Multi-family is still reeling in the lenders. A 12-property apartment portfolio in Manhattan has just been refinanced to the tune of $94.4 million, courtesy of Beech Street Capital L.L.C. The mortgage banking firm financed a group of Freddie Mac loans for owners Henry Moses and Robert Moses as part of its correspondent relationship with originator Meridian Capital Group L.L.C.

The portfolio was irresistible.  “[They're] low-leveraged, well-located Manhattan properties,” Meridian’s Josh Rhine told Commercial Property Executive.   The collection of apartment communities encompasses 488 residences located on the Upper East Side, Lower East Side and in the East/West Village. And the tenant rosters are full at all 12 properties.

The Moses brothers have owned some of the assets for over a decade, having amassed the portfolio over a nine-year period beginning in 1999. A Wall Street lender had held the majority of the loans on the assets. The entire group of loans has now been replaced with a full-term seven-year interest-only loan package.

“The borrower was extremely pleased with the entire process,” Rhine said in a prepared statement. “Beech Street understood what they wanted and delivered accordingly.”

Joe Hoesley, of U.S. Bank

General Growth Properties Inc., of Chicago; U.S. Bank, of Minneapolis; and RBC Capital Markets, of Toronto, recently closed on a $1.5 billion secured term loan refinancing 16 of GGP’s properties in the United States, U.S. Bank announced Wednesday.

U.S. Bank acted as joint-lead arranger, joint bookrunner and administrative agent on the transaction, while RBC Capital Markets served as joint-lead arranger (left), joint bookrunner and syndication agent. A U.S. Bank spokesperson told Commercial Property Executive that the other 11 co-lenders in the facility are predominantly commercial banking institutions, along with two investment banks and one insurance company.

The 16 GGP properties are Columbiana Centre (S.C.), Eastridge (Wyo.), Fallbrook Center (Calif.), Grand Teton Mall (Idaho), Mayfair (Wis.), Mondawmin Mall (Md.), North Town Mall (Wash.), Oakwood Center (La.), Oakwood Mall (Wis.), Pine Ridge Mall (Idaho), Pioneer Place (Ore.), Red Cliffs Mall (Utah), River Hills Mall (Minn.), The Shops at Fallen Timbers (Ohio), Sooner Mall (Okla.), Southwest Plaza (Colo.).

Joe Hoesley, vice chairman of Commercial Real Estate at U.S. Bank, said in the release that U.S. Bank and its partners were able to raise more than $1.8 billion in commitments for this credit facility, “demonstrating the strong appetite lenders have for quality commercial real estate assets.”

The loan was originated out of U.S. Bank’s commercial real estate office in Chicago.

The $1.5 billion loan is secured by cross-collateralized mortgages on 16 properties with a weighted-average interest rate of LIBOR plus 2.50 percednt and a term-to-maturity of 3.0 years (with two one-year options), according to a report from GGP. The prior loans secured by the properties had a weighted-average interest rate of 3.98 percet and a term to maturity of 3.3 years. The transaction generated approximately $180 million in net proceeds.

In the three-month period ending March 31, GGP’s FFO increased 13.6 percent to $252 million, or $0.25 per diluted share, from $222 million, or $0.22 per diluted share, in the prior year period. EBITDA increased 5.7 percent to $496 million from $469 million in the prior year period.

Net operating income for the company’s portfolio of U.S. regional malls increased 3.7 percent to $513 million from $495 million in the prior year period.

Net loss attributable to common stockholders was $14 million, or $0.01 loss per diluted share, versus a net loss of $198 million, or $0.21 loss per diluted share, in the prior year period.

Tenant sales per square foot on a trailing 12-month basis, mall leased percentage and initial rental rates for executed leases commencing in 2013 on a suite-to-suite basis all increased.

At the 2013 Mortgage Bankers Association CREF/Multifamily Housing Conference, David Durning, president and CEO of Prudential Mortgage Capital Co., explains Prudential’s targets for balance sheet, Fannie Mae, Freddie Mac and FHA, CMBS and bridge financing for 2013.

Could the conduit financing recovery reverse course overnight? Not likely, according to some experts, who believe a sudden evaporation of conduit financing is less likely this time around because the economic recovery appears to have legs.

