George Smith Partners Arranges $105M in Construction Financing
- Jul 24, 2012
Wildomar, Calif.—George Smith Partners has successfully arranged $105 million in construction financing for client GLJ Partners, for two new multifamily developments in the Inland Empire region of California, according to Vice President Malcolm Davies. Davies was assisted by George Smith Partners’ Vice President Michelle Lee in these transactions.
The transactions include $52 million in construction financing for Oak Springs Ranch, a to-be-built 312-unit multifamily property in Wildomar, Calif. and $53.7 million in construction financing for The Paseos, a to-be-built 385-unit multifamily property in Montclair, Calif.
-Oak Springs Ranch–Davies arranged $52 million in construction financing for the ground-up development of GLJ Partners’ to-be-built Class A multifamily community, Oak Springs Ranch in Wildomar, Calif. Upon completion, the community will consist of 312 units across 18 buildings. The land is fully-entitled, permitted and shovel-ready for development.
Davies explained, “Our client has owned this land since 2008, but had not yet secured construction financing because they had put the project on hold due to the Great Recession.”
According to Davies, GLJ Partners worked with a joint venture partner to acquire the land in 2008. The project required at least $52 million of proceeds in order to move forward. In addition, the client required financing which was guaranteed solely at the entity-level, providing protection to the client’s principals.
In order to achieve the required financing, George Smith Partners conducted extensive market research and analysis to show potential lenders that the market was viable for new multifamily development. According to Davies, this research showed that Wildomar is an extremely strong rental market due to a shift in the demand from buyers to renters.
“Finding a lender familiar with the area and willing to reinvest was a challenge,” Davies continued. “By utilizing our extensive industry connections we were able to secure a dual-structured deal, with one lender placing $35 million in construction debt and the other placing $17 million in mezzanine construction debt financing. Through a successful inter-creditor negotiation, we were also able to meet all of the client’s requirements, as well as their joint venture equity partners’ requirements for financing.”
According to Davies, the property is a total of 21 acres, with a density of 15 units per acre, making it the least-dense Class A apartment community in the Southwest area of Riverside County. The property is also adjacent to a major-anchored neighborhood shopping center, and is more proximate to employment centers in Riverside and Ontario than other competing residential communities in the corridor.
-The Paseos–Davies also arranged $53.7 million in construction financing on behalf of GLJ Partners, who will develop a 385-unit luxury Class A apartment community called “The Paseos” in Montclair, Calif.
“This land is fully-entitled, permit- and shovel-ready for development,” explained Davies. “While construction lenders in the Inland Empire have not been active in recent years due to the recession, we were able to demonstrate the strength of this local market and the area’s increasingly positive multifamily absorption rates, ultimately identifying a lender who recognized the value in this investment.”
According to Davies, by emphasizing GLJ’s extensive track record and substantial liquidity, George Smith Partners was able to secure this financing as well as achieve all the requested terms by the client.
The property is located directly across the street from a major regional mall, the Montclair Plaza, and one block south of the Metro link commuter rail with service to Downtown Los Angeles and Pasadena. Upon completion, the apartment community will contain 385 Class A units situated on 15.4 acres with 722 parking spaces.
The construction financing was a libor based and interest-only loan underwritten to a 65 percent loan-to-cost ratio and a 1.2 stabilized debt coverage ratio.
Davies had previously arranged $25 million in joint venture equity for the acquisition of the to-be-built multifamily property in early 2012.
Panther Properties buys a 352-unit community in Georgia
Rincon, Ga.—Private equity multifamily investor and developer Panther Properties LLC has purchased Effingham Parc Apartments, a 352-unit Class A asset located in Rincon, Ga. The sales price was $30.8 million, or approximately $87,500 per unit. The transaction marks Panther’s sixth acquisition since 2010, and is their second purchase in Georgia. Their first buy in the Peach State was Mandalay Villas Apartments in McDonough, which was bought in the spring of 2011.
“We are very excited to add Effingham Parc to our portfolio,” says David Masse, principal of Panther Properties. “The property is at the top of its sub-market and performing exceptionally well. The Savannah region is poised for long term future growth and this bodes well for the Class A apartment market.”
Effingham Parc is located 13 miles northwest of Savannah. Community amenities include a swimming pool, fitness center, dog park, business center, a two-acre community lake, and an outdoor theater.
Essex Property Trust Acquires Calif. Asset for $48.2M
Huntington Beach, Calif.—Essex Property Trust has completed the purchase of The Huntington, a 276-unit community located in Hunting Beach, Calif. The sales price was $48.2 million, or $174,818 per unit. The asset was sold by Friedkin Realty Group, which was represented by ARA.
“We had strong interest from a number of local players, as well as the major national groups—all of who recognized the inherent value of a well-located coastal asset such as The Huntington,” says John McCulloch, who along with Curtis Gardner and Tyler Martin, represented both parties on the transaction for ARA Pacific.
Essex assumed the existing Fannie Mae loan, which originated in 2009 and bears an interest rate of 5.74 percent.
“Considering the prevailing rates available on agency debt, the necessity of assuming the existing loan was material to the transactions,” says Martin.
The Huntington was built in 1975 and has a total rental area of 202,256 square feet. Amenities at the property include a heated swimming pool and Jacuzzi, an expansive sun deck, a clubhouse, and two tennis courts.