Project Spotlight

The Challenge

The challenge facing the owners of Canyon Crossing, a 440-unit apartment complex on the west side of Lubbock, Texas, was synchronizing the financing of the complex’s two phases.  The loan on Phase I of 232 apartments was set to mature in February 2012.  The loan on Phase II in 2015.  In the best of all possible worlds, the solution would have been to consolidate the financing right now, but given the substantial prepayment penalty on the Phase II note, consolidation was hardly desirable.  Working through Meridian Capital Group, the borrowers approached Beech Street looking for an instrument with maximum prepayment flexibility.

“We had worked with Beech Street on a number of transactions starting in 2010, and we were impressed with their knowledge of the agencies,” said Harry Bookey, one of the principals.  “We felt confident that they would come up with a solution.”

The Challenge

What do you do with a borrower who wants the best of both worlds?  At Beech Street, we find a way to deliver!  That’s what Patrick Cadigan discovered when he approached Beech Street to refinance one of his apartment complexes. Exclusively represented by the real estate investment firm Greenwood & McKenzie, Cadigan had two objectives: refinancing his property at the best possible rate while postponing closing to the last possible minute to minimize his prepayment penalty.

The property, Amberway Apartments, is located in a residential neighborhood of Orange County, California.  Consisting of 272 units in 29 two-story buildings, the Amberway Apartments are well maintained.  Its studios, one-bedroom, and two-bedroom garden units are spacious and compare favorably to the competition. Common amenities include garage and covered parking, a fitness center, large courtyards, five 24-hour laundry facilities, a swimming pool and spa. The occupancy rate at the time of application was 97 percent.

The borrower desired a $30.0 million loan to refinance existing debt of $23.3 million.  The prepayment penalty represented a substantial portion of the difference.  Accordingly, he was in no hurry to refinance the loan, but he was worried that interest rates would rise if he delayed refinancing any longer. 

The Challenge

School House Trust, the owner of Christiana Meadows, a 648-unit garden-style apartment complex in Bear, Delaware, found itself in a difficult situation. It needed to refinance $26 million of existing debt, consisting of $22.0 million low-floater bonds issued by the Delaware Economic Development Authority, plus a floating rate second mortgage of $4.4 million. The problem was that it was depending on the net cash flow made possible by these bonds to fund an ongoing unit-upgrade program. The trust assumed that its only options were to sacrifice net cash flow and lock in a fixed-rate loan or turn to a new LIBOR-based floating rate mortgage in hopes that rates would remain low. Neither option was very appealing.

The Challenge

Time was getting uncomfortably tight for Mayfair Investors LLC.  The group faced a looming deadline to pay off a maturing loan on Mayfair Chateau Manor Apartments, a Class A apartment complex in an attractive Birmingham, Alabama, suburb.  They needed to refinance and to refinance quickly, so they turned to Beech Street Capital.  “We have worked with the team in Beech Street’s Birmingham office on several deals in the past,” said William Butler, executive vice present of Engel Realty and key principal for the deal.  “They’ve always come through for us.”