Multifamily Finance — Project Spotlights

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

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.

The Solution

“This transaction illustrates the flexibility that Capital One set out to achieve when acquiring Beech Street Capital,” said Chuck Christensen, Senior Vice President in Capital One’s Newport Beach office. “We used our balance sheet for this deal, allowing MG Properties the time it needs to reposition the asset and then potentially refinance with an agency loan.”

Capital One structured the transaction to support this business plan. The three-year, adjustable-rate $22.8 million loan has 27 months of interest-only payments and is amortized thereafter on a 30-year schedule.  The loan has two optional one-year extensions, and may be pre-paid, in part or in whole, at any time during the loan term without penalty.

“We were very pleased with Capital One’s approach,” said Lane Jorgensen, MG Property Vice President of Investment Management.  “They invested the time to understand the potential of the property as we envisioned it and followed through on their commitment to structure the financing to meet our needs.”


WHAT THEY SAY ABOUT US

“We had a very short time-frame within which to secure financing for our acquisition. Capital One Multifamily assured us they could do it—and they delivered.”

Ronald Charvet, Senior Vice President for Asset Management at Lerner

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*Beech Street is now Capital One Multifamily Finance and our commitment to customer service is even stronger.

Capital One Multifamily Finance is distinguished by its ability to structure multifamily mortgages customized to the precise needs of its clients. We are a Fannie Mae DUS® lender, a Freddie Mac lender, and a FHA HUD lender. Plus, we offer balance sheet financing backed by the full strength of Capital One Commercial Banking. You can count on our team of multifamily mortgage makers to deliver apartment financing smoothly, quickly, and with certainty.