Colorado Real Estate Journal - December 16, 2015
CBRE’s Capital Markets’ Debt & Structured Finance Services recently secured $55.6 million in financing on behalf of Los Angeles-based Gelt Inc. for its $74 million acquisition of the Tamarac apartment community in Denver. (See related story on Page 1.) Brian Eisendrath and Ross Moore with CBRE’s Beverly Hills office arranged a 10-year fixed-rate loan with a five-year interest-only component for the acquisition of the 564-unit community built in 1977 at 3300 S. Tamarac Drive. The financing is a 75 percent loan-to-value transaction. “The fundamentals in Denver remain quite strong with annual rent growth exceeding 10 percent in specific markets,” Eisendrath said. “As a result, there was strong demand from lenders,” he said. In additional to Denver’s fundamentals, the strength of Gelt also helped it land an attractive financing package. “Given Gelt’s long-term strategy in secondary growth markets, 10-year debt with maximum interest only will allow them to execute on their business plan by providing solid cash-on-cash returns to their investors,” Eisendrath said. With the Fed appearing ready to raise its rates and new banking regulations in place, Gelt’s timing for the acquisition and financing was good. “Given the volatility in the capital markets, we were able to navigate the new mandates and provide the best terms possible,” Eisendrath said. Keith Wasserman, a co-founder of Gelt, was pleased with the financing deal by CBRE. “Brian and his team secured a loan that allows us to continue repositioning this well-built asset while providing an attractive value alternative for renters who are priced out of the newer Denver product,” Wasserman said. “They were able to move fast, providing lender commitment prior to going hard on the purchase, all the while securing aggressive long-term financing with seamless execution,” Wasserman added. John Winslow, principal of Winslow Property Consultants, who was not involved in the transaction, said the financing package was typical for strong investors buying apartments in the Denver area. “A 75 percent LTV is pretty typical in today’s market,” Winslow said. “I’ve seen some really strong players get even higher ratios,” he said. From Gelt’s perspective, the five years of interest only is crucial. “The cap rate might be 4.5 percent or 5, but really what the investor is looking at is the cash-on-cash return,” Winslow said. “A common mistake people make is that they see a property sold at a 5 cap rate and they think it is crazy,” Winslow said. “But their cash-on-cash return might be 12.5 percent in the first five years and that is how buyers sell it to their general partners and investors,” Winslow explained. “The cash-on-cash return makes the investment look really good,” he said. Units at Tamarac range in size from 450 square feet to 1,015 sf. The seller, TruAmerica, had renovated about 200 of the units. Gelt will continue to renovate the remaining units, upgrade commons areas and add new amenities. Pam Koster and David Martin of the Denver office of Moran and Co. represented TruAmerica in the sale.