Project Spotlight

Maximizing Funds with Tailored Financing

31 March, 2014
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The Challenge

Sierra Village Apartments met Trion Properties investment criteria almost perfectly.  Trion, a private equity investment company, focuses on value-added and distressed commercial real estate assets with an emphasis on the multifamily sector.  It specializes in properties that require moderate-to-heavy rehabilitation on a 12-24 month investment horizon. 

The 185-unit Sierra Village Apartments, located in the Sacramento MSA, had languished since it had fallen into receivership in 2006.  In 2012, it was included as part of a large $180 million receivership sale in 2012, but it was almost immediately slated for resale.   Although the company that purchased it made some capital improvements to the property, it lacked the local market expertise to maximize the value of its expenditures or a strategy that would justify a more comprehensive renovation plan. 

Trion believed that with more involved day-to-day management, investment in interior and exterior renovations, and aggressive leasing, there would be significant upside value to the acquisition.

Further increasing its attraction to Trion is Sierra Village’s location in an attractive submarket—North Highlands—within an MSA that is on the cusp of better economic times.  Although the Sacramento MSA—the seat of California government—was hit hard by the recession, the state has weathered its budget crisis, and unemployment in the Sacramento MSA has declined 200 basis points over the last year.

To take advantage of this opportunity, though, Trion needed financing structure that would maximize the funds it could invest in the property and give it time to realize the value-added from its improvements. 

Delivering Cash Flow to Support Value Add Strategy

12 February, 2014
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The Challenge

SGI Partners, LLC., a Commercial Real Estate Investment company based out of Santa Ana, California, approached Beech Street Capital to finance the acquisition of The Villages at Lost Creek located in San Antonio, Texas.  A key priority for the borrower was to obtain financing that produced the highest amount of cash flow to enable them to upgrade the 260-unit complex and move it from a B- to A-class property through renovation. 

The borrower also faced some legal complexities to work through that had the potential to impact their timeline, including existing tax-exempt bonds and occupancy restrictions that would remain in place under a Land Use Restriction Agreements (LURA) until 2021. A late hour change in the borrowing structure right before closing also added to the challenge. 

Striking the Right Balance

31 October, 2013
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The Challenge

The U.S. Real Estate Investment Fund, which is managed by Boston based Intercontinental Real Estate Corporation, holds offices and apartments as well as industrial, retail, and mixed-use properties.  When the fund’s managers decided to add The Westheimer, a 244-unit luxury apartment in Houston, to their portfolio, they turned to Beech Street’s Brian’s Sykes, senior vice president based in its Boston office.

The fund’s managers had good reason for being confident that Sykes would come through for them.  Although new to the fund, Sykes had previously originated two deals with Peter Palandjian, chairman and CEO of Intercontinental and he understood their objectives perfectly.  “The borrowers wanted to strike a balance,” he says. “Their goal was to maintain a low overall leverage position for the fund, while maximizing the cash-on-cash yield for their investors.”   

A Parking Lot That Fell Through the Cracks

18 June, 2013
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The Challenge

For Allmark Properties, time was of the essence.  The firm recognized that the syndicated ownership structure of its partnership planning to purchase The Place at Park Timbers, a 230-unit complex in the Dallas suburbs, might slow things down.  But it hardly expected to discover that a section of one of the property’s parking lots wasn’t owned by the seller at all. With the rate on the 10-year Treasury steadily rising, they could foresee that the longer it took to resolve this issue, the higher the rate of interest they would pay.  

“It was definitely an odd situation,” recalls Chuck Christensen, senior vice president of originations at Beech Street’s Newport Beach, California, office.  “Neither the county nor the seller was aware that the parcel was not officially a part of the property collateral until the buyer’s survey was completed.”  When the seller acquired the property in 2010, the discrepancy went unnoticed—and since the county never sent it a separate tax bill, it assumed that everything was in order.

“We didn’t want to let the deal slip away,” notes Mike Krcelic, Allmark’s vice president. “It was a perfect fit for our portfolio.” Allmark owns more than 1,000 units in Texas, including a 260-unit complex located within a mile of The Place at Park Timbers.  “We decided to see if Beech Street could help us.”

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