Multifamily Finance — Project Spotlights

Project Spotlights

Each deal presents its own set of challenges. Learn how Capital One Multifamily Finance exceeds expectations to meet the needs of its customers.


Capital One Helps SF LGBT Center Revitalize Its Home

15 March, 2017

Thirteen years after it first opened, it was clear to everyone who entered the SF LGBT Center that it needed to be updated and reconfigured to better serve the local community. The problem was how to finance the renovation. Capital One, working in partnership with the Northern California Community Loan Fund, developed a package that allowed the center to proceed with its plans. In addition to a New Markets Tax Credit equity investment, Capital One provided a senior loan and a bridge loan.

The Challenge

It was time for a renovation. Located at 1800 Market Street, the SF LGBT Center had been providing a comprehensive array of direct services and community development programs for low-to-moderate-income individuals and families since 2002. Although its building—which combines a modern steel structure with a Queen Anne-style Victorian—won the 2004 SF AIA Design Award for Excellence, it no longer met the evolving needs of the local community.

After surveying founders, donors, and community partners, the center directors developed a three-point plan for the renovation:

  • Triple the amount of affordable nonprofit office space available, welcoming new partner tenants and adding primary medical care, mental health, substance abuse, and legal services to the Center’s existing programs.
  • Transform the lobby to make it more inviting, create new community meeting spaces, and upgrade the Rainbow Room, the center’s largest multipurpose event space.
  • Promote long-term sustainability by designing a more efficient floor plan that allows the building to pay for itself and the center to establish a capital reserve fund to support future building needs.

“This is an opportunity to make the Center an even stronger resource for the community and gives us the ability to expand critical services to the entire community," Rebecca Rolfe, the Center’s Executive Director, told the Bay Area Reporter in 2015.

But getting the finances right was as important to the Center’s future as the design. With its tight budget, the center needed to minimize its carrying costs.

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Capital One Supports Sprawling Affordable Housing Complex

30 June, 2016

Thanks to the investment that the ownership team of Taconic Investment Partners and Clarion Partners have made to modernize and revitalize Eastchester Heights apartments in the Bronx, occupancy rates at this sprawling affordable housing complex averaged 95.7 percent over the last six years. In order to refinance Eastchester Heights, given this Bronx community’s size, the ownership group needed a lender with a commitment to affordable housing and the capacity to underwrite and finance a large-scale community. It found such a partner in Capital One.

The Challenge

Eastchester Heights underscores the role that progressive, committed owners play in preserving New York’s stock of affordable housing. Originally designed in the 1930s by urban reformer Clarence Stein, Eastchester Heights was built around a series of interconnected courtyards, and included playgrounds, common rooms for workshops and clubs, and a nursery school. But by the mid-1990s, it had fallen on hard times.

When Taconic Investment Partners and Clarion Partners purchased the community in 2007, a turnaround was already underway, but the ownership group acted decisively to complete the turnaround and ensure that the change would be lasting. Thanks to a steady stream of improvements, the community is once again on track to recover its founding ideals. 

Since they purchased Eastchester Heights, Taconic and Clarion have invested over $35 million, renovating nearly half of the apartments, replacing stairwells in many common hallways, opening laundry rooms, converting boilers to natural gas, and refurbishing playgrounds and basketball courts. The company recently concluded a two-year, 200,000-square-foot roof and parapet replacement project. These improvements have made a difference, raising average occupancy over the last six years to 95.7 percent. 

When the time came to refinance their existing loan, Taconic and Clarion wanted to recoup their investment in the property, but also wanted a deal structure that would preserve options as they analyzed future plans for the community.

“Capital One understood our priorities, structured the loan accordingly, and streamlined the process,” said Charles Bendit, Co-Chief Executive Officer at Taconic.

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Choosing The Financing Option That Best Meets An Investor's Needs

26 February, 2016

The Challenge

MG Properties Group knows its way around the multifamily market. The San Diego-based real estate owner and operator has more than 12,000 units in its 52-property portfolio, located across Arizona, California, Nevada, and Washington. Ten of these properties, totaling more than 2,600 units, are in the Inland Empire of Southern California. Acquiring Ontario Town Square Townhomes, a 140-unit luxury apartment complex in Ontario, California, thirty-five miles east of downtown Los Angeles, was an opportunistic investment in a market the company knows well.

The original developer built the townhouses to sell as condominiums, but demand was weak when they appeared on the market in 2009. The developer then tried to operate them as rentals, but struggled to make ends meet.

The recent seller, Artemis Real Estate Partners, purchased the note on the property in late 2014 and took possession in March 2015 in lieu of foreclosure. Artemis brought in a new management company that subsequently raised rents closer to market levels, but the property needed additional management repositioning work to reach its potential. MG is typically a long term, fixed-rate agency borrower, but because of its recent distressed ownership and management turnover history, Ontario Town Square was not quite ready for agency financing.

“We believe we will see additional upside in revenue through a proper ownership-management plan,” said Paul Kaseburg, MG Property Vice President of Acquisitions. But MG needed the right financing to put this plan in place.

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Earning Repeat Customers

24 September 2015

The Challenge

In 2011, Capital One Multifamily Finance found an innovative way to help Commonwealth Partners refinance Christiana Meadows, a 648-unit garden-style apartment complex in Bear, Delaware. Commonwealth needed to refinance $26 million of existing debt, consisting of $22 million low-floater bonds issued by the Delaware Economic Development Authority, plus a floating rate second mortgage of $4.4 million.

However, Commonwealth was depending on the net cash flow made possible by these low-interest bonds to fund an ongoing unit-upgrade program. The trust assumed that its only options were to sacrifice net cash flow and lock in a fixed-rate loan or turn to a new LIBOR-based floating rate mortgage in hopes that rates would remain low. Neither option was very appealing.

Capital One presented Commonwealth with a third alternative—a Fannie Mae structured adjustable rate mortgage (ARM). The Fannie Mae structured ARM has one of the lowest initial pay rates of any floating-rate instrument available on the market. To enhance the amount of net cash flow generated by the property, Capital One provided the borrower with four years of interest-only payments on the 10-year loan.

Four years later, with the interest-only period about to expire, Commonwealth was once again on the market to refinance. Its unit-upgrade program allowed it to raise rents, increasing its NOI and the value of the property. Refinancing would also give it the opportunity to recoup some of this investment.

Commonwealth would give Capital One a look at the deal, but business is business. Financing would go to the lender who offered the best terms.

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WHAT THEY SAY ABOUT US

“Moving quickly and decisively is imperative. Capital One took the transaction from term sheet to close in under 30 days, allowing us to acquire a well-located, value-add property that fits our strategy perfectly.”

Kevin Kaberna, Senior Managing Director of Investments at Greystar

US TREASURY RATES

MATURITY

5 Yr Bond

YIELD

1.91%
CHANGE

-4.17%
7 Yr Bond 2.20% -4.04%
10 Yr Bond 2.38% -4.12%
30 Yr Bond 2.99% -3.26%
Rates as of: 3/27/2017 12:00:00 PM 

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