GlobeSt.com EXCLUSIVE: Watson Affiliate Gets Nearly 100% Financing in Apartment Buy

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MAITLAND, FL-An affiliate of Atlanta-based Watson Real Estate and Management Inc. has received nearly 100% financing in its $13.6-million purchase of the 246-unit Twin Lakes Manor Apartments at 201 E. Monroe Ave. The 92%-leased multifamily property is located in this suburban community, five miles north of Downtown Orlando.

Todd F. Cohen, director of Primary Capital’s Income Property Capital Group in Orlando, arranged the $13.55-million loan with Irving, TX-based First Horizon Loan Corp., a division of First Horizon National Corp., based in Memphis. The starting interest rate is 6.5%. Speaking about the three-year, interest-only loan, Cohen tells GlobeSt.com the loan’s principal would be repaid in one of two ways. “If the project becomes a conversion, then the loan will be repaid from near-future condo sales. If the project remains an apartment asset, the new owner will refinance down the road,” he explains.

Area brokers tell GlobeSt.com the funding is probably the best financing deal a developer has received this year on a Central Florida property. The Watson affiliate plans to invest another $5 million in renovations that may allow the property to convert to condominium homes in the near future, Cohen tells GlobeSt.com.

“We were able to structure this loan with minimal cash outlays from the developer,” Cohen says. “The loan also permits for the conversion and sale of the units as condominiums, provided certain hurdles are met with respect to the renovations.” The mortgage banker says the nearly 100% financing “will allow my clients to conserve cash for that next great deal.”

The seller was Twin Lakes Apartment Ltd., a two-investor partnership that held the property for 13 years. The deal was done at this time to coincide with the redevelopment of Downtown Maitland where several new condos, retail nodes, public buildings and pedestrian areas are being constructed, Cohen tells GlobeSt.com. Twin Lakes is adjacent to the targeted redevelopment area.

“Once the apartments are renovated, it is expected that the property can be repositioned into the type of apartment complex worthy of its location,” Cohen says. The property was never on the market. “It was direct deal.”

The new financing for the Watson affiliate continues Primary Capital’s lengthy relationship with the developer. Cohen says his company closed deals for Watson totaling about $40 million in 2005 “and has another $30 million committed for early 2006.”

Average rents at Twin Lakes are about $625 per month, “way below market,” Cohen says. “Once renovated, the average rents should increase to well over $700 per month.” The financing deal took 60 days to close. “The buyer actually had the deal under contract for quite awhile…I think since March of this year… but neither party was in a hurry to close.”

The deal marked the finale to a record production season for Primary Capital’s five-year-old Orlando office, Cohen says. The office did $250 million in closed and committed transactions this year versus $175 million in 2004 and $75 million in 2004.

“It has definitely been a whirlwind 24 months,” says the mortgage banker who opened the Orlando office in March 2000. “We expect this to continue well into 2006, as interest rates are expected to remain at levels conducive to great financing.”