LOS ANGELES-Federal Reserve chairman Ben Bernanke's remarks last week indicating an end to economic stimulation via bond purchases and a potential rise of interest rates are already having an impact in Southern California.

Michael Elmore, EVP and managing director of NorthMarq's Los Angeles regional office, tells GlobeSt.com that a mobile home park deal that locked rates on June 19 has since gone up 42 basis points. “On top of that spread, the all-in coupon, in probably less than a week, has gone up 50 basis points," he says. "Half of that has occurred in the last four or five business days."

Elmore says the Fed effect may “shock escrows and slow down the purchase market. You can't increase the cost of capital by 1% and, in a short period of time, say it won't affect the business. It has to.”

While those with maturing loans will still refinance, “the discretionary refinance guy will pull back and, on purchases and sales, that can have a radical effect,” Elmore says. Lenders have also gotten the message, he adds. On one deal that's now in escrow, “the loan amount has dropped 10% in the last three weeks.”

Before the recent Fed indications, NorthMarq arranged combined first mortgage refinancing of $29.5 million for two market-rate multifamily properties in Los Angeles County. The two properties contain a combined 255 units. The Courtyards Apartments, located at 12401 Studebaker Rd. in Norwalk, contains 153 units and was refinanced at $18.5 million. Northwind & Tres Palms Apartments, at 16227 Eucalyptus Ave. in Bellflower, contains 102 units and was refinanced at $11 million.

Financing for both transactions was based on a 15-year term and a 30-year amortization schedule. NorthMarq arranged this financing for the borrower, Advanced Real Estate Services, through its relationship with an undisclosed national bank.

“These transactions provided significant cashout on a five-year fixed-rate loan with a five-year floating rate tail and scheduled prepayment,” Elmore says. “The lender was willing to return substantial capital to the borrower while accommodating mezzanine financing on Northwind & Tres Palms and providing a leasehold loan on the Courtyards.” He adds that the deals were the third and fourth done with the bank for this client.

The common attribute was the properties still had some upside in them. “The Courtyard Apartments had rehabbed 80% of the units,” Elmore says. “They wanted something that gave interest-rate protection for five years. The current loan balance allows them time to finish the rehab and refinance it out.”

The Chase Palms strategy was focused on the short-term, Elmore says. “Over the next five years, they'll continue to move rents up and refinance all the debt out," he notes. "They got some fixed-rate protection, can finish their business plan and refinance or sell.”

As previously reported by GlobeSt.com, the Los Angeles regional office of NorthMarq refinanced two multifamily properties last month for north of $40 million.