Tower Capital has arranged a $6,550,000 acquisition bridge loan to convert a 150-key motel into a 101-unit apartment community catering to area workforce housing.

The property is located in central Phoenix near the I-17 freeway and is comprised of a front building housing the lobby, reception, meeting space and common areas, along with a back building containing the guest rooms. The two buildings enclose a large, landscaped courtyard, and community swimming pool. The current 150-key configuration is comprised of 75 single rooms and 75 double rooms. The borrower plans to modify the existing configuration, creating 101 apartment units offering a mixture of 1-bedroom, 2-bedroom, and studios.

Challenge:
The local sponsorship saw an opportunity to add value to a building that was not operating at its highest and best use as a run-down motel. In recent years, increasing land values, construction costs, and labor shortages have forced developers to build high-end, class A apartments, while at the same time there has been a major lack of new workforce housing where there is growing demand. Unfortunately, the transitional neighborhood and very poor condition of the property limited the pool of lenders that could get comfortable with the transaction. Nevertheless, Tower ran a competitive bidding process and was able to show that low cost housing is becoming increasingly difficult to find near the city core, causing more renters seeking these modestly priced units to move westward, towards the subject property.

In the end, Tower was able to find a lender who believed in the business plan and secure a high-leverage, bridge, acquisition loan at an extremely competitive rate.