Property Type Storage
Date May 9, 2023
Four Property Upleg Completes Strategic 1031 Exchange with Assets in Tennessee and Florida; Gantry’s Correspondent Life Company Lenders Continue to Favor Self Storage Asset Class
Irvine, Calif. – Gantry, the largest independent commercial mortgage banking firm in the U.S., has secured a total of $40 million of financing for the acquisition of four self storage facilities (in separate transactions) as the upleg for a strategic 1031 exchange. The portfolio includes three assets in Tennessee and one in Florida, encompassing a total of 286,000 rentable square feet. The assets were assembled in a series of individual acquisitions requiring unique loans in both permanent, bridge and hybrid structures to optimize each financing.
“Gantry has cultivated an expertise in financing self storage assets over the past decade while continuing to educate our correspondent life insurance companies on modern, state-of-the-art deal structures for this specialized asset class,” said Gantry Principal Andy Bratt. “These assets were financed over a period of months during what has truly been one of the most volatile rate climates in a decade, highlighting our platform’s stability and certainty of close provided by our life insurance company lenders. Our creative approach to the acquisitions was critical in completing all four of these transactions in a timely manner.”
Gantry’s Bratt and Amit Tyagi, Senior Director, with the firm’s Irvine and Los Angeles production offices, respectively, secured the loans on behalf of the borrower, a multi-generational private family. All four fixed rate loans were secured from Gantry’s roster of correspondent life company lenders. Two of the loans were for permanent loans of 7- and 12-years, each with significant interest only periods. Two of the loans were bridge loans, also done through a correspondent life insurance company, featuring extension options and an interest only period. Andy and Amit have been on the forefront of creating a “structured perm” program, using concepts from other asset classes, with the Life Insurance Companies over the past handful of years to enhance their clients’ financing strategies.
“On these assignments, we reviewed each loans requirements against programs from more than 100 lenders to ensure we optimized the financing for each asset’s unique business plan,” said Gantry’s Tyagi. “This included sourcing quotes from banks, debt funds and CMBS sources, as well as life insurance companies, with the latter uniquely positioned in this cycle to provide attractive terms. The deeply inverted yield curve at the time of financing posed a unique challenge. All the assets had some level of lease-up to be achieved, but the yield curve inversion made short-term traditional bridge financing very expensive. Further, the Fed was rapidly raising interest rates making floating rate bridge loans unattractive. We were able to structure each loan with a fixed rate execution. Two of the loans were permanent loans, structured to accommodate lease-up, that provided rates in the high 5% to low 6% range and staggered maturities to help offset future refinance risk. We were proud of finding stable executions that were very well suited to the Sponsor’s business plans during an extremely unstable market.”
The assembled portfolio includes the following properties: