Square Mile Capital Management this week originated $160 million in construction financing split across two loans for developments in the multifamily and industrial sectors – bringing its total construction lending originations so far in 2022 to more than $1.6 billion.
A $97.5 million construction loan – made to a joint venture between Chicago Illinois-based commercial real estate firm Glenstar and West Palm Beach, Florida-based Columnar Holdings – will finance a ground-up development of the Tri County 75 Industrial Campus in Fort Myers, Florida.
The other loan, a $61.8 million financing, was originated on behalf of Minneapolis-based real estate development firm Roers Companies and will be used to finance another ground-up development of Class A multifamily projects. The property at 375 West Whitney Avenue will comprise 264 units and is located in Salt Lake City, Utah.
Tom Burns, a principal at Square Mile Capital, said the $61.8 million Salt Lake City loan is a compelling opportunity to provide financing in a growing market. This is the firm’s first debt investment with Roers Companies, a relationship Square Mile hopes to expand.
“The market has experienced strong rent growth coupled with positive net absorption as the apartment sector has benefited from Utah’s business friendly policies,” said Burns. “Once delivered, we anticipate that the property will be well received by the market due to its proximity to major employers, expansive amenity package and location.”
Square Mile’s construction lending volume this year along with its two most recent originations indicate pockets of opportunity despite broader market volatility, which include rate hikes by the Federal Reserve and inflation woes.
Although the Federal Reserve in July increased interest rates by 75 basis points and inflation numbers continue to rise, active construction lenders specialists are seeing more stability, which allows them to more comfortably assess risk and move ahead with deals. A key indicator of this is the yield on the 10-year Treasury, which has been in a narrower range.
“Last month, inflation was up and the Federal Reserve increased interest rates again. But the 10-year Treasury actually dropped,” said Paul Rahimian, CEO of Los Angeles-based construction lender Parkview Financial, as reported by Real Estate Capital USA last month.
“That shows you the market now understands and accepts the Fed is going to increase rates to battle inflation but that doesn’t mean that rates need to spike as much they did during the past 90 to 120 days. We are getting to the point where things are stabilizing.”