TruAmerica Multifamily last week lined up $300 million of agency financing to refinance bridge debt on a five-property multifamily portfolio that the Los Angeles-based manager acquired in 2021.
The firm believes the properties had substantial long-term potential and wanted to align the debt on the assets with that vision, said Bob Hart, founder, chief executive and president.
“Sometimes the best offense in real estate is a good defense. Securing additional term for these properties was accretive to the overall portfolio strategy,” Hart said. “We were able to take advantage of a little bit of a dip in the interest rate market, which made the timing make sense. We did some floating- and some fixed-rate debt, and we were able to add, on average, five years of term to these deals.”
The underlying portfolio is comprised of value-add properties of scale in primary markets. While the firm believed the in-place debt was attractive, there were several other factors at play.
“Our team’s ability to drive value resulted in strong operational performance of these assets. With our capital markets strategy, we obtained even more attractive financing for our portfolio, even in today’s environment,” Hart said.
Walker & Dunlop’s Russell Dey and Trevor Fase arranged the financing on the properties, which total 2,100 units and are located in Florida, Georgia, Arizona and Tennessee. The refinancing allowed the firm to extend maturity on what the firm believes is a significant portion of existing floating-rate debt, which mitigates risk in a downside scenario. It also provides for added flexibility for future exits or refinancings, Hart noted.
While the debt markets are more difficult to navigate than a year ago, there is debt available.
“Debt has always been available, be it bridge, through banks, debt funds or insurance companies. It is just a matter of more stringent requirements for DSCR or LTV,” Hart said. “Borrowers are not able to obtain as much leverage as when rates were lower and the market was more robust. For those who are aren’t as leveraged or where properties have gone up in value, there is plenty of financing out there.”
The firm, which is celebrating its 10th anniversary, is continuing to invest in the sector. The firm completed four recapitalizations in early 2023 totaling $332 million in value that preserved 1,500 units to its portfolio. The transactions were completed in Colorado, Florida and Utah, and support the company’s institutional investment thesis of uncovering and unlocking value with alternative investments.