“The borrower has experience and a proven track record operating in the submarket,” Vincent Punzi, Capital One’s vice president of multifamily finance, told MHN. “Furthermore, the seller has proven that the partially renovated units were achieving rent premiums and the few fully upgraded units were achieving a much higher premium. Our review of the borrower and appraisal rent rolls comps demonstrates that there is still room to increase rents through completing unit renovations.”
The 12-year fixed-rate loan includes four years of interest-only payments followed by amortization on a 30-year schedule. Aline Capital LLC was the debt broker for the transaction. This is the sponsor’s first loan with Capital One.
According to Punzi, due to the flattening yield curve the spread differential for seven-, 10- and 12-year loans was minimal.
“The 12-year fixed rate allowed us to support additional years of interest only, which helped maximize the borrower’s cash flow,” he said. “The longer-term loan was also tied to the borrower’s business plan and the attractive terms would also be appealing to a potential buyer through an assumption if the business plan changes.”
Improving the Units
Developed in 1988, The Parc at 1875 boasts a clubhouse with fitness center, a pool, sports court, security systems and patios or balconies in many of the units.
Over the past two years, the seller had invested nearly $2 million in upgrading the community, renovating approximately 80 percent of the units, adding new landscaping, doing exterior painting and making pool improvements. The borrower intends to finish the renovation program.
“The local knowledge and financial strength of the sponsors, the condition of the units, and the experience of the sponsor-related management company were all decisive factors in our decision to fund this loan,” Punzi said. “In addition, there is rental rate upside and the Sponsor plans to finish upgrading unit interiors. This strengthened our position.”
Located just 10 miles south of Atlanta, the capital of the Southeast, the property benefits from the region continuing to outgrow and outpace the nation’s best-known metropolitan regions. The property is also near Hartsfield-Jackson Atlanta International Airport.
“The Parc at 1875 benefits from its strategic location in south Atlanta’s expanding Aerotropolis district,” Punzi said. “The submarket’s vacancy rate has been trending down and there is a limited development pipeline, further pushing rental demand.”
In April, Capital One provided Kort & Scott Financial Group with a $48.8 million Fannie Mae Structured Adjustable-Rate Mortgage (SARM) loan for Lincoln Center Mobile Home Park, a 305-unit manufactured housing community in Cypress, Calif.