Institutional Sponsors Get Easy Money

Shlomi Ronen is the managing principal and founder of Dekel Capital and is a Los Angeles market expert.

LOS ANGELES—While we saw some pull back in the debt markets earlier this year, multifamily properties, especially those with institutional owners, aren’t seeing a shortage of available capital. A joint venture between institutional investors advised by J.P. Morgan Asset Management and SARES-REGIS Group has secured a $129.8 million loan to refinance two multifamily properties in Thousand Oaks. The loan has a five-year term and a floating rate, and was funded through a national bank. The borrower will use the funds to pay off matured debt and fund capital improvements. Shlomi Ronen , a managing principal at Dekel Capital and a capital markets expert that was not involved in this specific transaction, says that these types of deals aren’t unusual for good-quality assets in good locations. “With institutional ownership, my guess is that they requested a low loan-to-value, which in that scenario makes it ideal for a bank, because it is a very safe loan in an asset class that is very well liked by both banks and agencies,” he tells GlobeSt.com. “There is a lot of capital out there for this type of loan, and I expect that they got really good pricing as a result. HFF executive managing director Mike Tepedino , senior managing director Kevin MacKenzie , managing director Charles Halladay and director Brian Torp secured the funds on behalf of the borrower, but declined to comment on the deal. The Knolls and Westlake Canyon are the two properties to receive the funds. They total 672 units, and are adjacent communities located at 2544 Vista Wood Circle and 2338 Fountain Crest Lane in Thousand Oaks. While Thousand Oaks is outside of the very active Los Angeles market, Ronen says that it benefits from the same positive fundamentals and, for lenders, is equal to Los Angeles proper. “Thousand Oaks is very supply constrained, and it is very tough to get anything built in that market,” he explains. “It is really close enough to L.A. so that people aren’t really differentiating between the two markets at this point, especially with the similar demographics and all of the growth happening out in the Conejo Valley.” While there has been some pull back in the debt markets, this transaction is just one example that lenders are still bullish on institutional multifamily assets. That is because they are likely to perform better during a downturn. “The one thing about multifamily, and the reason why cap rates are low and continue to be low in multifamily, is that it performs well even during the downturn, and that is especially true of A assets in A locations,” says Ronen. “Banks continue to lend on multifamily throughout a downturn, and they have even increased allocation. There is a substantial amount of liquidity in the multifamily space for stabilized.” It’s not only institutional borrowers, either. Ronen adds that private investors still have plenty of capital options in the market. “For non-institutional ownership, you may not get the large banks, but you can still get really good aggressive financing from the agencies on assets like this,” he says.