Monday, April 18, 2011
The Seattle apartment market has rebounded from the deepest recession in recent memory more quickly than many expected. At the height of the recession in fall 2009, vacancy rose to 7.2%, according to Dupre + Scott Apartment Advisors’ March 2011 Apartment Vacancy Report. Today, vacancy has fallen to 4.6%, and the company expects it to continue to decrease in the coming year. The market is showing other signs of stabilization: landlords are offering fewer concessions, and rents have begun to rise, though they haven’t yet gotten back to peak levels.
The Dupre + Scott report theorizes that persistent weakness in the single-family housing market is discouraging many from purchasing a house or condominium, which is one reason the apartment market is thriving. They expect that during 2011, apartment vacancy will continue to fall, rents will continue to rise, and concessions will essentially disappear.
Apartment Insights’ First Quarter Report provides similar predictions about the strengthening apartment market in 2011. It expects just 1,866 units to come online in 2011 and only about 2,000 in 2012. So development will ramp up during 2011, and many more units will deliver in 2013 and after.
The Seattle metro area placed fifth on Multifamily Executive’s list of the Hottest Multifamily Markets for 2011, or those where they expect the most development to occur. 3,692 multifamily permits were issued in Seattle in 2010, an impressive 57% increase over 2009.
NBS Financial Services not only arranges financing for multifamily properties, but can also secure financing for any type of commercial property, including office, industrial, retail, self-storage and hotel. In the past few years Fannie Mae & Freddie Mac have been most competitive on multifamily financing. More recently, life insurance company lenders’ spreads have compressed to be competitive with Fannie and Freddie rates. NBS Financial Services has lending relationships with life insurance companies, Fannie Mae, Freddie Mac, FHA, banks, credit unions, structured finance and specialized providers of mezzanine bridge and equity capital. With low interest rates and strong market fundamentals, now is a good time to refinance any commercial building.
Friday, April 8, 2011
One challenge to obtaining financing was that Wallingford Center sits on land that is leased from the Seattle School District, and some lenders avoid lending on buildings with ground leases. However, the property’s desirable location in the densely populated Wallingford area, as well as its solid occupancy, made a strong case. The loan was 60 percent loan to value with an 8-year term.
“While the unsubordinated ground lease made the loan request more challenging, the lender was ultimately able to get comfortable with the real estate and the operator, which resulted in the borrower receiving very competitive loan terms,” Wood said.
The 42,177 sf Wallingford Center, which is listed on the National Register of Historic Places, was constructed in 1904 as Interlake Elementary School and served as a school until the 1970s, when it closed. The building then sat vacant for a number of years. The current owners purchased the building in 1984 and renovated it, with two floors of retail and 24 studio apartments on the top floor. The retail portion is more than 90 percent leased, and tenants include Trophy Cupcakes, Tweedy and Popp ACE Hardware, The Exploration Academy and 4 Your Eyes Only Optical.
Monday, April 4, 2011
The loan for the Cobblerock Office Building, a Class A, multi-tenant building in Rancho Cordova, a suburb of Sacramento, was funded by Symetra Financial, a life insurance company based in Bellevue, Washington. NBS Financial is consistently one of Symetra’s top producers nationally, and services its loans.
One unique aspect of the loan was that the property was only 82 percent occupied. In addition, two tenants occupied 79 percent of the building, with short-term lease expirations. The risk was mitigated with partial recourse, a strong submarket and tenant investment in their own tenant improvements, Griggs said.
With continuing uncertainty in the employment market and overall economy, lenders are cautious about office deals, especially in the Sacramento market, where office vacancy is estimated at between 20 and 25 percent.
“A conservative loan request with a strong borrower went a long way,” Griggs said.