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Lower CMBS Volume Pays Off Handsomely For Alpha Capital CRE

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A mixed-use asset at Elston and Webster in Chicago
Alpha Capital CRE arranged $13M in CMBS refinancing for this 140K SF mixed-use asset at Elston and Webster.

Alpha Capital CRE entered 2017 with a new partner in Managing Director Trisha Connolly and a new focus on recapitalizing CMBS loans. That strategy is paying dividends. Alpha Capital CRE recently arranged $20.6M in financing for three properties in Illinois and Indiana.

The largest deal involved $13M in CMBS refinancing for a 140K SF property at Elston and Webster avenues in Lincoln Park. The asset is fully leased and split into a 104K SF office property and a one-story, 36K SF masonry and mill. Alpha Capital Senior Vice President Matthew Stearns said the CMBS market was the best option for this property because a combination of reduced deal flow in the area — CMBS volume is down 30% in 2017 compared to this time last year — and pent-up demand means investors are willing to take some money off the table to make a deal happen. The asset's performance and location helped with the pricing of the refinancing and in securing a 20-year amortization.

Stearns, Connolly and Alpha Capital Managing Partner Anthony Longo repped the borrower.

55740 Currant Road in Mishawaka, Ind.
55740 Currant Road in Mishawaka, Ind.

Alpha Capital arranged $3.6M in acquisition financing via a bridge loan for a 290K SF industrial facility at 55740 Currant Road in Mishawaka, Indiana. The property is fully leased by book e-retailer Better World Books. Senior Associate Mike Spirovski, who arranged the financing with Longo, said the northwest Indiana industrial real estate sector is as strong as the Chicago market, with tight barriers to entry like a 5% vacancy rate. A large asset like this one is guaranteed to attract investor interest when it hits the market.

Spirovski said there were several moving parts to the deal. Alpha Capital originally wanted to place the loan with a local bank, but switched to a bridge lender because the deal was nearing its closing date and the bank needed extra time to do its due diligence. The borrower was determined to enter the market and not willing to wait, so Spirovski and Longo found a bridge lender within 10 days to seal the deal. The loan's terms were attractive: Spirovski said Alpha Capital secured a 12-month loan with an open period after nine months. This loan will be refinanced after the terms end, possibly with the local bank that was originally going to handle the acquisition loan.

The third deal involved $4M in refinancing for a multifamily property in downstate Urbana, arranged by Stearns and Longo. This asset includes 96 one- and two-bedroom units across six buildings and 146 parking spaces. It includes a Section 8 component, but Stearns said that it was mismanaged before the borrower acquired it last year. The borrower received a steep discount from the seller, who provided 100% of the financing. The borrower assumed property management responsibilities, stabilized the asset and improved the occupancy rate from 65% to 96%.

Stearns said the stabilization increased its value by $1.5M, which made it attractive for investors. Stearns and Longo landed a 10-year agency loan with a 30-year amortization for the client, which will hold on to the property long term and use the refinancing to pay off existing debts on the asset.