Cohen Financial, a division of SunTrust Bank and a national real estate capital services firm, announced today that it has arranged $13 million construction financing with a regional bank to develop two self-storage properties in the Greater Phoenix. Both properties are multi-level and 100 percent air-conditioned.
Kevin Sellers, director of capital markets in the Cohen Financial Phoenix office, arranged a $6.85 million loan for a 126,700 square-foot self-storage facility in Scottsdale that features drive-through access. He also arranged a $6.15 million loan for a 105,000 square-foot self-storage facility in Chandler.
Both loans have a loan term of four years, adjustable rate based on the 30-day LIBOR index and limited recourse to the operating sponsor after completion of construction. The first three years are interest-only before converting to a 25-year amortization schedule. The borrower entity is a partnership between a self-storage owner/operator, a Phoenix-based investment group and an institutional equity group. The lead sponsor is a long-term client of Sellers. The Scottsdale transaction closed on April 26. The Chandler transaction closed on March 24.
“The self-storage owner/operator has a deep history of building, owning and operating self-storage properties,” said Sellers. “The partnership was formed to build a portfolio of self-storage properties in the Western United States. The Chandler and Scottsdale properties are the first two transactions closed by the partnership.”
After the project reaches stabilization and certain cash-flow performance benchmarks are met, the ownership group can elect to exercise an option to extend the term of the loan with a fixed rate.
“Our ability to arrange the construction loan with limited personal recourse was critical to the lead sponsor. In the current environment, securing commercial construction financing is challenging. We spoke with numerous potential lenders to find the optimal construction and mini-perm debt which met the sponsor’s financing objectives. Most banks are cautious about financing commercial construction projects and are under pressure from regulators to carefully manage their construction loan portfolio,” added Sellers.