Lyon Lands Large Lease-Up Loans for Two SoCal Properties

By Barbra Murray, Contributing Editor 

Lyon Communities completed construction of The Marke at South Coast Metro and Palomar Station in Southern California in 2014, and now the developer has obtained two loans totaling $166.7 million for the 670-unit Class A portfolio. Lyon, relying on commercial real estate and capital markets services HFF to arrange financing, secured the loans through Freddie Mac’s premiere lease-up program.

Sited on 4.4 acres at 100 E. MacArthur Blvd. in Santa Ana, Orange County, The Marke holds the distinction of being Lyon’s flagship lifestyle community. The building offers 300 residential units housed on five floors above a six-story parking facility, and it was financed with an $88 million, 10-year, 3.32 percent fixed-rate loan.

Palomar, the newest of Lyon’s developments, carries the address of 1257 Armorlite Dr. in San Marcos, roughly 35 miles north of San Diego.  Consisting of 16 three-story buildings, the 370-unit property also features in-line retail space. The residential complex fetched a $78.66 million, 10-year, 3.32-percent, fixed-rate loan.

The Marke and Palomar are 63 and 55 percent occupied, respectively, and they more than fit the bill for the Freddie Mac opportunity. The government-sponsored enterprise’s premiere lease-up program allows an owner of a newly constructed multi-family community with a maximum loan-to-value of 65 percent and a location in a Tier 1 or Tier 2 market to lock in a rate and fund a loan in advance of the asset’s full stabilization. Rate lock requirements call for the property to be at least 40 percent occupied and 55 percent leased. And no credit enhancement is required.

As for fully stabilizing The Marke and Palomar, Lyon shouldn’t have too much trouble. In Orange County, the vacancy rate, spurred by increasingly strong job growth, is forecasted to drop 20 basis points to 3.3 percent in 2015, according to a report by Marcus & Millichap Real Estate Investment Services, and the vacancy rate in metropolitan San Diego is expected to continue to hover at 3.2 percent.