Shift to Non-Energy Industries Leads to Market Confidence

The Preserve at Mesa Hills is a fully occupied 248-unit garden-style apartment community.

EL PASO, TX—The El Paso market is benefiting from a $5 billion expansion of Fort Bliss , which is underway to serve the population of nearly 90,000 soldiers, family members, civilian employees and military students. In addition, El Paso is an established manufacturing hub and the healthcare industry there is growing rapidly. The city’s skilled labor force, favorable business climate and low cost of living will continue to attract workers and drive demand for rental housing. A part of that demand is the recent acquisition financing of The Preserve at Mesa Hills , a fully occupied 248-unit garden-style apartment community. Financing for the acquisition of the community was arranged by George Smith Partners ‘ principal David Rifkind and vice president Ameet Chagan . Chagan, who took the lead on securing the loan, tells GlobeSt.com: “One of the most unique aspects of this transaction was overcoming lender hesitation based on the property’s location in El Paso. While formerly dependent on oil and energy, we’re now seeing Texas markets grow in industries such as healthcare and manufacturing. In fact, El Paso is now the fourth largest manufacturing hub in North America. By communicating this market shift to lenders, we were able to garner their interest and ultimately secure financing that was beneficial to our client, and to the lender.” Chagan notes that the borrower, a private investor, was investing in Texas for the first time and sought a CMBS loan for the acquisition. The $10.6 million interest-only CMBS loan secured by George Smith Partners closed at a sub-5% rate with a five-year cap. “The interest-only component is of note, primarily because this structure is far less common on a full leverage CMBS loan now than it was even a year ago,” says Chagan. “In the current market, we’re frequently seeing interest-only components reduced or eliminated by the B piece buyer near closing. In this case, our team worked hard to keep this structure in place for our client.” Located in the heart of El Paso’s northwest submarket, The Preserve at Mesa Hills is comprised of nine two-story and five three-story walk-up buildings offering an array of sizable one- and two-bedroom apartments. Units feature mountain and valley views, and private patios or balconies, while select units also feature vaulted ceilings and wood-burning fireplaces. Common area amenities in the gated community include landscaped courtyards, a pool with spa and sundeck, a fitness center, basketball and volleyball courts, as well as barbecue grills and picnic areas for residents. “Several cities in Texas have very little exposure to energy sectors and are growing in other diversified industries. The city’s skilled labor force, favorable business climate, and low cost of living will continue to attract workers and drive demand for rental housing. This asset is well positioned to leverage current and future renter demand and deliver long-term value. Based on its 100% occupancy and in-place market rents, the class-B community delivers stable cash flow which further bolstered our ability to secure competitive financing. The CMBS market has been in flux, and many borrowers are facing substantial rate changes between the time they apply and the time their loan funds. In this case, we were successful in closing the loan within 9 basis points of the initially estimated rate, which was extremely helpful to the borrower,” says Chagan.