Atlanta–The grip of the credit crunch may be loosening but, as Cortland Partners is well aware, securing financing for commercial real estate investments remains no simple feat. However, despite the ongoing challenges in the debt market, the Atlanta-based multifamily real estate firm has emerged victorious in its goal to secure funding for a $9.5 million renovation of a distressed apartment community in the City of Clarkston in DeKalb County, Ga.
The 168-unit residential property, formerly known as Cedar Pines Apartments, carries the address of 1086 Montreal Road and sits approximately 20 miles northwest of Atlanta in a desirable neighborhood of the city. Cortland Partners acquired the multi-structure complex in April for just over $1 million, rescuing it from impending demolition. With funds in hand, the company will take 12 months to transform the downtrodden complex of two-, three- and four-bedroom residences into the revitalized Avalon on Montreal via a top-to-bottom upgrade program assisted by architect George Rees of Rees Designs.
Financing for the renovation project comes in the form of a $3.2 million construction loan from state Bank & Trust Company and $4.9 million in Neighborhood Stabilization Program (NSP) funds through the DeKalb County Community Development Department, which works with funds from the U.S. Department of Housing and Urban Development. “We have to give credit to the Community Development Department, our lender partner on the NSP funds,” Steven DeFrancis, president of Cortland Partners, tells MHN. “Across the country, there has been trouble getting NSP funds to real estate companies, so securing the funds is a testament to working with them.”
Still, the process of obtaining a complete financing package for the renovation of the apartment property required a great deal of diligence and hard work. “To layer in these funds with traditional construction funding–to bring public funds into the capital stack–made it difficult,” he says. “It took us a while to get this across the finish line. Anything that’s not traditional is difficult. Banks are out of the business of creative financing.”
Cortland Partners believes the investment in the apartment property’s renaissance will benefit the company and the neighborhood, as demand for rental units does exist in the area and is on track to increase. The mostly market-rate community will also feature a small percentage of affordable housing units as a requirement to receive the NSP funds. “What we see is an evident rebounding of operations at the property level, either due to the economy or the supply,” DeFrancis notes. “We’re going on the third year of no new supply. Few deals started in 2008 and there were none in 2009. With the turnover of units and increase in population, the prolonged delay of new product has started to help demand creep back in.”