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Real Money: DC, San Diego, Seattle Apartments Head Newest Freddie Mac CMBS

Also This Week: SBA Expands Opportunities to Refi CRE Loans and New Finance Raisings
October 19, 2011
Freddie Mac is going to market with a new multifamily mortgage-backed securities offering. The company expects to offer approximately $1 billion in K Certificates (K-015) that are expected to price by Oct. 24.

The K-015 certificates will be offered to the market by a syndicate of dealers led by Wells Fargo Securities and Merrill Lynch, Pierce, Fenner & Smith as co-lead managers and joint bookrunners.

The K-015 certificates are backed by 91 recently originated multifamily mortgages and are guaranteed by Freddie Mac.

The three largest loans in the pool are as follows.
$101.67 million on West End 25, a 283-unit complex in Washington, DC;
$45 million on the La Terraza Apartments, a 402-unit complex in San Diego; and
$41.2 million on Creekside Village, 512-unit complex in Mountainlake Terrace, WA.

This is the tenth K certificate offering this year.

SBA Expands Opportunities to Refi CRE Loans

The U.S. Small Business Administration has revamped its (SBA) 504 loan program to refinance existing real estate debt after relaxing the regulations on loan qualifications.

The revamped refinance program will allow many thousands more small businesses to take advantage of long term, fixed-rate loans to refinance maturing real estate debt. Recent interest rates - including fees - were as low as 5.05% for SBA 504 refinance loans last month.

Certified Development Companies, or CDCs, are the SBA's conduit for providing 504 loans and will be the point of contact for obtaining a refinance loan for existing real estate debt. These refinance loans are structured like traditional 504 loans. Typically, a bank or third-party lender provides at least 50% of the project cost, the SBA - through a CDC - provides up to 40% of the project cost and the small business borrower must provide equity of at least 10%. This equity may be drawn from the existing asset equity, rather than new cash injection.

A major change in the regulations enables a small business to refinance not only existing debt but, more importantly, use excess equity to obtain working capital that can be used for financing of eligible business expenses. Borrowers will be able to refinance up to 90% of the current appraised property value.

The SBA received extensive feedback from the 504 industry, banks and small businesses on a number of issues with their initial regulations over the past six months. They also noted the low volume of refinance loans that have been processed since the program's inception last February and decided to revise a number of restrictions that were part of their initial regulations.

The revamped program is set to expire on Sept. 27, 2012.

Real Money

General Growth Properties

in Chicago refinanced four shopping malls representing $966 million of new mortgages. These four new fixed-rate mortgages have a weighted average term of 9.1 years and a weighted average interest rate of 4.63%, as compared to the 5.66% rate on the prior maturing loans. The four newly refinanced malls have the following terms.
* Natick Mall (Natick, MA-Boston): $450 million at 4.60% due 2019;
* Galleria at Tyler (Riverside, CA-Los Angeles): $200 million at 5.05% due 2023;
* First Colony Mall (Sugar Land, TX-Houston): $185 million at 4.50% due 2019; and
* Northbrook Court (Northbrook, IL-Chicago): $131 million at 4.25% due 2021.

Chesapeake Lodging Trust

in Annapolis, MD, amended its credit agreement providing for a three-year secured revolving credit facility with a syndicate of banks led by Wells Fargo Bank, JPMorgan Chase Bank and Deutsche Bank Securities. The amended credit agreement increases the maximum amounts from $150 million up to $300 million. The interest rate was reduced to LIBOR, plus 2.75% - 3.75% as compared to LIBOR, plus 3.75%.

Senior Housing Properties Trust

in Newton, MA, raised $193.2 million through the sale of common stock. SNH expects to use the proceeds to repay debt.

