Dekel Capital has arranged a $45.1 million loan for manager DB Capital via UBS for the acquisition of the Boulevard, a 296-unit apartment community that is about 20 minutes from the Las Vegas strip.
The Los Angeles-based advisory company came into the deal after a different lender was unable to provide bridge financing for the acquisition due to widespread market volatility, noted Shlomi Ronen, managing principal.
The situation is a common one in today’s market. Ronen has seen continued dislocation among bridge lenders, largely caused by a combination of the higher pricing that alternative lenders are seeking due to lack of liquidity from their warehouse lines through which they originate loans. Additionally, the pricing in the commercial real estate collateralized loan obligation market has increased significantly.
“Liquidity is available, but it is more expensive, and we are finding that certain banks are not as tied to the volatility that is going on in the market right now,” Ronen said. “We focused our efforts on sourcing the loan from a strong balance sheet lender that had lending capacity to not only fund this loan but as well fund future loans.”
Denver-based DB Capital had a couple of advantages going into the process of finding a new lender, Ronen said. The sponsor was interested in a lower-leverage loan for the property, which will be rebranded as Summit on Nellis after an extensive renovation. Additionally, the company is well capitalized.
“UBS, which has never been one of the most aggressive bridge lenders, was able to offer leverage that was adequate. DB Capital wasn’t looking for the last dollar of debt,” Ronen said. “We were also looking at pricing that was 200 to 300 basis points inside of what traditional debt fund bridge financing was being offered at.”
There was a final factor that weighed in DB Capital’s favor in getting the deal done. Las Vegas is a market in which both UBS and Dekel have significant expertise, with the lender funding a loan there earlier this year and the advisor arranging a number of loans there in recent years.
“Having done quite a bit of financing there over the years, we are attuned to the diversification of the market from an economic engine standpoint. A lot of people think the Las Vegas economy is just based on gambling and entertainment but that is not really the case,” Ronen said. “We have seen more major companies establishing back office operations in Las Vegas and it has become a strong distribution hub as well.”