3650 REIT Originates $103 Million Multifamily Portfolio Mezzanine Loan

In a tough market for refinancing, 3650 REIT announced that it had originated a $103 million mezzanine loan for a multifamily portfolio of 12 assets with more than 3,500 apartment units and 3.7 million rentable square feet. The properties span four states: Louisiana, South Carolina, Georgia, and Tennessee.

The units include a mix of one-, two-, and three-bedroom apartments with an average size of 1,200 square feet. “Interior units feature modern finishes, high-end appliances and high ceilings with crown moldings, private balconies/patios, in-unit washer/dryers, walk-in closets and soaking tubs,” the company said. “Nearly one third of the units have been recently renovated with continuing interior renovations underway.”

The firm said it got the deal because of its ability to provide creative financing that supported the tax structuring requirements of existing partners and complied with existing senior lenders loan requirements.”

“The loan, originated from 3650’s Bridge and Event Driven (BED) lending platform, carries an initial term of 24 months and is provided to a joint venture between sponsors David Werner Investments and Onyx Partners, a real estate investment firm led by Jeremy Rieder, and Carlton Associates,” the company said in a press release.

“We are thrilled to complete another transaction for repeat borrowers with whom we have strong relationships,” the release quoted Jonathan Roth, co-founder and managing partner of 3650 REIT, as saying. “[We] believe the properties comprising the Southern Residential Portfolio will keep seeing great success. We built 3650 REIT for the type of moment facing today’s challenging market, and we continue to see a multitude of strategic opportunities to work with sophisticated sponsors investing in well-located assets across the U.S. This mezzanine financing is one such opportunity and will enable the sponsors to achieve their desired financing goals by recapitalizing the existing equity structure of the diversified and historically well-occupied portfolio.”

The story is news not just because it’s a large mezzanine deal but because refinancing is getting progressively more difficult. Rates have climbed and are likely to do so again, not because the Federal Reserve has hiked its benchmark rate but because the delay in resolution of the debt ceiling crisis means the Treasury will issue an unusually large amount of bonds at once. The action is expected to pull liquidity out of the financing system and drive Treasury bond yields up. Bank of America estimates having estimated that the action will have the effect of a quarter point rate hike.