Bethany Cuts Capital Costs Via $157M Loan

IRVINE, CA-Multifamily repositioning specialist the Bethany Group has lowered its capital costs and replaced floating rate debt on a portfolio of 2,904 units with a $156.5-million five-year, fixed-rate interest only loan from Norwalk, CT-based GE Real Estate. The deal, structured with a $130.5-million CMBS A-note and a $26-million mezzanine position, refinances 12 class B multifamily properties in Atlanta, Norfolk, VA and the Greensboro Winston/Salem area of North Carolina.

Linda Gorbenko, senior director at GE Real Estate, comments that the geographically diverse real estate markets represented in the portfolio "hold a lot of interest and opportunity for us, and we're pleased that we were able to retain the loan," which refinances a previous deal between GE and Bethany. GE Real Estate securitized the A-note and held the mezzanine piece on-book.

According to Greg Garmon, CEO of the Bethany Group, the properties are in improving markets and the company is on track with renovations to the buildings. The portfolio consists of garden style apartments in buildings ranging from one to three stories.

Since the Bethany Group acquired the portfolio in 2005, exterior renovations have been completed on approximately 95% of the properties and interior renovations have been completed on more than half. Gorbenko calls it "a solid portfolio with tremendous upside potential."

The deal builds on a lending relationship between GE Real Estate and the Bethany Group that includes a $159-million loan last year when the locally based company bought a portfolio of 2,873 apartment units in Florida, Texas and South Carolina from Aimco. The Bethany Group typically buys properties in B-grade or C-grade properties and brings them up to a higher grade via more efficient management and capital improvements, funding its business plan through both high-net-worth individuals and institutional investors.