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Monday, 08 August 2016

Universe Holdings Gets Freddie Loan on Calif. Apartments; Resolves Modified CMBS Loan

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Commercial Real Estate Direct Staff Report

Universe Holdings has refinanced its Acacia Park apartment property in San Bernardino, Calif., paying off the property's previous securitized financing in full.

The Los Angeles multifamily specialist has owned the property, at 5280 North Little Mountain Drive, since 2003. Three years later, soon after a renovation was completed and cash flows were on the increase, Universe Holdings lined up what then was $31.5 million of mortgage debt that was securitized through Wachovia Bank Commercial Mortgage Trust, 2006-C27. The loan, which paid a 6.8 percent coupon, was written with the assumption that the property, which was appraised at a value of $37.5 million, would generate $2.5 million of net cash flow.

Problems started brewing in 2008, when economic conditions turned recessionary. Cash flow fell below breakeven when occupancy at the 304-unit property slipped to less than 90 percent and rents fell.

Universe Holdings then sought to modify the terms of its loan and in September 2010 reached an agreement with special servicer LNR Partners. It injected $2 million of fresh equity into the property, whose appraised value by then had fallen to $22.5 million, reducing the loan's principal. In return, the loan was split into a $20.5 million A-note and a $9 million B-, or hope, note. The A-note continued to accrue and pay interest at its original rate, while the B-note only accrued interest.

Like most A/B note modifications, the equity that was injected had a preferred return. In other words, in a liquidity event, either a sale or refinancing, any proceeds after the A-note and any interest owed on it were paid would go toward paying a yield to the equity, ahead of payments toward the B-note. Only after the equity reached a predetermined internal rate of return hurdle did the B-note receive any proceeds.

The modification freed up enough cash flow to allow Universe Holdings to fund the property's turnaround. Occupancy is now 95 percent. Cash flow also has improved, to roughly $2 million annually, from less than $1.8 million at its nadir.

Meanwhile, apartment values have skyrocketed. Acacia Park was no exception. It recently was appraised at a value of $41 million.

So Universe Holdings recently was able to line up $32.7 million of fresh financing from Freddie Mac through HFF. The loan pays a coupon of 3.79 percent and requires only interest payments for the first five of its 10 years. And Universe Holdings' annual debt-service obligation has shrunk to $1.2 million from the CMBS loan's original $2.1 million.

The refinancing allowed Universe Holdings to fully retire the A-note, generate the expected yield on its equity infusion and fully retire the B-note.

"Universe Holdings prides itself on its long-term commitment to its assets, lenders, partners and investors," explained Henry Manoucheri, the company's founder and chief executive. "We pay off our obligations," he added. "We're a good partner."

He said that the property, which was constructed in 1988, will be upgraded. Its units will be refreshed, as will common areas and its asphalt parking areas.

The property, across from the California State University at San Bernardino campus, includes a swimming pool, spa, tennis courts, sand volleyball court and a fitness center.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Additional Info

  • Syndicate to Realpoint: No
  • States: California
  • Sector: Multifamily
  • Subject: Commercial MBS (CMBS)
  • Deal Name: Wachovia Bank Commercial Mortgage Trust, 2006-C27
  • Private: No
  • bloombergDealName: WBCMT 2006-C27
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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