6A — July 2023 — Financial Digest — M id A tlantic Real Estate Journal
www.marej.com
F inancial D igest
ising interest rates and more conservative un- derwriting are begin- By David L. Church, CCIM, U.S. Realty Capital, LLC. Commercial real estate faces refinancing challenges as interest rates rise R
ning to have an impact on commercial real estate as five- and ten- year loans move toward maturity. The impact on multifam- ily projects is
David L. Church
likely to be far less than the im- pact on commercial properties, particularly office buildings. While multifamily continues to maintain very high occupancy rates with significant annual increases in rental rates, office occupancies have dipped, are likely to continue to deterio- rate, and rental rates will be flat at best for many properties in coming years. The example above high- lights the refinancing short - fall for a 60,000 s/f office
property financed five years ago. Rent psf was $30.00. The loan of $11,838,000 was closed at 4.0% on a 30-year amortization schedule. Five years later, the lender reviews the T-12 to underwrite the amount of a refinance. Both gross income and operating expenses increased at a rate of 2.5% per annum for four years. However, stabilized occupancy dropped from 95% to 88%. At
the same time, mortgage rates increased to 6.75%, the cap rate increased by 100 bps, and the maximum loan to value pro- vided by the lender fell to 65%. The refinance with a poten - tial new loan of $8,651,000 is constrained by loan to value. Since the outstanding principal balance on the original loan was $10,716,754 at refinance, the shortfall is $2,065,754. After factoring in transaction
costs, the total shortfall is ap- proximately $2,218,055, which is summarized to the below:
building in today’s market is a hardship for most investors and developers. U.S. Realty Capital can assist borrowers in deter- mining potential shortfalls on a conventional refinance and help structure creative solutions to minimize the actual cash out- lay. Please reach out to us and let us know how we can help. David L. Church, CCIM is managing director of U.S. Realty Capital, LLC. MAREJ
Having to produce signifi- cant new cash to refinance a
Independence National Historical Park Awarded $22.2 Million in Federal Funding
Kennedy Funding closes land loan on 192-home development
vives intact and established a template for bank archi- tecture for the next century and a half. Borrowing from classical design, the Penn- sylvania blue marble front facade features two-story Corinthian columns. The pediment above the columns features a sculptural panel with the rst known depic - tion of an American eagle with 13 arrows in its talons, evoking the Great Seal of the United States. Carved in mahogany, the sculpture’s preservation won the Grand Jury Award from the Preser - vation Alliance of Greater Philadelphia in 2021. Weathered elements of the facade will be repaired or replaced as part of the reha- bilitation, and the building’s grand interior, a oor-to-roof rotunda supported by 40 col - umns and crowned by scal- loped glass panes installed during a renovation in 1902, will be carefully retouched. All mechanical systems will be modernized and housed in a modest addition on the back of the building that will also serve as the primary entry for all visitors. The original front doors, which open onto South Third St., will continue to function and be used for special events. MAREJ
PHILADELPHIA, PA — Independence National Historical Park (INHP) has been awarded $22.2 million in federal funding from the Great American Outdoors Act (GAOA) Legacy Restoration Fund, to help rehabilitate the landmark First Bank of the United States building con- structed in Philadelphia in the 1790s, with the intention to transform it into an interactive museum. The Independence Historical Trust (Trust), the nonpro t philanthropic partner of INHP, had earlier raised $4.5 million toward the building’s rehabilitation for essential architectural and construction documents and for the design, fabrication and installation of state-of-the-art interactive and immersive exhibits. The First Bank of the United States was a central part of Secretary of the Treasury Alexander Hamilton’s vision to create a national nancial system that would knit to- gether the economies of the 13 newly independent states. The First Bank building is one of the rst federal build - ings constructed by the U.S. government and sits a mere 1,000 feet from Independence Hall. Now part of INHP, it is regarded as one of the most important artifacts of George
The First Bank f the United States Washington’s administration. With funding secured for the rehabilitation, the INHP and the Trust aim to open the First Bank by the 250th anniversary of the founding of the United States in 2026. The Trust is now leading an effort to raise $6.6 million to fabricate and install dynamic exhibits about the First Bank and America’s early economy in the building. “Rehabilitat - ing the First Bank will meet a long-held goal for INHP – it was acquired in 1956, with the establishment of the park, but has been closed to the public for many years. The landmark building gives the park the op- portunity to showcase aspects of the economy of the early republic and the role of the controversial bank,” Amnesty Kochanowski , acting super- intendent of Independence National Historical Park, said. The building’s facade sur -
Vines of Sandhill
specializes in and maintains the robust network necessary for rapidly and successfully closing loans. “To successfully secure funding, you need to under- stand the obstacles to fund- ing and how to work through them to secure the deal you need, and more importantly, you need a partner who can navigate those challenges,” said Wolfer. “At Kennedy Funding, we have the knowl- edge and experience to evalu- ate deals on their merits for the community, not on painstaking criteria that traditional lenders impose on borrowers that cause un- necessary delays.” To date, Sandhill Real Es - tate Investments, L.L.C. has completed three phases of the six-phase Vines of Sand- hill development, and those three phases have since been sold off. MAREJ
MILTON, DE — Traditional banks’ slow approval periods and the tight lending market can hold up projects when time is of the essence. That’s why Sandhill Real Estate Investments, L.L.C. turned to Kennedy Funding to se- cure the financing they needed for Vines of Sandhill, a single- family residential development project in southern Delaware. The Englewood Cliffs, NJ- based direct private lender provided a $1 million short- term bridge loan for the bor- rower. The loan proceeds will be used for working capital for roadwork that will move the development project into its final phases. Kevin Wolfer , CEO/presi - dent of Kennedy Funding, said that obtaining real estate financing when the market is competitive and needs are urgent can be highly chal- lenging, but Kennedy Funding
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