Life Companies, Banks Vie for Mega Million Portfolio
A quality ownership structure led to a financing process that attracted a variety of domestic and foreign capital providers, including PGIM which ultimately won out with aggressive terms and rent control knowledge.
SAN FRANCISCO—An approximately $300 million refinancing package has been recently arranged on behalf of Trinity Properties, secured by eight multifamily communities throughout San Francisco totaling 1,154 units. The recapitalization is replacing debt that was previously originated between 2012 and 2013.
The communities include such landmark assets as 2000 Broadway in Pacific Heights, 350 Union atop Russian Hill with unobstructed views of the Bay and Golden Gate Bridge, and Trinity Place II, the second phase of Trinity’s 1,900-unit Mid-Market development. The portfolio is nearly 98% leased and was built between 1955 and 2013. The communities have 24-hour front-door security, bicycle storage and resident lounges.
Newmark Knight Frank’s Ramsey Daya, Jonathan Soffer, Chris Moritz and Travis Bailey represented the borrower in the financing efforts. PGIM Real Estate Finance provided the financing.
“Trinity’s institutional ownership and top-notch management led to a financing process that attracted a variety of domestic and foreign capital providers,” said Daya, vice chair/head of the debt and structured finance team for NKF in Northern California and Pacific Northwest. “PGIM separated itself from the pack with aggressive terms and a keen understanding of San Francisco’s unique rent control environment and Trinity’s ongoing business plan.”
National multifamily housing debt outstanding rose to $1.3 trillion in the second quarter, up 1.5% quarter-over-quarter. GSE lenders account for 48.2% of all multifamily housing debt outstanding and grew outstanding debt to $616.9 billion, representing 14.3% year-over-year growth, according to a Newmark Knight Frank report.
“We had several life companies and banks aggressively vying for this financing and we were able to execute another large core financing deal at terms that exceeded our client’s expectations,” Daya tells GlobeSt.com. “With this transaction, our Northern California debt and structured finance team has now closed over $2 billion year-to-date 2018 and is on track to close approximately $3 billion by year-end.”
As Daya indicated, financing and acquisitions by international capital sources is increasing. In the second quarter, acquisitions increased 51.1% year-over-year on the heels of several large-scale portfolio and entity-level transactions involving groups from Canada, the Netherlands and Singapore.
New supply for the past 12 months nationally totaled 367,765 units, while 341,876 units have been absorbed. Inventory growth and vacancies remained flat. Of the new supply delivered during the past four quarters, the top metros have accounted for nearly 40% of all deliveries, according to a second quarter report by Newmark Knight Frank.
The 12-month total sales volume accelerated to $158.9 billion, translating to a 7.7% annual growth, while second-quarter investment sales volume totaled $34.5 billion, decreasing 6.9% compared with second quarter 2017.
Yields contracted 10 basis points year-over-year to 5.4% nationally. At the same time, secondary and tertiary markets experienced 20-basis-point contractions year-over-year, partly because of intense competition among investors continuing to chase yield.