ASSIGNMENT: Boston Realty Advisors was engaged to secure an $11.5 million acquisition loan for a 131-unit apartment community located in Providence, RI. The subject property, known as Moshassuck Square, is situated within the neighborhood of College Hill, one of the most affluent areas in Providence. It is also home to world-renowned Brown University and Rhode Island School of Design (RISD), which is consistently ranked as one of the best educational institutions in the world for art and design.
CHALLENGES: Of the 131 units, 122 were encumbered by a master lease with RISD that was expiring next year and RISD had already given notice of intent to vacate. At first glance, most lenders balked at the prospect of such an immediate and substantial vacancy. In addition, the pipeline of current construction and anticipated deliveries added to concerns over underwriting assumptions. Further complicating the assignment, Boston Realty Advisors was tasked with securing a five-year loan in order to mitigate refinance risk, while still providing maximum flexibly that would allow its client to access the permanent debt markets once the business plan is executed.
RESULTS: Boston Realty Advisors secured the most advantageous financing available in the market tailored to the risk profile of the asset. In June 2019, the buyer closed on a five-year loan with an interest rate of 3.64% and three-years of interest only. By utilizing a three-year “swap” instrument on the five-year loan, the buyer has a variety of options including (i) the ability to refinance the loan at the end of the swap contract without penalty, (ii) float at the end of three years while pursuing Agency or another permanent financing, or (iii) execute a new swap in three years if the interest rate environment remains attractive.
