$93M Acquisition Financing Closes for 1,333-Unit Nashville Apartment Portfolio

As the Nashville multi-family market continues to blossom, Harbor Group has purchased three rental properties in Tennessee's capital for $93 million.

Investor interest in the Nashville, Tenn., multi-family market continues on the upswing and Beech Street Capital recently assisted Harbor Group International with its expansion in the area. Beech Street closed a $92.6 million financing deal for the private real estate investment and management firm’s purchase of three rental properties in Music City.

The communities include the 627-unit Cherry Creek Apartments in Hermitage; Cambridge at Hickory Hollow, featuring 360 units in Antioch; and the 346-unit Arbors at Brentwood Apartments in Nashville. Harbor snapped up the assets from an affiliate of Lehman Brothers.

Beech Street financed the loan, which was originated by Meridian Capital Group L.L.C., an advisory firm with which the mortgage banking company has a correspondent relationship. The financing for Harbor’s purchase of the 1,333-unit portfolio came in the form of fixed-rate Freddie Mac Capital Markets Execution loans featuring a seven-year term, with two years interest-only. The entire process occurred with unusual speed, accommodating a fast-approaching maturity on Lehman’s debt on the three apartment communities.

“Beech Street worked seamlessly with Freddie Mac to achieve the closing date,” Matt Legge, senior vice president of credit, said in a prepared statement. “The team mobilized quickly to organize site visits and engage third parties to expedite the process.”

Providing financing for a multi-family acquisition in Nashville today is not exactly fraught with high risk. The Nashville apartment market may not be the tightest in the country, but with a second quarter vacancy rate of 6.5 percent, according to a report by commercial real estate services firm Jones Lang LaSalle, which marketed the Lehman assets, the city is outrunning some of the other most-watched MSAs in the South. Houston reported a vacancy rate of 11 percent in the second quarter, and Memphis came in at 10.8 percent. JLL rates Nashville as a “rising market.”

The strong response among multi-family buyers is evident in the numbers. Per the JLL report, in the second quarter, year-over-year transaction volume in Nashville increased 39.6 percent; quite an accomplishment compared to the U.S. national average increase of 9.7 percent.