Advanced Real Estate Services

closed first mortgage financing of $178.1 million for eight apartment properties in Southern California. The properties contain a combined total of 1,753 multifamily units. NorthMarq arranged the financings through its seller-servicer relationship with Freddie Mac. Terms were based on the following.
* Lakewood Manor - 4907-1/4 Hayter, Lakewood, CA - Financed at $64.4 million 565 units; 7-year term; 30-year amortization schedule - 3.82% rate.
* Beachwood Apartments - 2970 W. Orange, Anaheim, CA - Financed at $30.1 million 301 units; 10-year term; 30-year amortization schedule - 4.37% rate.
* Somerset Apartments - 336 N. Garfield Ave., Montebello, CA - Financed at $28.5 million 256 units; 7-year term; 30-year amortization schedule - 3.86% rate.
* California Palms - 901 S. Harbor Blvd., Santa Ana, CA - Financed at $13,.3 million 190 units; 10-year term; 30-year amortization schedule - 3.95% rate.
* Sundial Apartments - 2701 W. Ball Road, Anaheim, CA - Financed at $11.9 million 106 units; 10-year term; 30-year amortization schedule - 3.95% rate.
* Crestwood Apartments - 21011 Osterman Road, Lake Forest, CA - Financed at $12 million 76 units; 10-year term; 30-year amortization schedule - 4.21% rate.
* Countrywood Apartments - 1255 E. Citrus Ave., Redlands, CA - Financed at $10.9 million 161 units; 10-year term; 30-year amortization schedule - 4.35% rate.
* Summerwood Apartments - 600 N. Harbor Blvd., LaHabra, CA - Financed at $7.02 million 98 units; 10-year term; 30-year amortization schedule - 4.35% rate.

Sabal Financial Group

in Newport Beach, CA, acquired a $153 million loan portfolio from a major Midwest retail bank. The portfolio includes more than 100 loans, both performing and non-performing, and is primarily secured by retail, office and industrial properties and land. The portfolio includes a number of distressed loans in Illinois, Wisconsin, Arizona and Florida.

Summit Hotel Properties

in Sioux Falls, SD, and ING Investment Management agreed to a non-binding term sheet to refinance and consolidate all four of the company's outstanding loans with ING. As of June 30, 2011, collectively the loans had an outstanding principal balance of $71 million. They are secured by 16 hotel properties and bore interest at a weighted-average rate of 5.97%. The new loan is a single 7-year term with a principal balance of $67.5 million, amortized over 20 years and bearing an annual interest rate of 6.1%.

Ashford Hospitality Trust Inc.

in Dallas is selling $30 million of preferred stock with the proceeds to be used for general corporate purposes.

AmREIT Monthly Income & Growth Fund III

entered into a $12.8 million secured term loan with U.S. Bank to refinance a $13.4 million mortgage on the 6.7-acre Lantern Lane Shopping Center in Houston that matured in September 2011. The new loan will mature on April 7, 2013, unless AmREIT chooses to extend the maturity date by 12 months. Interest is payable monthly at a rate per year of 3% plus the one-month LIBOR rate.

NorthStar Real Estate Income Trust

in New York originated a $9.5 million senior mortgage loan for the refinancing of Ranch Lake Plaza, an 85,000-square-foot, grocery-anchored retail center in the Bradenton submarket of Tampa, FL. The loan has a minimum interest rate of 8.25%, a 36-month term, with two one-year extension options available. The current occupancy at the plaza is 96%, its loan-to-value ratio is 76% and its current net operating income is $1.1 million.

Resource Real Estate Opportunity REIT

in Philadelphia agreed to purchase a non-performing promissory note secured by a mortgage on a student housing community from MSCI 2006-HQ10 Fletcher Avenue LLC. The contract purchase price is $8.3 million. The note was originated in June 2006 in the original amount of $10.5 million, which remains the outstanding balance. The borrower, ING US Students No. 14 LLC, is in default for failure to make payments since November 2009. The note is secured by Campus Club Apartments, a 256-bed student housing community in Tampa, FL, that services the University of South Florida.

Cassidy Turley BRE Commercial

arranged a $6 million loan for a 109,807-square-foot industrial building is at 2495 Faraday Ave. in Carlsbad, CA, leased to Federal Express. The bank lender provided a non-recourse, cash-out refinance with a 30-year amortization. The interest rate on the loan is fixed for seven years at 4.76%.

Tweet me @mheschmeyer with your comment or news.

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