ST. PAUL—In mid-July, GlobeSt.com wrote about how the increase in US interest rates had altered the world of mortgage refinance in the Twin Cities, pushing up activity in the multi-family market. Ken Dayton, managing director at St. Paul-based Oak Grove Capital, said that “when interest rates move 100 to 125 bps it sets off kind of a shockwave.”

“It's still very active,” he now says. The national lender recently originated 11 loans totaling $89.5 million for affordable, market rate, and seniors housing facilities across the United States. The deals, which range from $15.2 million to $3.85 million, all closed between July 16, 2013 and August 6, 2013. In addition, between June 13 and July 1, 2013, the firm originated $80.3 million in financing for six affordable and market-rate multifamily housing developments in Minnesota.

“We are seeing more competition from banks,” Dayton adds. “The banks haven't moved their rates as much as the agencies.”

He expects the heightened activity in the refinancing world will continue at least until the end of the year.

Other changes are afoot in the Twin Cities' multifamily market. “There are a fairly large number of properties on sale,” he says. This includes properties that will just change hands and the thousands of units under construction and nearly ready for delivery. Dayton says there are about 7,300 units under construction and about 13,000 units in the planning stages.

“Vacancy rates are at historically low levels,” and the overall health of the market is bringing in more financing. Many of the recent buyers have been able to get funds for rehab work and the preservation of affordable housing such as project-based Section 8. “There's a lot of new equity coming in.”

Three of the recent deals Oak Grove completed were in the Midwest and totaled $13.4 million:

Hidden Ponds in Apple Valley, MN, received a $4.4 million HUD GNMA 223 (f) loan. This 84-unit, mixed-income property provides affordable housing and this loan helps the owner “lower the annual debt services payment,” Dayton says.
Baypoint Estates Apartments in Duluth, MN, is a 76-unit market-rate property and got a $4.1 million Fannie Mae MBS loan. Dayton facilitated the loans for Baypoint and Hidden Ponds.
Woodbrook Apartments in Indianapolis is a 196-unit property and received a $4.9 million Freddie Mac CME Fixed Rate loan facilitated by Tim Leonhard, the managing director of affordable housing at Oak Grove.

Instant Insights /

Refi Wave Continues in Minnesota

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