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Tower Capital Builds Momentum in Wake of National Build-For-Rent Surge, Hotel-to-Multifamily Conversion Trend

Tower Capital reports it closed nearly $370 million in financing transactions so far in 2021 and is on track to reach $750 million for the year.

The commercial real estate lending activity in H1 2021 was powered by a surge in build-for-rent (BFR) activity as well as increased activity to meet housing demand including conversions of hotels to multifamily housing.

Tower Capital’s principal and co-founder Adam Finkel, CCIM, said, “Tower Capital remains on the leading edge of Phoenix’s exploding commercial real estate market. We continue to see significant activity in the build-for-rent market nationally, an asset class that gained popularity in Phoenix and for which we have another $1 billion of BFR projects in the pipeline. Our results this year also reflect a burgeoning hotel-to-multifamily conversion trend.”

Tower Capital’s 2021 activity encompassed 31 acquisition, refinancing and construction deals including more than 2,800 multifamily units, 800 single-family build-for-rent units, more than 290,000 square feet of industrial space and a robust deal pipeline exceeding $250 million expected to close in the next 60 days. The company participated in a wide array of debt and equity placements across asset classes including multifamily, single-family rentals, hotel and industrial. The most active capital sources so far this year have been debt funds, banks and agency lenders.

Two trends are fueling the CRE sector in Phoenix, which are reflected in Tower Capital’s H1 2021 results. The firm has closed more than $400 million in build-for-rent financing transactions in recent years and continues to be a leader in the marketplace with another $1 billion of projects in the pipeline. The firm’s pipeline of projects spans multiple states including in Arizona, Texas, North Carolina, Alabama, Georgia and Florida.

“Demand for build-for-rent assets continued to expand in 2021 as both Baby Boomers and Millennials found the format attractive. BFR housing allows Boomers to downsize without giving up features and comforts of an owned residence. Millennials appreciate that the larger BFR layouts align with their shift to a more family-style of living,” said Tower Capital principal and co-founder Kyle McDonough. “We also continue to see an increase in conversions of hospitality properties to multifamily housing, a trend that picked up steam because of travel restrictions the past year. There is a robust pipeline of available capital interested in creating value for owners with hotel assets hard hit by impacts of the Covid pandemic.”

Highlights of 2021 include:

  • Arranged a programmatic joint venture with an institutional private equity firm, which resulted in $50 million in financing for three separate single family rental developments. (pictured above)
  • Arranged $21.3 million in acquisition and renovation loans for two hotel-to-multifamily conversions involving a Best Western hotel in Tempe and a Quality Inn Phoenix Airport in Phoenix that will result in 210 new apartment units.
  • Arranged $28 million in acquisition financing for a 276-unit, garden-style apartment community in Glendale, Arizona.
  • Arranged a $15.6 million acquisition and rehab loan for a 74-unit, garden-style multifamily property in the Portland, Ore. suburb of Tualatin.
  • Arranged a programmatic joint venture with an institutional private equity firm, which resulted in $75 million in financing for five separate single family rental developments.

Tower Capital closed more than $400 million in financing transactions in 2020. Tower Capital’s financing activity so far in 2021 has pushed its total loan activity to nearly $2 billion since the independent structured finance firm’s inception in 2015.