Appetite Strong for Workforce Housing

DOWNEY, CA—Several lenders competed to fund an $18.8 million loan for the Bascom Group's purchase of a 112-unit apartment complex. In a recent story, GlobeSt.com reported that the investor purchased the property for $25.5 million and plans to invest additional capital to renovate the building. The competition from lenders for the asset shows that there is strong interest in funding workforce housing and value-add opportunities, especially in markets with low vacancy rates, like Downey.

“We had multiple lenders competing to win this business due to the strength of this location, with near 100% occupancy in the Downey market, value-add opportunity, and strong Bascom sponsorship,” Annie Rice of CBRE's Beverly Hills office, tells GlobeSt.com. “Interest from both the debt and equity providers in this deal signals that the appetite for workforce housing is strong and will continue to increase in the future.” Rice secured the funds on behalf of the borrower, along with her CBRE colleague Brian Eisendrath.

The team secured an $18.8 million loan at a sub 2.5% starting interest rate. The floating rate loan is 65% of the total costs and 74.5% of the total value of the property. “With no debt yield tests for the first three years, Bascom has the flexibility to spend their planned renovation dollars and properly execute their business plan,” says Rice. “Additionally, the low interest rate of 225 over LIBOR will allow them to maximize their cash on cash returns to investors.” The lender was not disclosed, but the CBRE team says that they chose the particular lender because of their speediness and aggressive floating rate loan.

The property is nearly 100% occupied, and is located near major employment and entertainment centers with easy access from the 105, 710, 605, and 5 freeways.