Alterra Pursues $140M Refi Of Spring Garden Modular Building With Rialto
The owner of a 4-year-old apartment complex a short walk from the Center City office district is planning to refinance the property, which is among the largest modular multifamily buildings on the East Coast.
Alterra Property Group is tapping Rialto Capital Management for a new $140M floating-rate loan to underpin LVL North, a 426-unit mixed-use project at 510 N. Broad St., Alterra Managing Partner Leo Addimando told Bisnow.
The building on the corner of Spring Garden Street is 97% leased and 95% occupied after the former office space on the second floor was converted into 16 additional apartments, but Addimando said stabilizing it has been a challenge.
“Our original rent projections, original occupancy projections, we’ve fallen short of those,” he said.
Developers' race to qualify for a city multifamily tax abatement that expired in 2021 resulted in a large number of units being delivered at the same time, creating a glut.
With supply outpacing demand following the pandemic, concessions became commonplace as owners sought to remain competitive in a tenant's market. In 2024, 60% of multifamily communities offered concessions, while just 17% did so in the suburbs, according to a GREA report.
This weighed on the net operating income of many properties, including LVL North, Addimando said.
While the new loan is partly to “rebalance the capital stack,” he added that the property is in an opportunity zone. Extending the financing will allow Alterra to take full advantage of the program’s tax compliance period, which Addimando said ends in three years.
FS Investments said in a report it filed with the Securities and Exchange Commission earlier this month that it closed a $117.2M senior loan associated with LVL North. FS declined a request for comment about the filing, while Rialto didn’t respond to Bisnow’s inquiry.
Addimando wasn’t sure why his property showed up in the company's report, which he had never worked with before.
“They do buy slivers of real estate loans, and my assumption is that they did that at some point in time,” Addimando said. “Either they bought a slice of a portfolio of loans or a slice of a single loan in 510, and the portfolio might have included 510.”
FS and Rialto do have a relationship, according to another document an FS-affiliated REIT filed with the SEC in 2018. Rialto was reportedly tapped to select investments and manage them day to day.
“We expect to capitalize on Rialto’s significant and broad experience managing various real estate strategies across equity and debt,” the filing says.
“We also expect to capitalize on its national footprint and origination platform to deploy significant amounts of capital in investments with attractive risk-return profiles.”
Alterra bought the LVL North site in 2020. The $179M project was delivered two years later. It also has two levels of underground parking and 108K SF of retail occupied by Planet Fitness and the grocery chain Giant.
Addimando said Alterra started the project with a construction loan from Bank OZK. It then refinanced with Natixis Corporate & Investment Banking in September 2022.
“It is one of the largest modular construction projects in the entire East Coast,” he said of the building, whose third through eighth floors are made up of 65 individual boxes delivered to the site on flatbed trucks.
