The capitalization rate on the deal is 7.34%. At the time of the closing the apartment complex had no vacancy. The vacancy rate on an annual basis is 3%. Average rents in the complex are as follows: for one-bedroom, one bath $688; two-bedroom, two bath $809. The range for a one-bedroom is $665 to $705, two-bedrooms range from $780 to $825.
Motivation for the loan was leverage to purchase property, low variable rate with no prepayment penalty to give buyers the ability to sell or refinance the property once market rents are achieved. A 75% loan to value achieved based on actual rents.
The financing for the complex was arranged by Marcus & Millichap Capital Corp. (MMCC). The amortization/term is 30/30. Although rents were well below market, MMCC achieved a 75% loan-to-value ratio for its client. The financing was arranged through the Ontario, Calif., office of MMCC.
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