William E. Cave, vice president of PW Funding Inc.'s Dallas office, set up a 10-year loan at an interest rate of nearly 6.1% for the financing, which retired acquisition debt, rehab funding and covered closing costs for Northcrest/Shadywood Partners LP, which has principals in both Dallas and Fort Worth. Cave tells GlobeSt.com that the borrowers retired a loan of about $10.6 million, with a 7% interest rate, and a $675,000 mezzanine component, with a 12% rate, floated in June 2000 with bridge lender, Fremont Investment & Loan Co. of California. The Fremont loan was used to buy the 208-unit Gardens of Josey Lane at 1937 N. Josey Lane in Carrollton and the 150-unit Gardens of Bedford Apartments at 1948 Shady Brook Dr. in Bedford.
Once affordable housing properties, the 1970s-era assets shucked the label in time for the current owner to acquire, renovate and collect market rents for a double repositioning, according to Cave. The Bedford asset is now 90% occupied and Josey Lane, 92%. The 17-building Bedford complex, positioned on nine acres, has monthly rents of $571 to $784 for one-, two- and three-bedroom units ranging from 670 sf to 1,100 sf. Situated on 14 acres, the 25-building Josey Lane Apartments' mix of one- to three-bedrooms range from 680 sf to 1,035 sf and has monthly rents of $654 to $853.
The Josey Lane property, Cave says, is the heavyweight earner with an NOI that made the deal come together. The upshot is one loan with two mortgages that "move as one" along with a provision to sever in the event of a sale, Cave explains.
PW Funding, in packaging the loan with a 30-year amortization, had to get a special waiver from the Fannie Mae DUS program to marry extra NOI from the Josey Lane property to the Bedford complex so the deal could close, says Cave, who devised the single financing package for the contrasting properties. But, once the loan commitment was made, the final papers were inked 24 hours later. "Everyone was focused and working in concert," he explains of a quick settlement for a borrower racing to beat the clock before interest rates changed.
"We were confident with Dallas-area assets because they are well located, infill neighborhoods and in places where there's very little multifamily competition," Cave says. "That's why in a soft market, we were comfortable with the transaction.
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