TODAY’S DEALS: ARA Brokers $85M Sale of Seniors Housing Community

ARA brokers the sale of a 350-unit seniors housing community in Naples, Fla.; Western National buys a luxury apartment community for $95.4 million; and Cohen Financial helps restucture and extend a distressed apartment CMBS loan.

Carlisle Naples

Naples, Fla.—ARA has brokered the $85 million sale of the Carlisle Naples, a 350-unit independent and assisted living community located in Naples, Fla. ARA’s seniors housing specialists Ryan Maconachy and Chad Lavender represented seller Naples Club LLC in the transaction. The Carlisle Naples will operated by an affiliate of Senior Resource Group under a triple-net lease with a leading healthcare real estate investment trust.

“This was an ideal fit for the buyer in that The Carlisle Naples is a Class A+ asset in a very strong seniors housing market,” says Maconachy. “The Naples senior housing market has extremely high barriers to entry and The Carlisle community has been operating at or near 100 percent occupancy for the past two years while charging top of the market rates.”

The three-story mid-rise community was built in 1998 and has 257 independent living units and 93 assisted living units. The community underwent a significant upgrade in 2003, and has an amenity package featuring a private cinema, pool, billiards, sun deck with hot tub, on-site salon and spa, library, on-site bank, and a business center.

Western National acquires 368-unit asset in Orange County for $95.4M

San Clemente, Calif.—Western National Group has acquired Seacrest Luxury Apartments, a 368-unit community located in San Clemente, Calif., for $95.4 million. The property was purchased from an affiliate of TRECAP Partners—represented by CBRE Group Inc.—through the Western National Realty Fund II LP.

“Seacrest’s solid location in Orange County, with its high barriers to entry, is the type of project we are seeking in the market,” says Rex DeLong, president of Western.

The community, which was built in 1988 and renovated in 2009, was 97 percent leased at the time of sale. Amenities at the property include a pool, fitness center, business center, barbecue area, and ocean views.

The Orange County multifamily market had the country’s tenth-lowest vacancy rates in the second quarter of 2011 at 4.7 percent, according to a report by Cushman & Wakefield Inc.

Cohen Financial helps restucture and extend distressed apt. CMBS loan

Winter Park, Fla.–Cohen Financial announced that its Debt Advisory Services group successfully facilitated the restructuring and extension of a $12.5 million commercial mortgage loan secured by a multifamily property located in Winter Park, Fla. The loan, which had an original term of seven years, was originated in late 2004 and included in a commercial mortgage-backed securitization (CMBS) trust.

“We successfully worked with all parties to negotiate favorable restructuring and extension terms,” says Deborah A. Schiavo, managing director of Debt Advisory Services. “The special servicer issued its conditions for approving the restructuring in June 2011, and the transaction closed in 45 days.”

The multifamily property’s occupancy rate, which had exceeded 90 percent during the first three years of ownership, began to drop in late 2008 and continued to fall to the mid-70 percent range during 2009. Overbuilding in Florida, household consolidation and competition from newly constructed and unsold condominiums converted to rentals had contributed to a steep drop in market rents and a precipitous fall in revenues. Average rents dropped from $700 in 2006 to $500 by late 2010.

The investors had contributed additional equity in 2010 to cover cash flow shortfalls and projected that more equity would be required in 2011.

The borrower needed to increase the property’s occupancy level to 95 percent at current market rent rates to achieve profitability. Faced with insufficient cash flow to cover the monthly debt service payment, the mortgage loan transferred to the special servicer acting on behalf of the CMBS bondholders in March 2011, at which time the special servicer began foreclosure proceedings.

The borrower believed that implementing a capital improvement program could increase occupancy to the target level and support an increase in rents. Facing a balloon maturity date in early 2012 and loan refinance proceeds that would not be sufficient to pay off the current mortgage loan, the borrower needed to justify contributing additional equity when a maturity default appeared inevitable. Working with Cohen Financial’s Debt Advisory Services group, the borrower proposed a capital improvement plan that would attract new tenants at higher rents and rebuild the multifamily property’s value.

Cohen Financial’s Debt Advisory Services group facilitated the process by working with the borrower and property manager to analyze the property’s historical and projected operating performance within its submarket. The group evaluated a possible capital expenditure budget and reviewed mortgage loan refinance options and loan extension scenarios.

Cohen Financial’s Debt Advisory Services group then worked with the borrower and the special servicer to reduce the monthly debt service payments for the first year by negotiating a waiver of principal amortization and secured a two-year extension of the mortgage loan term. The borrower agreed to contribute additional equity to fund the capital expenditure program.

Cohen Financial’s Debt Advisory Services group negotiated a plan to ensure that the borrower would have flexibility in determining budget allocations and that the capital expenditure reserve disbursement process would allow the borrower to manage cash flow by minimizing upfront vendor payments. As a result, the property is expected to generate sufficient cash flow to pay the modified debt service payment and to refinance at the extended maturity date.

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