by Grace Huebscher
BEECH STREET CAPITAL CLOSES $15 MILLION IN FANNIE MAE LOANS TO REFINANCE A TEXAS APARTMENT PORTFOLIO
FEBRUARY 26, 2013, BETHESDA, MD – Beech Street Capital, LLC, announced today that it closed $15 million in Fannie Mae DUS loans to refinance a four‐apartment portfolio of properties in the Dallas, San Antonio, Austin and San Angelo MSAs. Larry Sneathern, senior vice president in Beech Street’s Dallas office, originated the transaction. This was the borrower’s sixth deal with Beech Street.
The borrower was interested in refinancing to take advantage of the historic low interest rates while minimizing the prepayment penalty on its existing loans. The Beech Street team 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, mitigating interest risk while allowing time for a reduction in pre‐payment penalty. “There are option for apartment owners with high interest rates late in their yield maintenance period besides just hoping that rates will stay low while their pre‐payment penalty expires,” Sneathern says.
Each of the existing loans had slightly different terms. Beech Street worked closely with the borrower to 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 says. “The end result was increased cash flow for the borrower.” And to ensure that the borrower wouldn’t face a similar dilemma in the future, each new loan has a flexible prepayment structure.
The portfolio—Solarium Apartments, Village Green Apartments, Encino Park Apartments and La Calera Apartments—together total 625 units. The fixed‐rate loans have a 10‐year term with 30 year amortization. Yield maintenance is seven years.
US TREASURY RATES
As of Monday September 22, 2014
|5 Year Bond||1.781%||-3.33%|
|7 Year Bond||2.251%||-2.54%|
|10 Year Bond||2.567%||-0.95%|
|30 Year Bond||3.289%||+0.40%|