Make no mistake, spreads for conduit loans can spike, as has been demonstrated in recent history. “We have seen disruptions before. There were a few instances in the last years. Spreads can increase suddenly, and CMBS financing can become non-competitive very quickly,” said Gary Tenzer of George Smith Partners.

A recent false start in the CMBS market occurred in 2011, when the recovering market was derailed by the European debt crisis and concerns about the U.S. economic recovery. “Because of the volatility, it was difficult to price deals on the front end,” explained Rusty Fleming, partner at Morris, Manning and Martin L.L.P. When the loans were taken to market, the conduits were not able to obtain the yields they anticipated. “That shut down the market.”

However, though a reversal of the current CMBS financing recovery is “always possible,” it is currently unlikely, according to Fleming. “We feel the U.S. and world economy are at different places now compared to two years ago.”

Tom Muller, co-chair of the real estate and land use practice group at Manatt, Phelps & Phillips L.L.P., agreed that the conduit market “would not be as easily derailed again.” He elaborated: “We expect the conduit market will be sustained for the next several years because the U.S. general economic recovery will be sustained for the next several years.”

Tenzer said borrowers can protect themselves against possible CMBS market disruption by locking in rates. “CMBS is a volatile market. Until you get to the point of locking the rate, you do not know you have a deal.”

CMBS financing allows for early rate locks of about 30 days in advance. But Tenzer also stressed that the borrower should not lock the rate until the due diligence, such as environmental reports, has been performed. Borrowers could lose their deposit if they lock the rate and decide not to complete the transaction.

 For more on the conduit market’s performance, see “Comeback Redux” in the May 2013 issue of CPE.

Robert Knakal, chairman of Massey Knakal Realty, said the New York City commercial property investment sales market is currently red hot, but warned that sustained periods of low interest rates typically lead to real estate bubbles.

“Things are phenomenal now if you are in the sales business,” said Knakal. Knakal gave an address as keynote speaker at the New York City Real Estate Career Expo, held yesterday at the New York City Bar Association.

Knakal said that the state of the New York City land market is currently “unprecedented.” Land prices in New York City have increased by 20 to 25 percent in the past three months, and have even exceeded levels achieved at the peak of the market in 2007. He said that the Upper West Side is registering prices of $600 per square foot, compared to $400 in 2007. And in Tribeca, land prices are $1,000 per square foot, up from $500 per square foot at the last market peak. “Land prices are on fire,” he said.

By dollar volume, the New York City investment sales volume in 2012 was $40 billion, compared to $63 billion at the market peak in 2007. Knakal noted that more buildings sold last year than at any time in New York City’s history. The relatively high sales level in 2012 was driven in part by the increase in the capital gains tax rate, said Knakal. He expects the number of buildings sold this year to decrease by 20 to 25 percent, but the dollar volume of sales to nevertheless increase. “If you are a sales broker, you are feeling pretty good.”

Knakal said that price per square foot of New York commercial properties has increased by 13 percent in 2012, and by 15 to 20 percent in the first three months of this year alone.

The drivers of the investment sales market are the low interest rates, the “same pool of capital fighting over” a limited pool of real estate, and relatively small yields in other investment vehicles resulting from a mediocre economy. Knakal emphasized that values are increasing not because of underlying fundamentals but above all because money is cheap as a result of low interest rates maintained by the Fed.

“The government is artificially manipulating interest rates.” The leasing market, he added, is not as hot as the investment sales market.

“Things right now look great, but are we in another period of asset bubbles? History tells us that sustained periods of low interest rates create asset bubbles.” And he said that in the past few real estate cycles, a spike in land prices has always preceded a downturn in the market. The sky-high price of land, he said, “makes us nervous.”

He said if interest rates eventually rise because of traction in the economy, that will be not pose as much of a threat to the real estate market as if interest rates rise as a consequence of the high level of government debt.

Life companies and pension funds increased their market share of commercial property financing last year despite ongoing industry deleveraging, and the mortgage loans yielded a total return of 4.7 percent for the institutions in 2012.

According to the Giliberto-Levy Commercial Performance Index, 25.6 billion in new permanent mortgages were originated in 2012 by institutional balance-sheet lenders. The Index principal balance ended 2012 at a total level of 180.6 billion, compared to 178.7 billion in 2011. The Giliberto-Levy Index is a private debt market index that tracks senior loans made by balance-sheet lenders, primarily life companies and pension funds.

