CWCapital Closes $388M Apartment Refinancing Package in Largest LIBOR SWAP Deal of 2010

Financing for the portfolio of luxury apartment properties, made available through CWCapital's Agency Lending Group, came in the form of four cross-collateralized loans with 10-year terms.

November 9, 2010
By Barbra Murray, Contributing Editor

Working with Fannie Mae, CWCapital L.L.C. has completed a $388 million transaction for the refinancing of a premier four-property Los Angeles apartment portfolio owned by Douglas Emmett Inc. The assets account for an aggregate 820 residential units in the city’s upscale Brentwood neighborhood and the highly coveted beach community of Santa Monica.

Financing for the portfolio of luxury apartment properties, made available through CWCapital’s Agency Lending Group, came in the form of four cross-collateralized loans with 10-year terms. The loans featured a floating rate equivalent to one-month LIBOR plus 165 basis points, but in a move simultaneous to the facilitation of the loans, Douglas Emmett signed interest rate swap contracts that leave the all-in interest rate at approximately 3.65 percent for the next seven years. The borrower used the proceeds from the new loans, scheduled to mature on November 2, 2020, to eliminate $388 million in existing discount mortgage-backed securities debt due to mature on June 1, 2012.

Allan Edelson, the CWCapital senior vice president who originated the loans, said that Fannie Mae’s borrower group extended tremendous effort and was committed to structuring and closing the deal.

In addition to a solid relationship with CWCapital and Fannie Mae, Douglas Emmett’s performance in the real estate market undoubtedly helped pave the way to financing. The company, a top owner of high-quality office and multifamily properties in Southern California and Hawaii, reported Funds from Operations totaling $55.9 million for the third quarter, compared to $47.8 million in the third quarter of 2009. Additionally, the REIT’s multifamily portfolio boasted an occupancy level of 99.3 percent; the national apartment vacancy rate is 6.6 percent, as per a third quarter report by commercial real estate research firm Delta Associates.

CWCapital–which executed a $71 million loan for a 645-unit multifamily property in Mercer Island, Wash., and $151 million in financing for a 469-unit multifamily asset Washington, D.C., in the third quarter–expects that business will continue at a brisk pace in the upcoming months. “We are seeing a growth in large, complex deals and have experienced a steady increase in loan application activity for Fannie Mae, Freddie Mac and FHA loans this past year,” CWCapital president and CEO Michael Berman said. “2010 will be an exceptional year for CW as we have already exceeded our $2 billion projected origination goal.”