Leaders of the Pack: Six Projects & Deals That Set the Pace for 2017
- Dec 05, 2017
Throughout 2017, developers and investors have been dedicating billions to develop, reinvent and acquire assets from coast to coast. Representing these trends, the standouts presented here range from a record-setting Manhattan deal Houston landmark’s improbable second act to a project that is reshaping the Los Angeles skyline. For all their diversity, these cases have at least one thing in common: a team that solved large, complex challenges on the path to success.
Project: F1RST, 1263 First St., S.E., Washington, D.C.
Developers: Grosvenor Americas and McCaffery Interests
Architect: Hickok Cole Architects
Number of Units: 325, including 50 below market-rate
Completed: April 2017
Who’s on first? Residents of F1RST can go up on the roof of their new apartment building and tell you. F1RST overlooks Nationals Park, home of Major League Baseball’s Washington Nationals. “It’s 975 feet from home plate,” said Jonathan Carr, senior vice president of development for Grosvenor’s D.C. office.
F1RST also stands between two hotels—a 170-room Residence Inn by Marriott that Grosvenor and McCaffery developed, and a Hampton Inn & Suites that the project team initially thought was unlikely to win approval from city officials. But when the hotel passed the test, after all, it threatened to have the effect of a rally-killing double play, blocking the property’s views of the Anacostia River. “It was totally oriented to the water,” Carr said of F1RST’s initial design. (F1RST’s first design, however, faced some obstacles. How many stories is this thing?]
A four-month redesign restored some water perspectives and improved the interaction of the units’ balconies and views. “You have to really take into consideration the immediate environment, which is more wide-open, but also the long-term environment, which is what could be built around you,” Carr said of the design challenges. “We’re all very proud of how it worked out.”
A Star is Reborn
Property: The Star, 1111 Rusk St., Houston
Developer: Provident Realty Advisors
Architect: HBG Design
Estimated Cost: $150 million
Number of Units: 286
Completed: February 2017
For much of the 20th century, the Texaco Building enjoyed pride of place. Designed by Warren & Wetmore, the served as the home of the energy company from its completion in 1915 to Texaco’s departure in 1989.
The landmark then sat neglected for more than two decades. Among other efforts for a renewal, Provident Realty Advisors made an initial attempt to buy the Texaco Building in 2007. But the stars lined up at last in 2014, when Provident bought the building for $17 million.
By then, the new owners faced challenges stemming from the building’s decades of being out of service. Among other issues, the building had been gutted and its generators removed. Provident made a multimillion-dollar investment in new generators as part of a $150 million overhaul that also added a parking garage and 25,000 square feet of retail space, most of it leased to a local restaurant. To honor the landmark’s legacy, Provident renamed the property The Star, a nod to Texaco’s logo as well as to its vintage advertising tag line, “You can trust your car to the man who wears the star.”
Once its long journey from corporate headquarters to trendy residences was complete, it turned out that the early 20th-century landmark had plenty of 21st-century appeal. “There’s not a lot of pre-World War I stuff that you can live in, in Houston,” Platt explained. “This was a … unique product in a great location.”
Property: Metropolis, 889 Francisco St., Los Angeles
Developer: Greenland USA
Architects: Gensler and JG Neukomm Architecture
Number of Units: 308
Resident Move-in: April 2017
Cost: $1 billion (entire project)
Every high-rise project in Los Angeles faces the challenge of incorporating structural features that can keep the property safe in an earthquake. Metropolis, a $1 billion multifamily and hotel complex under way in downtown L.A., faced some additional challenges. Shanghai-based Greenland USA’s challenge was a self-imposed deadline to complete the first condo tower in two and a half years. The second challenge was finding experienced high-rise construction workers, said Winston Yan, chief technical officer for Greenland’s L.A. office. Selling Angelenos on downtown living rather than commuting was the third. Although downtown L.A. has come into its own as a residential community in recent years, selling residents on the location posed a third challenge. Set between downtown’s financial and business districts, the property had been vacant for 20 years. The first phase, an 18-story, 350-key Hotel Indigo, opened in March 2017. Its second condo tower, with 514 units and two levels of retail, is slated for completion in mid-2018, and a third is on track for 2019 delivery.
