MWest Opts for Bridge Loan Despite Rising Rates

LOS ANGELES—MWest Holdings has secured a $52 million bridge loan for the purchase of the Emerald Terrace, a 302-unit apartment community located between Koreatown and Silverlake. In an earlier story, GlobeSt.com reported that MWest purchased the property for $66.5 million and plans to renovate and reposition it. MWest secured the funding through Mesa West. This is the investor's first transaction with the debt fund.

"Originally they were cautious about rates moving up, and they wanted to look at a max leverage fixed-rate deal," Jake Roberts, of IPA Capital Markets, a division of Marcus and Millichap, tells GlobeSt.com. "When we started to look at it, we realized that they were not going to get the proceeds because the rents weren't there based on how the current operator ran the building. With all of the repositioning that they are going to do, they are going to be pushing rents a lot, so we suggested that we go the bridge route. You are seeing rents push up already in that market, and they knew that they were going to be able to do the work quickly and achieve those rents in short order. That ended up really fitting best for them." Roberts secured the funds on behalf of the investors along with his colleague Anita Paryani.

Mesa West gave the best leverage and understood the deal, which is located in a vague area between Silverlake and Koreatown. The banks weren't aggressive enough on pricing to meet the investor's needs. "We went out to the bridge and value-add lenders," says Roberts. "Most of the banks that were really cheap, meaning LIBOR+ 200 pricing, were maxing around $44 million. They just weren't able to get aggressive enough."

Even though the market wasn't in a prime Koreatown location, lenders were still really interested in the deal. The success of the newly renovated Chadwick property from Kennedy Wilson across the street also helped to fuel interest. "The overall interest was high from the more local debt funds that get the market," adds Roberts. "The national groups didn't get it as much. It wasn't quite Koreatown and it wasn't quite Silverlake, and if you look at just the REIT reports, they aren't quite as bullish in that neighborhood. This was a unique asset of being comp'ed well by the asset across the street. So, the local and more regional debt funds really got it, and there was strong activity from three or four of those debt funds as well as a few banks that are more aggressive and pension funds."