Four Deals in the $20M-Plus Range Show 'The Market Is Getting ...

By Gail Kalinoski, Contributing Editor

The Pirate's Cove student-housing development in Greenville, N.C.

Ranging from $20 million to $60 million, four financing deals for a variety of commercial real estate properties are indicators that capital is beginning to flow again for midsize and larger projects.

?The market is getting better for financing overall and specifically for multi-family,? said Mike Edelman, senior vice president of production management for Beech Street Capital L.L.C., a multi-family lender that handled one of the four financing transactions.

However, the National Association of Realtors? annual Commercial Real Estate 2012 Lending Survey found that there is still a sizable split in commercial lending depending on the transaction?s value. Many of the NAR?s members are dealing with commercial transactions less than $2.5 million and more than half of the respondents to the survey said they are still finding lending just as stringent as it was in 2011.

For larger deals, industry experts are cautiously optimistic about this year. Real Capital Analytics expects investment volume across the United States to grow by 50 percent to approximately $300 billion, with much of the activity coming in the second half of the year.

?In terms of larger properties, we?ve seen investors from larger banks and equity investors start to come back,? George Ratiu, the NAR?s manager of quantitative and commercial research, told Commercial Property Executive.

Ratiu, who prepared the NAR lending survey, said funding for mid-level projects depend on two main factors ? the property fundamentals and ?the underlying performance of the company managing it.?

He agreed with Edelman that multi-family funding had been strong in 2011 and expected the trend to continue in 2012 and 2013.

Edelman said Beech Street Capital deals mainly with loans through Freddie Mac and Fannie Mae. Last year, the firm originated $2.3 billion in multi-family loans and is aiming for $3 billion this year, he said.

?We originate loans for them and go out and sell to the investment market,? Edelman said. ?It?s been a busy market.?

Freddie Mac was the lender for a $20.2 million refinancing loan that Beech Street Capital, provided for the owner of Horizons North Apartments, a 276-unit, garden-style apartment complex in Miami. Joel Mazur, vice president in Beech Street Capital?s Chicago office, originated the Freddie Mac CME loan transaction. The fixed-rate loan has a seven-year term with two years of interest-only.

The unnamed borrower bought the complex in 1999 and wanted to refinance the existing debt on the property to lock in a lower rate. Mazur said the transaction took 40 days to complete. The owner had made recent capital expenditures and is planning more improvements to the 30-year-old property.

Also in Miami, Newmark Grubb Knight Frank?s Capital Group arranged a $26.7 million refinance of the National Hotel in South Beach with a 10-year, fixed-rate conduit mortgage facility from an unidentified global investment banking firm.? Robi Das, David Larson and David Preston represented the owner, Delphine Dray, in the transaction.

Dray bought the historic 1939 Art Deco hotel at 1677 Collins Ave. in 2007 and has been making major renovations to the 151-room hotel, including adding 36 poolside cabana rooms and suites.? An additional $5 million in renovations is under way, for a total of $10 million in upgrades since 2009.

The largest of the four deals was $60 million in financing for phase five of Southlake Town Square, a Class A entertainment and lifestyle center in Southlake, Texas, secured by Holliday Fenoglio Fowler. The team was led by senior managing director Kevin MacKenzie and associate director Jim Curtin. It was one of two financing deals announced by HFF.

The fixed-rate loan was placed through MetLife Real Estate Investments. The approximately five-year term loan is coterminous and cross-collateralized with the $90 million loan placed on four previous phases of the mixed-use development. Phase five covers 310,711 square feet of the total 840,288-square-foot complex that was completed within the last 10 years. Tenants include Cheesecake Factory, The Container Store, Banana Republic and Brooks Brothers. Southlake Town Square is owned by Retail Properties of America, Inc., one of the largest owners and operators of shopping centers in the United States. HFF arranged the $90 million loanFFHfHjjj refinancing of the property in April 2010. That seven-year, fixed loan was also secured through MetLife Real Estate Investments.

HFF also announced that it had arranged a $21.75 million, 10-year, fixed-rate loan through Freddie Mac for the acquisition of Pirate?s Cove, a 264-unit, 1,055-bed student housing community near East Caroline University in Greenville, N.C. A joint venture between The Scion Group and Virtus Real Estate Capital acquired the 12-year-old complex that sits on 55 acres about two miles from the university. Dave Keller, senior managing director, lead the HFF team. The financing will be securitized through Freddie Mac?s CME program. HFF will also service the loan through its Freddie Mac Program Plus Seller/Service program.

Scion plans to make $2 million in interior upgrades to the property by 2013. In January, Scion acquired two Texas student housing properties with joint venture partner Arch Street Capital. HFF also secured the $52 million in financing for the purchase of the student housing properties in Denton and Lubbock.

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