ValueXpress has arranged a $2.4-million CMBS conduit loan for the purchase of a 68-unit apartment complex located in Hartford, Connecticut for $4.0 million. The purchase was part of an IRS Section 1031 tax exchange for the buyer. The property consists of five four-story brick buildings constructed in the 1960s. In 2000, the property was awarded $435,000 in tax credits under Section 42 of the IRS tax code. This was utilized to complete a substantial rehabilitation in exchange for the property providing units and rental rates to low- and moderate-income tenants for a period of 15 years. The compliance period ended in 2016 and the owner elected to sell the property since rental restrictions are no longer required at the property.
The transaction was challenging in that some oil tanks were removed from the property prior to 1992 without any documentation. As a result, the environmental firm called for a Phase II subsurface investigation, including a ground penetrating radar (GPR) survey of the property as well as subsurface sampling in areas where former tanks were suspected to have been present. The seller did not want the buyer to investigate the property, but he would not do the investigation himself. The issue was solved with environmental insurance.
The transaction was structured with a 10-year fixed-rate loan term that is payable based on a 30-year amortization schedule.