WASHINGTON, DC-Metropolitan area developers are receiving very favorable terms from lenders as they rush to refinance projects, according to Kevin H. Smith, president of ARK Realty Capital. He reports that the number of real estate projects seeking refinancing with ARK Realty Capital has doubled over the past year to comprise 30% of its business. The reason, clearly, has been the steady uptick of interest rate increases. "A lot of clients are interested in locking in rates long term," he tells GlobeSt.com. "We are very involved now in recapitalization as well as raising equity."
He says there are very favorable terms available in the marketplace for DC-area projects. These include very aggressive spreads for well-located, stabilized assets---110 to 120 basis points over 10-year Treasury. Lenders are also providing IO (Interest Only) periods for two to 10 years. "Lenders have conveyed to us that they want assets from the DC market in securitized pools," Smith says.
"It is a market with very strong fundamentals. As a result we constantly appear in the number one position year after year as a location where investors want to invest in commercial real estate."
Aside from its recapitalization activities, ARK Capital's pipeline of financial transactions remains strong, Smith adds. "One of our most exciting projects right now is an $80-million, 250,000-sf office building in Alexandria, VA, for which we are raising construction debt." Smith says the developer will announce details of the transaction in mid-September. Other transactions include a long-term ground lease with a financial institution, a Tysons Corner, VA office refinancing, several retail center refinancings and the sale of approximately 40 acres of developable land in Manassas, VA.
The company also arranged financing for the recently announced 260-unit condo building to be developed by Faison Enterprises at First and M Streets, SE. ARK arranged $73.7 million in non-recourse construction financing and $15.7 million in joint venture equity from Canyon-Johnson Urban Fund.
"To date this year we have closed on $300 million in transactions," Smith says. "We anticipate closing another $300 million to $400 million by the end of the year."
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