Tryko Partners acquired Peninsula Grove in Hampton, Va., with intentions to do a value-add rehab.

When Chad Buchanan and the team from Tryko Partners were seeking financing for an acquisition-rehab deal, it garnered significant interest.

The plan to do a value-add upgrade to a 580-unit property located in Hampton, Va. struck a chord with lenders across the spectrum: conduit lenders, banks, life companies, and agency lenders. The Brick, N.J.-based company ended up with a dozen proposals, most of which were for full asking proceeds, Buchanan, chief investment officer, says.

“We went with who gave us the best terms and who we were the most comfortable with from a transaction point of view and that was Prudential,” he says.

Since finding a lender wasn’t difficult for this particular rehab deal, the company was able to land what Buchanan feels were pretty great rates. However, that wouldn’t have been the story about three years ago.

“There’s no question that in 2011 the financing probably would have looked a bit different,” he says. “I’m not sure that any deals wouldn’t have been done, but the best were getting done through balance-sheet lenders and certainly not at attractive rates and terms.”

In order to sell the idea and verify their track record, Buchanan’s team brought along a similar story of an acquisition-rehab project from 2011, when new construction had ground to a halt and developers were focusing on renovations.

The company closed the 2011 deal for a Baltimore property that was in foreclosure and was about 80 percent occupied. After renovating 250 units at about $12,000 per unit, the property is 95 percent leased today.

This story was something the company could use to help sell their credibility to current lenders for the Hampton deal.

“Obviously every property is different,” Buchanan says. “But the general business plan is very similar.”

The team has significant renovation plans for this current property and will invest about $8.5 million into the Hampton property, putting about $14,000 in each unit. Tryko tends toward more significant rehabs than modest ones.

“We’re not really the kind of company, honestly, that wants to buy into a story of spending a couple of grand per unit so you can get a $20 rent bump,” he says. “Not only do we find that those value-add stories don’t wind up materializing, these types of investments are a little bit more appealing to us.”

And  lenders are increasingly seeking new construction and rehab deals in today's market.

"For the right project at the right price for the right borrower," Buchanan says, "there is zero problem financing acquisition-rehabs and transitional deals."

Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.