Freeman Webb Co., a real estate investment and property management firm based in Nashville, Tennessee, has finalized a proactive refinance of a 16-property multifamily portfolio located throughout its home state. The 16 properties comprise 2,830 apartments and include communities in Clarksville, Murfreesboro, and Nashville.
The new low-leveraged loans for the portfolio total $207 million and are based on the total appraisal value of $510 million. With an average loan-to-value ratio of 40% for the portfolio, Freeman Webb was able to take advantage of the lower-leverage financing while providing less risk for its investors as well as greater cash flow from the properties over time.
“Though rates have increased throughout 2022, we began the process several months ago and were able to lock in interest rates 75 basis points less than peak rates,” said Matt Olson, vice president of acquisitions. “We believe that rates will continue to rise through 2023 and property values will deteriorate. We felt it was prudent to take advantage of the current environment rather than bet on the uncertain economic or interest rate environment when the existing loans matured in the near future.”
According to Freeman Webb, this move will allow it to return significant funds to its partners during a time when other investments are declining in value and reducing cash flow. The firm noted that rising rates have slowed transaction volume, with pricing for multifamily communities decreasing 10% to 15% depending on the market.
“An economic slowdown and softening in values may create buying opportunities in the near future,” said Olson, adding that it was beneficial to “provide investors with dry powder in advance of those opportunities.”