Portrait of a Solid Financial Package

ROCKVILLE, MD-Jones Lang LaSalle closed a financing package this summer for an acquisition of a multifamily property from a special servicer. The transaction, for $27 million, was a winner for both lender and borrower--not always a foregone conclusion even in the Washington, DC market.

The property in question is the 127-unit Morgan Apartments, off of Montrose Rd. in North Bethesda. Capital One, N.A. provided the loan to the new owner, The Meridian Group.

JLL's Wesley Boatwright along with Mike Yavinsky, Jon Goldstein and Shawn McDonald led the team on this transaction.

The apartments were originally part of a 132-unit condominium development, of which 127 were converted to apartments in 2008. The property went into special servicing not because of the fundamentals of the deal, but because the equity partner in the project, which was providing 90% of the financing, went bankrupt, Boatwright tells GlobeSt.com.

The buyer's plan is to do some minor renovations to the property, push out rents and then sell in five years, taking advantage of the construction that will have delivered in the interim, such as Federal Realty's Pike and Rose project and the ongoing development at White Flint.

That is the story they took to lenders and, after some intense competition, this is what Meridian Group secured:

• 70% of the stabilized value of the property upfront, priced at 140 basis points over Libor;

• A straightforward five-year term, as opposed to a three-year deal and one-year extensions;

• Flexibility on the hedging. A lot of lenders now want to hedge interest rates on floating rate deals these days, says Boatwright. "They may not require a hedge for the first couple of years but they usually put the hedge on at the back end—a forward price hedge in which the hedge kicks in later on."