The portfolio consists of Solarium Apartments, Village Green Apartments, Encino Park Apartments and La Calera Apartments, totaling 625 units. The four-apartment portfolio of properties is in Dallas, San Antonio, Austin and San Angelo.
The borrower wanted to refinance the existing loans, which all had different terms, to take advantage of the historic low interest rates while minimizing the prepayment penalty on the current loans.
Larry Sneathern, senior vice president in Beech Street Capital’s Dallas office, originated the transaction and recommended that the borrower consider Fannie Mae’s extended early rate lock program. This strategy allowed the borrower to rate lock at six months prior to their closing date, therefore mitigating interest risk while allowing time for a reduction in prepayment penalty.
Beech Street Capital, based in Bethesda, Md., helped the borrower analyze their portfolio, performed a yield maintenance cost/benefit analysis for each loan, and timed the resulting series of closings to maximize savings.
“We worked closely with the borrower to identify those properties in their portfolio that were best suited for the extended rate lock program, and at what point it made sense to initiate the process,” Sneathern said. “The end result was increased cash flow for the borrower.”
Also, each new loan has a flexible prepayment structure so the borrower does not face this type of problem in the future. The fixed-rate loans have a 10-year term with 30 year amortization. Yield maintenance is seven years.
This transaction represented the sixth deal between the borrower and Beech Street Capital.