Tower Capital Arranges $100M in BTR Financing
The funds will go toward two projects in major Sun Belt markets.
Tower Capital, a Scottsdale, Ariz., private real estate capital advisory firm, has expanded its portfolio in the build-to-rent sector with two new construction financing deals totaling nearly $100 million. The funds are for properties in the Phoenix and Dallas markets.
The larger of the two transactions is a $70.3 million financing package for Village at Borgata, a 287-unit BTR community being developed by Empire Group of Cos. in Phoenix’s Queen Creek submarket. The firm arranged non-recourse construction financing via a debt fund for the community that will be built on about 27 acres at 3959 W. Hunt Highway in San Tan Valley. The Tower team was able to structure the loan with several attractive features including a rate burn down and an earn out.
The rate burn down allows the sponsor to lower their interest rate spread at final certificate of occupancy and the earn out allows the sponsor to draw incremental proceeds from the loan once the construction is complete. Tower notes these features allow the sponsor to lower project capital expense and increase project returns.
Despite the continuing challenging market conditions, the Tower team was able to get lenders comfortable with the project financing and secure multiple competitive term sheets for Empire Group.
The firm, which also has regional offices in Dallas and Los Angeles, specializes in arranging debt and equity placements across several real estate sectors, including multifamily and BTR, on behalf of private and institutional sponsors. Tower has closed about $2 billion in BTR construction financing and joint venture equity for 46 communities encompassing more than 8,000 units across the country.
The team for the Phoenix and Dallas transactions consisted of Kyle McDonough, Tower Capital managing partner and co-founder; George Maravilla, partner; David Stull, vice president; and Noah Schott, capital advisor.
Tower has previously arranged financing for 15 Empire Group projects. Based in Scottdale, Ariz., Empire Group has a substantial BTR track record with properties in Arizona, Colorado, Indiana and Texas and plans for further expansion and a robust pipeline this year.
In June, Tower arranged a $47.4 million construction loan for Empire Group’s Village at Mayfair project in New Braunfels, Texas, that will have 217 units. Tower also arranged $72.9 million in financing for the Village at Golden Triangle, a 317-unit single-family rental project built by Empire Group in Fort Worth, Texas.
Village at Borgata features
Units at the Phoenix property will average about 960 square feet and have a private patio or yard space. The homes will feature solid surface quartz countertops, stainless steel appliances, backsplashes, full-size washers/dryers and smart home technology packages. Community amenities will include open recreational space, a fitness center, clubhouse, outdoor walking path and dog parks.
The site is located near the LG battery plant in Queen Creek, which is expected to bring thousands of jobs to the area and serve as an economic driver for the entire Phoenix region. Village at Borgata will provide much-needed housing for LG and its related businesses.
Texas townhome transaction
The second recent BTR transaction arranged by Tower was a $29.5 million non-recourse construction loan for the development of a 118-unit BTR townhome community being built by a Dallas-based multifamily and BTR/SFR development and investment firm in Melissa, Texas. The sponsorship group was not identified by name but Tower said it is an established local investment firm with a strong presence in the North Dallas area. The sponsor’s developments have included more than 2,400 units of multifamily properties, including apartments and townhomes, with acquisitions exceeding $380 million in Texas, Florida and Georgia.
The Tower team arranged the financing from a debt fund. The firm noted it gave the sponsor pricing well inside of the competitive set with an attractive floor rate, allowing it to benefit from the downward trajectory of one-month term SOFR through the construction period.
Dallas property details
The 15.5-acre site set to receive funds is located north of Dallas, immediately off Sam Rayburn Highway and within a short distance of U.S. Route 75. The fast-growing area has experienced a nearly tenfold increase in population in the past 20 years and is expected to grow 11 percent over the next five years.
The homes will average 1,655 square feet and offer private patios or yards. Unit features include luxury vinyl-plank flooring, solid surface counters, stainless steel appliances, recessed lighting, flat pane cabinets, large windows and smart home technology. The residences have two-car attached garages and electric vehicle chargers.
Community amenities will include a swimming pool, clubhouse, fitness center, barbecue area, playground, pickleball courts, open recreational space and a walking path.
