TODAY’S DEALS: Praedium Group, CAPREIT Acquire Minnesota Community

5 min read

Praedium-CAPREIT joint venture acquires a Minnesota community for $19 million; Marcus & Millichap Capital Corporation arranges $5.3 million in financing for a Seattle property; and George Smith Partners completes financings for distressed, acquisition and refi transactions.

Shenandoah Apartments

Shakopee, Minn.—The Praedium Group and CAPREIT Inc. have acquired Shenandoah Apartments in Shakopee, Minn., a Minneapolis suburb. The firms bought the 202-unit community from a local investor for $19 million. The acquisition of the 2005-built property marks the second joint venture between Praedium and CAPREIT, which purchased a 204-unit property in White Bear Lake, Minn., in September 2010.

“Our existing relationships in the marketplace allowed us to work directly with the seller to acquire this attractive asset, which was not being actively marketed for sale,” says Chris Hughes, principal at Praedium.

Units at the Shenandoah Apartments have a porch or balcony, walk-in closets, central heating and air, and in-unit laundry. Community amenities include attached covered parking, a swimming pool, clubhouse with fitness center, a billiards room, walking trails and picnic areas.

“Shenandoah Apartments is well positioned as the Shakopee area continues to grow and mature,” says Ernie Heymann, senior vice president of CAPREIT. “The property should also be enhanced by a comprehensive capital-improvement program (including new exterior and interior painting, clubhouse, pool and other amenity upgrades) and the installation of a new management system.”

Marcus & Millichap refinances a 40-unit Seattle property

Seattle—Marcus & Millichap Capital Corporation has arranged a $5.3 million refinancing for a 40-unit, 28,920 square-foot community located in Seattle. Glenn Gioseffi, director of the firm’s Seattle office, arranged the loan—a 4.4 percent fixed rate loan with a three-year term amortized over 30 years. The loan-to-value is 75 percent.

“The note was in forbearance for a year and was scheduled to expire in 35 days when the borrower came to us for assistance,” says Gioseffi. “A pending sale of the property had fallen through and the purchaser had to refinance or risk bank action that would have resulted in foreclosure. The owner had approached the lender directly but wasn’t able to achieve a positive result.”

George Smith completes financings for distressed, acquisition, refi transactions

Los Angeles–George Smith Partners closed four multifamily transactions totaling $13.4 million on behalf of its clients.

“George Smith Partners has seen a steady increase in the volume of commercial real estate loan activity in 2011,” says Steve Bram, principal and managing director of George Smith Partners. “The market is steadily moving back into a positive place, and we are seeing many of our clients, new and old, returning to the market to invest. These clients are seeking our experience in order to achieve optimal financing on their various investments across the nation.”

George Smith Partners secured $5.3 million in financing for a newly constructed, mixed-use apartment and retail property in Los Angeles. The troubled asset was originally constructed as for-sale condos and then converted to rental units. Upon completion of the building’s construction, the FDIC seized the construction lender and transferred the note to a new bank.

“The new lender extended the balloon date with a short-term mini-permanent loan, but placed the loan in special services adding pressure on the sponsor to be paid off,” Bram explains. “The rentals, which were built to condo specs, commanded higher rents, above the baseline for residential units in the area. The property had substantial retail on the ground floor, but included only 20 percent of the total retail income in their underwriting.”

“We were able to use our market knowledge to increase the underwriter’s range for multifamily comps to confirm collections,” Bram continues. “GSP demonstrated the retail tenants’ dedication to this location and provided support for their ‘top of the market’ rental terms. As the property was well constructed, fully occupied and managed with ‘pride of ownership,’ we were able to attract a lender who aggressively underwrote the request. The building appraised as underwritten by GSP, and the previous lender was paid in full.”

Bram was assisted by George Smith Partners Vice President Jonathon Lee in securing the non-recourse loan at a fixed rate of 5.37 percent for 10 years, with an amortization of 30 years and a loan-to-value of 75 percent.

George Smith Partners secured $3.2 million in financing for the acquisition of a multifamily property in Glendale, Calif. in just 35 days.

“Timing was critical for this deal, in order to meet the borrowers’ investment objectives for an unrelated project,” notes Shahin Yazdi, vice president of George Smith Partners. “We worked with the borrower, lender and third-party vendors to present an expedited but fully underwritable loan package, and were able to secure the loan within 35 days of being introduced to the transaction.”

Yazdi secured this non-recourse loan at a fixed rate of 5.3 percent for 10 years, with an amortization of 30 years and a loan-to-value of 55 percent.

George Smith Partners secured $2.6 million in financing for the acquisition of a 31-unit multifamily property in Canoga Park, Calif.

“The borrower had locked the interest rate for the loan at application in order to secure the rate in the event of a rate spike,” explains Shahin Yazdi, vice president of George Smith Partners. “However, just prior to closing, the market rates fell significantly and the borrower wanted to adjust the rate to take advantage of this drop.  We worked with the lender to allow the borrower to re-lock at the then-lower market rate, in exchange for a small portion of the borrower’s rate.”

Yazdi secured the loan at a fixed rate of 6.02 percent for 10 years, rolling into a floating rate loan for the remainder of the 30-year loan.

George Smith Partners secured a $2.3 million cash-out refinance of a 40-unit multifamily property in Glendale, Calif.

“The borrower had required a self-liquidating loan that precluded the balloon risk to refinance their multifamily property,” notes Shahin Yazdi, vice president of George Smith Partners. “We were able to get a great rate for the borrower and close the loan in less than 45 days by utilizing the high quality of the asset and the borrower’s strength.”

Yazdi secured the loan at a fixed rate of 4.25 percent for 5 years, with a term of 30 years and an amortization of 30 years.

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