Cornerstone REIT Secures $25M-Plus Refinance for Class A Asset

The Richmond, VA-based REIT is now holding a Freddie Mac adjustable-rate mortgage with a lifetime cap for the 396-unit Windsor Heights at Valley Ranch, a 19.4-acre complex developed in 1995 at 8001 N. MacArthur Blvd. in Irving. Cornerstone, acquiring the asset two years ago, has hiked occupancy from 86% to 92%, completed some cosmetic upgrades and raised rent about 5% to set up the property for a refinance, Michael Bryant, SVP in Dallas for the Horsham, PA-based GMAC Commercial Mortgage Corp., tells GlobeSt.com. He says GMACCM retired a bridge loan without penalty because it was picked to be the mortgage broker for the new deal.

Bryant says the loan also was shopped to life insurance companies, Fannie Mae and conduits. "Freddie won the beauty contest," he says about the capped ARM program. "It's one of the most innovative finance tools we've seen in 15 years."

Cornerstone's package has a 10-year term with a floating rate of 150 to 200 basis points over the 30-day Libor index. The sweet spot is the float is capped at about 6% for the loan's life, according to Bryant. The Freddie Mac package comes with an embedded rate cap without paying a visit to Wall Street to purchase extra protection from a sharp interest rate hike, he explains. Other provisions include a 1% prepayment penalty after 12 months, fully assumable financing and the option to convert to a fixed-rate mortgage whether it's Cornerstone or a prospective buyer should the REIT decide to sell before the loan is paid off, Bryant adds. The new deal represents an 80% loan-to-value and is about 50 basis points less than the bridge loan's interest rate.

Assessed at $28.9 million by Tarrant County, Windsor Heights is a mix of one-, two- and three-bedroom units ranging from 912 sf to 1,624 sf. Rents run from $975 to $1,624 per month. "They had executed their business plan," Bryant says, "and it was time for them to refinance on a longer term basis." GMACCM's SVP Don Marshal in the Richmond, VA office teamed with Bryant to arrange the permanent financing.