$68MM Multifamily Acquisition | Virginia Beach, VA

Placed fixed-rate permanent loan and preferred equity to acquire a value add 287-unit apartment complex in Virginia Beach, VA.

Challenges

A steadily rising interest rate environment and volatile end-of-year reinsurance market threatened to impact underwriting metrics prior to closing. A reduction in senior loan proceeds necessitated the integration of preferred equity into the capital stack. An inverted yield curve made short-term floating rate unattractive, and an alternative solution was needed. Furthermore, the timing to close was delayed so that the property could achieve the requisite occupancy numbers.

Solutions

Eyzenberg & Company advised the client to pursue a fixed rate option to remove future rate volatility,
avoid the cost of hedging and make securing a preferred equity investor easier. Agency lenders were
specifically targeted due to their unique ability to provide supplemental funding at future dates which
could be used to repay the preferred equity in a recapitalization or lever up for a potential buyer. Since
the property had not yet achieved the requisite occupancy a Freddie Mac option was chosen due to its
ability to rate lock the loan earlier in the process.

Although the aggregate amount of preferred equity capital was restricted by the lender’s DSCR
requirement, the preferred equity provider agreed to reduce the current soft pay below their typical
requirements to allow for greater proceeds to fill the funding gap.

Eyzenberg & Company approached a national owner/manager who agreed to provide third party
property management services in exchange for putting the property under their insurance umbrella
policy, thereby reducing costs by almost 60% thereby keeping anticipated senior loan proceeds flat.

Share on social media:

Seth Schumer

MANAGING DIRECTOR

Seth Schumer joined Eyzenberg & Company as a Managing Director. His primary focus is transaction management and structuring advisory for commercial real estate finance transactions.

Prior to joining the firm, Schumer served as Head of US Investments for Quadrum Global (formerly Cube Capital) where he grew platform from one US hotel investment to an 18-asset mixed use portfolio through new acquisitions, ground-up developments, team building and creation of three internal operating platforms (Tesseract Investment Advisors, Arlo Hotel Management and Quadrum Senior Living Management). While at Quadrum, Schumer acquired, capitalized and asset managed a hotel portfolio that includes Arlo SoHo, Arlo NoMad, Nautilus South Beach, The Godfrey Hotel Chicago, Essex Inn Chicago, and B Resort & Spa at Walt Disney World, and led the efforts to create an in-house hotel management platform and the new Arlo Hotel brand. He additionally led the efforts to develop a senior housing property and the Amavida brand.

His expertise in debt financing including loan underwriting, servicing and borrower relations was learned while working in London for ABN AMRO, and in New York for Chase Manhattan Bank and Chemical Bank. Whilst at AIG Global Real Estate and Real Estate Capital Partners (now CP Capital), he additionally gained asset management, development insight and JV equity structuring experience. Also, during his time at AIG, Seth was part of team that acquired four RTC loan portfolios.

Schumer holds a master’s degree in real estate investment and development from New York University and a bachelor’s degree in accounting from the University of Maryland.

Email

sschumer@Eyzenberg.com

D: (305) 995-0777 ext .306
C: (305) 360-9625