Insight on the state of the multifamily capital markets from the Mortgage Bankers Association CREF/Multifamily Convention and Expo

The Mission Capital team spent President’s Day Weekend at the Mortgage Bankers Association (MBA) CREF/Multifamily Convention and Expo in San Diego…and the overall consensus is that commercial real estate lenders, acquirers, and investors continue to seek multifamily properties more than any other asset class.

Not all deals, however, are equal in the eyes of capital sources.  Certain multifamily deals are more difficult to finance.

Construction and renovation projects remain the most challenging.  The uncertainty of project funding schedules, significant capital expenditures, low occupancies, and a lack of in-place cash flow eliminates many capital providers from participating in these types of transactions.  Agency financing is not available for these projects either, as it requires a 90-day history of 85%+ physical occupancy and 70%+ economic occupancy.

By removing Fannie Mae and Freddie Mac from the equation and adding a strong mortgage broker, owners and operators can essentially “auction” their project to the lender with the best terms and lowest rates.  Hundreds of viable lending options exist with a wide variety of rates, terms, structures and capital stacks from every type of lender: bridge to agency, CMBS conduits, debt funds, hard money lenders, and mortgage REITs, as well as money-center, regional, and community banks.

Here are some examples of how conducting an “auction” process amongst lenders results in materially better economic and non-economic terms for Mission Capital’s borrower clients:



Queens Plaza South
Long Island City, New York

  • Senior & Mezzanine:
    • $148.5mm Senior
    • $40mm Mezzanine
    • 90% LTC – Mid single digits blended rate
  • Added Value:
    The Borrower achieved 90% leverage by allowing the land lender to be subordinate to the construction lender. The Borrower was able to dictate final terms by having multiple higher rate construction lenders competing in the final “auction.”  Mission negotiated a pay and accrue feature, versus borrowing the full interest reserve that reduced the capital stack by over $4.0 mm.   The lower total capital stack reduced the equity required for the transaction.


Multifamily with Retail –  Construction
Seattle, Washington

  • Senior Construction Loan:
    • $97.5mm
    • 65% LTC
    • High 200’s over LIBOR pricing
  • Added Value:
    The Borrower received offers from multiple banks, insurance companies, and debt funds for senior and mezzanine construction financing.  The Borrower was able to decrease the spread from an existing relationship lender due to Mission’s “auction.”  Financing offers gave the Borrower multiple points of negotiating leverage with relationship lender on proceeds, term, rate, structure, and recourse.



The Equitable Building
Baltimore, Maryland

  • Senior Bridge Loan:
    • $34.3mm
    • 70% LTV
    • Low 300’s over LIBOR pricing
  • Added Value:
    The Borrower received proceeds to fully refinance the Property and received a $3.0mm earn-out structure. The Borrower saved $1.55mm, after Mission’s advisory on the prepayment of the in-place debt. The Borrower saved an additional $125,000, as Mission negotiated a favorable interest rate cap purchase schedule.


Hollywood/Koreatown Portfolio

  • Senior Permanent Loan Proceeds:
    • $79.8mm over 11 loans
  • Term:
    • 65% LTV
    • Term: 10 years Interest Only
    • Low 400’s WACC
  • Added Value:
    The Borrower was given the ability to upsize the loan 180 days following closing even though standard agency lenders do not typically allow upsizes prior to the loan’s first anniversary. Individual loans provided the Borrower with flexibility and ability to avoid cross-collateralization.  Closing with a single lender significantly decreased closing costs.  Mission provided the Borrower with higher leverage options from non-agency capital sources- a necessity given a volatile agency market at the time of close.


Click here to learn more about Mission Capital’s Debt & Equity Finance team

Mission Capital has arranged a $20.75m first mortgage ramp loan on behalf of SD Carmel Hotel Partners, an affiliate of Laurus Corporation, for the Hotel Karlan in northern San Diego.

REFI [PDF Download]

Mission Capital arranges $20.75m for San Diego hotel

By Sondra Campanelli

Mission Capital Advisors has arranged a $20.75m first mortgage ramp loan on behalf of SD Carmel Hotel Partners an affiliate of Laurus Corporation, for the Hotel Karlan in northern San Diego.

A ramp loan, which is primarily used to finance an asset that has limited in- place cash flow relative to its projected cash flow, is typically used as an intermediary step between construction and stabilization. “Construction financing can be more expensive and may include partial or even full recourse, depending on the deal, so a non-recourse ramp loan can remove a significant contingent liability from a sponsor’s balance sheet while also acting as an effective bridge from a construction or renovation loan to a more permanent loan,” said Gregg Applefield, director of the debt and equity finance group at Mission Capital. “In today’s market, it’s not uncommon for hoteliers to procure a ramp loan post- renovation, prior to securing permanent financing, and the sponsor turned to us because of our extensive experience in this arena.”

The 174-key, soft- branded DoubleTree by Hilton property has undergone a multimillion dollar renovation since it was acquired by the sponsor in 2014, including a remodeling of guestrooms, new dining spaces, including a San Diego-influenced brew pub, an upgraded spa with a fitness center, and two pools with outdoor cabanas. “We’re confident that our large-scale improvements have taken the property to a higher level, establishing it as a leader among resort hotels in the area,” said Peter Ciaccia, chief commercial officer at Laurus Corporation.

The three-year first mortgage loan, which will replace the property’s renovation loan and a preferred equity loan, was made by an undisclosed private equity fund. Mission Capital approached a variety of lenders to allow the sponsor to refinance and pay off its existing debt and allow it the time to ramp up its net operating income, according to Applefield. “Through a strong marketing effort, we were able to provide the sponsor with numerous competitive offers, including fixed-rate and floating-rate options with very high leverage for a hotel,” he added.

Laurus Corporation is a real estate investment and development company that has over $1.2b in assets under management. The firm focuses on creating capital appreciation opportunities through repositioning, restructuring, redeveloping, and intensively managing assets post-acquisition.

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