MMCC was able to remedy the issues and secure a lender (insurance company) with whom we have an established relationship, and which finances properties with similar challenges."The loan package includes a 5.85% interest rate for the first five years, followed by a five-year rollover to 280 basis points over the five-year Treasury. The loan is being amortized over 30 years with a loan-to-value of 40%.
Janet Krolman
In Miami, Stephen Wechsler, a vice president at Thomas D. Wood and Co., closed a $2.4 million loan for the 92,200-square-foot, 62-year-old Palm Bay Studios industrial building. The five-year, community bank loan carried a fixed-rate of 6.25%, amortized over 25 years with a loan-to-value of 35%. Thomas D. Wood is a member of Strategic Alliance Mortgage LLC.
Lee Hunter
Wells Fargo Middle Market Real Estate approved a $7.62 million construction loan and a $2.4 million historic tax credit bridge loan to fund the acquisition and development cost of the planned 55-unit Chestnut Green Apartments in Foxborough, MA.Janet Krolman, a director in the Boston office of Holliday Fenoglio Fowler LP, arranged the financing for the developers, Abrams Properties and VinCo Properties.
On the hotel development and investment fronts, Lee Hunter, chief operating officer at Atlanta-based Hunter Realty, is confident that "despite the flood of negative economic news, transactions are and will continue to close, especially in the under-$15 million-sized deals."
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