Real Estate

Akara's $19M Refi for Chicago Apartments Amid Tight Lending

Akara Partners secures $19M refinance for River North apartments, contributing an extra $3M amid tight lending conditions.

By Tal Alexander

5/16, 15:20 EDT

Key Takeaway

  • Akara Partners refinanced the Hensley apartments with a $19M loan, adding $3M in equity due to tough lending conditions.
  • The refinancing reflects broader challenges in commercial real estate from high interest rates, despite strong apartment demand.
  • Other Chicago landlords have successfully secured loans recently, highlighting a mixed environment for multifamily property financing.

Navigating the Refinancing Rapids in River North

In a move that highlights the complexities of the current lending environment, Akara Partners has successfully navigated the refinancing of the Hensley, a 43-unit apartment complex in Chicago's River North, albeit with a notable requirement for additional equity. The refinancing, facilitated by an affiliate of Pangea Properties with a $19 million loan, underscores the challenges faced by commercial property owners in securing financing amidst rising interest rates and a volatile market. This scenario, requiring an additional $3 million in equity to refinance the Hensley at 707 North Wells Street, reflects broader market dynamics where even strong rent growth and high demand for apartments cannot fully mitigate the impact of financial market pressures.

The Cost of Refinancing

The refinancing of the Hensley, developed by Akara nearly a decade ago, came at a critical juncture with its previous $22.1 million mortgage from a Greystone affiliate nearing maturity. The necessity to inject an additional $3.1 million in equity to secure the new loan at $441,800 per unit illustrates the tightrope walk many commercial property owners are currently performing. This situation is emblematic of the broader challenges within the real estate sector, where higher interest rates demand significant cash infusions for refinancing efforts, despite the sector's overall robust performance in terms of rent growth and occupancy rates.

A Comparative Look at Chicago's Market

The refinancing ordeal of the Hensley is not an isolated incident in Chicago's real estate market. With $240 million of multifamily debt in Chicagoland watchlisted by lenders, largely due to floating interest rates, the market is a testament to the broader national trend of refinancing challenges. However, success stories like CedarSt's $44 million loan for a 260-unit complex in the West Loop and 312 Properties' $31 million refinancing for the Drexel Apartments near Hyde Park offer a glimmer of hope. These instances demonstrate that while the market is fraught with challenges, strategic financial planning and market positioning can lead to successful refinancing outcomes.

The Broader Implications

Akara Partners' experience with the Hensley provides a microcosm of the current state of the commercial real estate financing market. It highlights the delicate balance between leveraging strong market conditions, such as near-full occupancy rates and high rents, against the backdrop of a stringent lending environment. This scenario is reflective of a broader trend where commercial property owners must navigate increasing financial complexities to secure refinancing, underscoring the importance of equity and strategic financial planning in today's market.