Capital One Provides $50M for SoCal Refi

The Terraces

McLean, Va.-based Capital One has provided a $50 million Fannie Mae 10-year fixed-rate loan to Allmark Properties to refinance a six-apartment portfolio. The apartment communities feature a total of 538 units, and are located in the Riverside-San Bernardino MSA city of Rancho Cucamonga, Calif. Newport Beach, Calif.-based Capital One Multifamily Finance Senior Vice President Chuck Christensen originated the transaction. A repeat customer of Capital One and Fannie Mae, Allmark Properties owns and manages more than 2,500 California and Texas rental units.

“This transaction was challenging in part because the borrowing entities were not single-asset entities and five out of six of them owned another non-related asset,” Christensen told MHN. “Also, the borrowers preferred to not remove all of the turf at the property in order to achieve the savings required to implement the green program.

“In order to overcome the first issue, we cross collateralized the six entities and placed affirmative restrictions on the future level of debt on the unrelated asset. Regarding the turf, we worked with the sponsor and a consultant to modernize the current irrigation system to achieve necessary water savings while allowing the turf to remain in place.”

Contiguous communities

Allmark developed the half dozen contiguous properties in the Terrace Portfolio during the period from 1971 to 1978, inclusive. They are Fir Terrace, Arrow Terrace, Cucamonga Terrace, Placer Terrace, Terrace 78 and Terrace 12. The six are operated as a single entity through a shared facilities agreement.

Noting steadily rising interest rates, Allmark eagerly sought to refinance. But the prepayment penalty on its existing loan gave the company pause.

Once Capital One presented Allmark with an analysis of available alternatives, its choice proved to be Fannie Mae’s Streamlined Early Rate Lock program. This option permitted the company to lock in rates while waiting three months for its prepayment penalty to decline to an acceptable level. “We have worked with Capital One on a number of transactions over the years,” said Allmark CFO Steve Strebel.

Water consumption reduction

“Chuck Christensen spends the time to understand our goals and always provides guidance and a variety of solutions in support of our business plans.”

The six contiguous properties are located in the Rancho Cucamonga foothills and together feature a resort-style layout, with amenities that include tennis courts, basketball courts, a dog park, business center, barbecue areas and swimming pools. The combined property has been carefully maintained by Allmark.

“Allmark received a substantial interest rate reduction by taking advantage of Fannie Mae’s Green Rewards program,” Christensen said. “They qualified for the program by installing fixtures yielding a 25 percent reduction in water consumption, upgrades that dovetailed nicely with other improvements [the company] plans to implement.”