“The good news here is that the life company/pension fund activity is actually increasing and gaining market share in the overall commercial space,” said Michael Giliberto, co-founder of the Giliberto-Levy Commercial Performance Index. He noted the increase in principal balance was occurring at a time when the commercial property sector was still deleveraging.

Speaking at a webinar reporting on the Giliberto-Levy 4Q Index, Giliberto noted that office and industrial lending by the institutions lost market share last year, while apartment lending by the institutions gained share. Office mortgages comprised 26.3 percent of total mortgage lending by the institutions, industrial made up 12.6 percent, and apartments were 20.1 percent of the total. Sixty percent of the institutional senior loans consist of five- to seven-year loans.

The Giliberto-Levy Index showed total returns from the balance sheet loans was 4.7 percent for the institutions in the whole of 2012. Giliberto noted that this return was higher than 10-year Treasury returns.

The Index showed that while 10-Year Treasury yields increased from 1.65 to 1.78 percent in the fourth quarter, 10-year mortgage spreads narrowed from 2.60 to 2.35, resulting in a net decrease in mortgage yield of 0.12 percent for the institutional lenders.

Construction is under way on Crescent Terminus, a $67 million luxury apartment community in Atlanta’s Buckhead section that will add 355 rental units to the restaurant, retail and office space in the Terminus master-planned development.

The project’s developer, Crescent Resources, is planning three eight-story buildings containing five levels of apartments above three levels of parking at the intersection of Peachtree and Piedmont Roads. The apartment community, previously called Circle Terminus, is located on a three-acre site that is the last vacant parcel available within Cousins Properties’ Terminus development. It is being financed by an equity investment from Crescent Resources and by a construction loan from JPMorgan Chase & Co. Completion is expected by spring 2014.

“Crescent Terminus will allow residents to take advantage of lifestyle amenities, while also helping to add to the sense of community within Terminus and the greater Buckhead area,” Ben Collins, vice president of Crescent’s multi-family group, said in a news release.

Designed by Lord Aeck & Sargent, an Atlanta-based architectural firm, the buildings will feature business centers, a salt-water, resort-style pool, rooftop terraces, a wine bar and tavern. Crescent Terminus will be a candidate for LEED certification. Crescent Resources has selected Greystar to serve as property manager.

“This is a quality plan by a quality team in a quality location,” Sam Massell, president of the Buckhead Coalition and a former mayor of Atlanta, said in the news release. “Crescent Terminus will fill an important need of Buckhead’s growing population.”

The rental market is hot in Atlanta, where job growth is among the highest in the United States. The Fourth Quarter 2012 Apartment Research Market Report from Marcus & Millichap Real Estate Investment Services Inc. noted that many young adults will be looking to rent rather than buy and “they will likely choose to live in modern, luxury apartments near entertainment and business districts.” The report stated that demand will outpace supply, allowing owners to boost rents to pre-recession levels. In Buckhead, the year-end vacancy rate was 4.7 percent, a year-over-year decline of 170 basis points. Meanwhile, average effective rents rose 1.7 percent to $1,051. That compares to average effective rents of $780 per month for the entire region at the end of 2012.

Crescent Resources said it changed the name of the Buckhead development to Crescent Terminus to be aligned with its corporate name and its other properties. Founded in Charlotte, N.C., in 1969, Crescent Resources has 20 master-planned communities and nine multi-family communities with 5,300 units under construction and in predevelopment. The company owns about 50,000 acres, including approximately 800 acres zoned for commercial use.

The firm has several projects under way including Crescent Bayshore, an $86 million multi-family complex in Tampa, Fla., with 367 units. The apartments are expected to be ready by early 2014. In January, the company purchased 221 acres in Franklin, Tenn., where it plans to build a master-planned community of 240 apartments and up to 384 single-family homes. Crescent Resources said in December it was building a $36 million 546-bed student housing complex in Charlotte near the University of North Carolina campus. It also announced that month it was developing a $33 million apartment community in Charlotte. Crescent Resources bought a 993-acre property in November near Houston, where it hopes to build a master-planned community with more than 2,200 single-family homes, 540 apartments, 50 acres of retail and other commercial uses, and a school.