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[IMGCAP(1)]LOS ANGELES-The owner of a 694-unit portfolio of six apartment properties in Los Angeles and Orange counties has refinanced the complexes with a five-year non-recourse loan that features a $33 million cash-out, according to Meridian Capital Group, which arranged the financing. Managing director Alex Katz of the Los Angeles office of New York City-based Meridian tells GlobeSt.com that the new financing, which is with a balance sheet lender, is interest-only for the first two years, carries a fixed interest rate of 4.88% and includes an option to extend for five years.

[IMGCAP(2)]Katz, who negotiated the deal, notes that the loan was rate-locked at application for 90 days and closed “well within that time frame.” The borrower was Los Angeles-based Century Quality Management, which is a long-time owner of the six properties, where occupancies average in excess of 90%.

Cash-out loans are “extremely uncommon” in today’s market, especially a cash-out of this size that is accompanied by a partial interest-only period, Katz points out. He says that what made the lender comfortable with the deal was a combination of the borrower’s qualifications and the quality of the apartment complexes, which Katz describes as stabilized assets in good locations. The properties include two in Torrance, two in Reseda and one each in Long Beach and Covina.

Borrowers’ qualifications have become much more important in today’s lending environment than they were when the market was hot, Katz points out. In the case of Century Quality Management, he says, the company is a long-term owner that has invested substantially in maintaining and upgrading the properties, has an extensive in-house management and leasing operation and has an extensive track record in the business.

Katz notes that lenders typically looked mainly at properties when making lending decisions before the downturn and the stagnation of the credit markets. Now, however, lenders consider a combination of sponsorship and asset quality.

Agency lenders like Fannie Mae and Freddie Mac “are extremely sensitive to the whole concept of cashing out,” Katz adds, which makes the Quality Management cash-out even more unusual. The borrower’s primary objective in the refinancing was to take cash out to be prepared for investment opportunities that may arise, he says. Katz says the deal demonstrates that “we are beginning to see some level of thawing in the capital markets.”

The six properties are the 174-unit Americana and Il Pompeii Apartments at 3635-3655 W. Artesia Blvd. and the 130-unit Mountain View Apartments at 1844 Plaza Del Amo, both in Torrance; the 105-unit Claire Woods complex at 4801 Claire Ave. in Long Beach; the 104-unit Casa del Lago at 716 E Workman St. in Covina; and the 93-unit Villa Sorrento and 88-unit Royal Villa at 7947 and 8040 Reseda Blvd., both in Reseda.

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