Tower Capital, a leading provider of build-to-rent construction financing, secured $70.25 million in non-recourse construction financing for a 287-unit build-to-rent community in the Southwestern US. The community will be situated on approximately 27 acres of land, with a portion of the site dedicated to amenities such as open recreational space and an outdoor walking path. Each home will have an average unit size of 960 square feet, and will offer some level of private patio or yard space. The greater community will also offer a fitness center, car care station, BBQ grills, a central community pool and leasing clubhouse. The units will feature solid surface quartz countertops, stainless steel appliances, premium kitchen backsplashes, full-size washers and dryers, and upgraded smart-home features and technology. The subject property is located in close proximity to the LG battery plant in Queen Creek, which is set to bring thousands of jobs to the immediate area and serve as a massive economic driver for the entire Phoenix MSA. The subject property will provide a much-needed product for the future employment base.
The Sponsor is a highly experienced, locally based development firm with a substantial track record in the BTR space spanning multiple states including AZ, CO, IN, and TX with plans for further expansion and a robust pipeline set for 2025.
The non-recourse construction loan arranged by the Tower Capital team was structured with multiple attractive features including a rate burn down and an earn out. The rate burn down allows the Sponsor to lower their interest rate spread at final certificate of occupancy. The earn out allows the Sponsor to draw incremental proceeds from the loan once construction is complete and a completed value is proven out. These features allow the Sponsor to lower project expense and increase project returns.
Tower Capital was able to secure the financing despite persistent challenging market conditions. Many lenders halted funding construction loans in recent months as the end of year approached, but Tower was able to get lenders comfortable with the project financing and secure multiple competitive term sheets for its repeat client.
This financing is the latest in a series of successful transactions for Tower Capital in the build-to-rent space. The company has closed approximately $2.0 billion in build-to-rent construction financing and joint venture equity for 44 communities encompassing more than 8,000 units across the country.
