Hunt Real Estate Capital Arranges $55M for Austin Apartments
- Jul 03, 2019
Hunt Real Estate Capital has arranged a Freddie Mac conventional multifamily loan to finance the purchase of Hyde Park at Wells Branch in Austin. The $55.2 million, seven-year fixed-rate loan has an initial interest-only period of three years.
It was used by the borrower, a joint venture involving an equity investor, CEO of American Landmark Joe Lubeck as managing partner, and Chief Investment Officer of Electra America Christine DeFilippis as CFO. The 20-year-old Hyde Park at Wells Branch is a 576-unit, garden-style apartment community. It features 25 three-story, garden-style apartment buildings stretching across a 29.3-acre parcel.
Upgrades to unit interiors will include the addition of new washers and dryers, as well as updated cabinets and plumbing and lighting fixtures. Outdoors, there will be improvements of sites and amenities, including the clubhouse. New pool furniture will be added, and landscaping enhanced.
“Since financing revolves around debt service coverage on the net operating income and exit formula on the unpaid principal balance to insure refinancing, this is a major challenge on every financing,” John Bean, Hunt Real Estate Capital managing director, told Multi-Housing News. “The lower the rate, the more dollars will be available on debt service coverage within a specified loan to value. The refi exit is determined by the reduction at loan balance over loan term stressed at a refinance rate and LTV.”
Today, Bean added, both GSEs have green financing programs that reward energy savings and water efficiency. The savings must be a total of 30 percent, featuring 15 percent energy and 15 percent water.
Dramatic pricing difference
“At Hyde Park, we had a substantial upgrade and capital expenditure budget,” he added. “On a line item basis, we needed to go through the budget with the green consultant to ensure items already planned in the budget were counted. There was also a much-reduced separate escrow on the uncounted green items. The final result was a dramatic pricing difference and a relatively small green escrow outside the cap-ex budget.”
The exit analysis rested upon balancing principal recapture, loan term, interest-only period and two years of fixed prepayment, allowing an early payoff without yield maintenance or defeasance. “Working with the lending agency, we were able to justify three years of interest only,” Bean said.