Insurance, agency lenders anchor $261m of California multifamily refinancings

Northmarq has arranged and facilitated recapitalizations for four assets across the state over the course of a week.

Irvine, California-based multifamily investor Advanced Real Estate and San Mateo, California-based apartment investor Prometheus Real Estate Group found themselves tapping into private and agency credit to separately recapitalize a pair of assets each this week, Real Estate Capital USA can first report.

On September 29, Bloomington, Minnesota-based capital markets specialist Northmarq arranged a $142 million refinancing for two of Advanced’s multifamily assets and a $119 million refinancing for two of Prometheus’s multifamily assets. The financings come as multifamily sponsors and owners are seeking new, non-bank capital sources to refinance their assets and tackle segments of the looming $1.5 trillion commercial real estate debt maturity wall on the horizon.

Advanced’s $142 million permanent fixed-rate refinancing package was originated by Northmarq through its Optigo status as a Freddie Mac lender. The cash-out refinance was structured on 10-year interest only term.

The Advanced deal will recapitalize two Southern California multifamily properties, including the 562-unit Villa Del Sol in Santa Ana, California and 142-unit Yorba Linda Pines in Yorba Linda, California.

Advanced acquired the properties in 1994 and 2003 respectively and has invested in property and operational upgrades since taking ownership of the assets. Fannie Mae was the previous lender for the Southern California properties.

“Advanced Real Estate’s stellar reputation and deep agency experience allowed us to create a competitive process in an otherwise difficult market,” said Alex Kane, senior vice-president of debt and equity at Northmarq. “Aggressive pricing coupled with a rate buy-down permitted us to achieve a large cash-out which will help to further grow Advanced’s portfolio with new acquisitions.”

Prometheus’ $119 million 10-year fixed rate refinancing package was originated by undisclosed life insurance company lenders. The loan terms include seven years of interest -only structuring built in and will recapitalize the Park Place South Apartments in Mountain View, California and Boardwalk Apartments in Santa Clara, California.

“The life companies were competitive on pricing and were able to beat out the agencies on loan proceeds, rate and interest only,” said Nathan Prouty, senior vice-president and managing director at Northmarq. “One of the life company executions allowed the sponsor to lock the rate immediately on a simple term sheet during extremely volatile times in the market.”

The pair of refinancing deals speak to the growing trend of using agency and private credit in place of more defensive bank lenders as sponsors seek fresh originations or recapitalizations for existing assets.

Andy Slaton, senior vice-president at Northmarq, said this was an interesting time in the market for financing, with a fair amount of price discovery, inconsistent lender feedback and volatility on both micro and macro levels.

“The attractive terms we were able to get were really a result of running a thorough marketing process, leveraging competitive feedback from across our national platform and proactively addressing and mitigating lender concerns around local market dynamics,” Slaton said. “Active, aggressive and creative lenders remain in the marketplace despite developing headwinds and discouraging headlines.”