“We worked with the unions and did our best to recruit the best possible people in this area to help us achieve our goal,” Yan said. “After our tremendous amount of effort, we succeeded.”
Six of a Kind
Properties: Modera Glendale, Glendale, Calif.; Modera Lofts, Jersey City, N.J.; Modera Douglas Station, Miami; Modera Mosaic, Merrifield, Va.; Modera Natick Center, Natick, Mass.; Modera Flats, Houston
Owner: Mill Creek Fund I, sponsored by Rockwood Capital LLC and Mill Creek Residential Trust
Loan Value: $363.7 million
Number of Units: 1,529
Lenders: Morgan Stanley, New York Life, MetLife
Intermediaries: Jesse Weber, Andrew Behrens and Scott Williams, CBRE Debt & Structured Finance
Lenders lined up to provide refinancing for six new luxury apartment communities scattered across the United States.
Known collectively as the Modera Portfolio, the buildings were in various stages of lease-up, from nearly full to 60 percent or less. Nevertheless, Morgan Stanley and a syndicate including New York Life and MetLife offered a highly attractive package: a five-year, interest-only $250 million floating-rate loan to Mill Creek Fund I, a joint venture of Rockwood Capital LLC and Mill Creek Residential Trust. The loan closed in February.
“We had a combination of urban and suburban assets which were interesting,” explained Jesse Weber, an executive vice president with CBRE Capital Markets. “Because Rockwood and Mill Creek are best-in-class sponsors, combined with new properties, we would expect that the financing markets would find that combination to be extremely attractive.”
The clients will use the proceeds—which they can prepay without penalty—to retire construction debt and return equity to investors.
Borrower: Warmington Properties
Loan value: $190.2 million
Properties: Clock Lusk Apartments and Casa Grande Apartments, Cypress, Calif.; Serrano Highlands, Lake Forest, Calif.; Sycamore Greens Apartments, Vista, Calif.; The Clubs at Rhodes Ranch and Martin Apartments, Las Vegas
No. of units: 1,240
Categories: Class A and Class B
Lenders: Freddie Mac and Fannie Mae
Intermediaries: Gregory Richardson and Scott Watson, Walker & Dunlop
Warmington Properties Inc. tasked Walker & Dunlop with refinancing its 1,240-unit portfolio of Class A and B communities in California and Nevada. Walker & Dunlop’s Gregory Richardson and Scott Watson structured five Freddie Mac loans for the California communities and for The Clubs at Rhodes Ranch in Las Vegas. The loan for a new property, the Martin Apartments in Las Vegas, qualified for an early rate lock and low interest rate with Fannie Mae’s Green Rewards program.
Warmington used the proceeds to fund major renovations to the kitchens, bathrooms and common areas of the older buildings, which date from the 1980s. The company also took “a significant amount” of cash, which it plans to deploy into other multifamily investments, according to Richardson. The financing’s staggered maturities, which call for varied forward rate locks, posed a challenge.
“We worked closely with the client and our pricing desk to insure our client got the best pricing and execution,” Richardson explained. “We started back in October 2016 and the loans closed between February and May 2017.”
Reach for the Sky
Property: Sky Residences, 605 W. 42nd St., New York City
Owners: The Moinian Group and SL Green Realty Corp.
Loan Value: $550 million
Number of Units: 1,175
Lender: Freddie Mac
Intermediaries: Steve Rosenberg, Billy Posey, Joe Mosley and Jeff Englund, Greystone Bassuk
Greystone & Bassuk secured Freddie Mac’s largest-ever single-asset refinancing deal for this 1,175-unit mixed-income building.
Majority owner Moinian Group sought the refinancing once the building was largely stabilized, according to Chief Financial Officer Ravi Ragnauth. In 2015, the first residents moved in. The project was funded with 4 percent low-income housing tax credits as well as tax-exempt and taxable variable-rate bonds issued by the New York State Housing Finance Agency. Freddie Mac bought the bonds to convert them to a single-asset securitization, a first-of-its-kind structure that provided certainty of execution combined with better pricing, according to the agency.
“The way it traded in the market, it was well-received by the industry,” Ragnauth said. Also of note: One-quarter of the units qualify as affordable, a rarity for Midtown Manhattan.
Originally appearing in the December 2017 issue of MHN.