Real Estate Transaction Alert

Newmark Knight Frank (“NKF”) announced it has closed a pair of structured transactions totaling $454 million for the refinance of seven assets on behalf of a private, San Francisco-based owner and Fannie Mae Priority Sponsor.

NKF’s Vice Chairman Mitch Clarfield and Managing Director Ryan Greer led the GSE effort, providing the sponsors with the ability to release or substitute individual assets and annual opportunities to borrow additional proceeds commensurate with improved property performance. 

The first transaction was a $69.3 million, 10-year, full-term interest-only advance to fund the addition of Callaway Apartments, located in Taylorsville, Utah, to a four-year-old Fannie Mae Credit Facility. The Facility is now comprised of five assets with 1,700 units and a balance of $240 million. Callaway is a 624-unit multifamily property with a strong mix of one- and two-bedroom floor plans. The sponsors used the proceeds to buy out a joint venture partner from a 2007 acquisition. 48 percent of the units met Fannie Mae’s affordable mission guidelines. The 73 percent loan-to-value advance priced in the 2.8 percent range.

In a second transaction, the NKF team funded a new $384.75 million Fannie Mae Credit Facility for the refinance of a six-property portfolio. The Fannie Mae execution was the winning bid in a highly competitive process involving several lenders with an interest in providing the requested financing. 

The new facility had a $130 million 10-year full term interest-only tranche and a $254.75 million 15-year tranche with 14 years of interest only at a 74 percent loan-to-value. The 10-year tranche had a coupon of less than 2.5 percent and the 15-year tranche was below 2.9 percent. This facility marked the 19th Fannie Mae Credit Facility that the team has funded.  

The six-property, 1,633-unit cross-collateralized portfolio includes four assets in Southern California, one in Northern California and one in Oregon. 

• Palisades at Sierra Del Oro is located in Corona, CA and includes 288 units, built in 2015. 
• Sierra Del Oro is located in Corona, CA and is comprised of 300 units, built in 1989. 
• Terra Nova, situated in Chula Vista, CA and includes 233 units, built in 1985. 
• Village Oaks in Chino Hills, CA totals 280 units, built in 1989. 
• Hawthorn Village is located in Napa, CA and includes 244 units, built in 2003. 
• Terrene at the Grove is located in Wilsonville, OR and includes 288 units, built in 2013. 

“NKF and Fannie Mae were able to navigate the market uncertainty to deliver an excellent execution,” said Clarfield. “By leveraging the sponsor’s expertise, resilient property performances and the inherent credit benefit of the crossed collateralization, NKF was able to offer higher proceeds and full-term interest-only at very low rates, along with the superior structure and flexibility of the facility.”

Greer added, “We have been doing business with this sponsor for over 15 years, and five years ago proved the relative benefits offered by the credit facility structure. Product confidence prompted the sponsor to start a second facility for a separate pool of capital almost immediately after the first facility was funded. The borrower has been extremely satisfied with the functionality and benefits of the existing credit facilities.”

“We’re pleased to deliver a top-notch loan to our sponsor, and this execution proves that despite the current challenges and unclear economic environment, it is possible to secure excellent financing at historically low rates,” Clarfield continued. “Best-in-class property operations allowed them to capitalize on current market conditions and secure extremely low-cost, flexible debt for years to come.”