Class B Apartment Acquisition – Phoenix, AZ

• Capital Source: Bank
• Purpose of Loan: Acquisition
• Loan Amount: $4,690,000
• LTV: 70%
• Rate: 3.8%
• Term: 10 Years
• Amortization: 30 Years
• Prepayment: Stepdown
• Recourse: Non-Recourse

Transaction Details:
Tower Capital recently arranged financing for a mid-century modern, 34-unit, low-rise, multifamily community located in the Arcadia/Camelback submarket of Phoenix, AZ. Built in 1964 and constructed of block with concrete slab sub-floors, the property features a pool, shade-cabana, and BBQ grills.

In 2017 the seller completed a significant rehabilitation and rebranding of the property with major interior and exterior renovations. The one-bedroom (some with lofts) and two-bedroom units have full-size upgraded stainless-steel appliances, subway tile backsplashes, modern LED track lighting, 5” baseboards, new countertops and cabinets, in-unit washer/dryer, and upgraded bathroom finishes.

The bank loan was structured as a 5/5 hybrid, with the first 5 years of the loan term being fixed at 3.8% and the second 5 years being fixed at a rate no greater than 4.3%. A stepdown prepay during only the fist five years of the term provides flexibility should the borrower wish to sell the asset midway through the loan term.

The challenge with this transaction was the fact that the borrower was a Chinese national living in China with no experience owning or operating commercial real estate properties of any kind in the Phoenix market, or in all of Arizona. Furthermore, onset of the coronavirus pandemic at the beginning stages of the transaction added tremendous logistical hurdles. Given Tower’s deep relationship and credibility with the lender, Tower was able to get the bank comfortable with the sponsorship by leaning on the borrower’s strong balance sheet and touting their use of reputable, local property management.

Furthermore, through an exceedingly proactive approach and process, Tower Capital’s team had a plan A, B, and C in place in order to make sure all timelines were met and the loan closed with the terms that were promised.