3650 REIT Provides $35M Construction Loan on Tacoma Rental Building [Updated]
Los Angeles-based investor Cypress Equity Investments and Hoang Quan Group (HQC), a Vietnam-based conglomerate, have scored a $35 million construction loan from 3650 REIT to finally complete the development of a fresh rental building in Tacoma, Wash., Commercial Observer has learned.
The financing will help finish The Hailey, a planned 186-unit multifamily development at 1210 Tacoma Avenue South in downtown Tacoma, just next to the Tacoma Public Library. Rush Commercial Construction is the general contractor on the project.
Matt Fisher of brokerage firm JS Coats Capital originated and arranged the debt for the $50 million project, sources told CO.
“The Hailey’s prime location…made it an especially attractive investment opportunity,” 3650 REIT co-founder and managing partner Jonathan Roth said in prepared remarks. “The development will provide renters with a new option in a market that has seen significant economic growth and an influx of residents over the past several years. We are excited to be expanding our relationship with the city of Tacoma following our recent success financing the Marriott Tacoma Convention Center.”
The debt will help kickstart development on the 7-story property, which had been stalled for more than a year as the development group sought financing to finish the project while also pushing for amendments to its development agreement with the city.
HQC bought the lot from the city in July 2017 for just $750,000, according to a May 2019 report by The News Tribune in Tacoma, and construction stalled a little over a year later.
In May last year, the Tacoma City Council rejected a proposal from the developers to make rents at the building completely market rate, after the developer had first agreed with the city to reserve a portion of the units as affordable. If it had passed, it would’ve permitted a switch from a 12-year multifamily property tax exemption to an eight-year timeline, which doesn’t require any units to be reserved and listed as affordable. The proposal was reconsidered and subsequently approved a week later in the very next council session following appeals from 3650 REIT that it needed the rents to be market rate in order to make the loan, according to Debbie Bingham, the project manager for Tacoma’s Economic Development Services Division.
After deliberations concluded, construction picked back up on Sept. 3, 2019, with an estimated date of completion in the first quarter of 2021, the city announced at the time.
The Hailey — located on a site that used to play host to a parking lot for the Tacoma Public Library — first broke ground in October 2017, with a plan to open in the spring 2019, according to a 2017 report by planning, design and engineering firm AHBL.
“HQC is thrilled to announce the resumption of The Hailey development. We have the best team in town with 3650 REIT as our lender, [Cypress Equity] as our partner, the city of Tacoma, and Rush Commercial Construction as general contractor, and we are excited to see the project come online in 2021,” HQC USA CEO Peter Truong said in a statement.
The property will include five floors of residential space and two levels of subterranean parking as well as two rooftop gardens with space for dining and lounging, according to information released by the city last year as well as commentary from AHBL, which has written on its website that it is providing civil engineering, structural engineering, landscape architecture and land surveying services for this project.
“This development will bring in future mixed-use projects along Tacoma Avenue, filling parking lots and underdeveloped properties where public transit is available and major public institutions such as the Pierce County courthouse, Pierce County administrative offices and Tacoma Public Schools’ headquarters are located,” Ricardo Noguera, who was the Community and Economic Development Director for Tacoma until December 2017 and now serves in a similar role for the city of Cape Coral, Fla., said in a quote used on Rush Commercial’s website.
While rents at the location could not be gleaned, monthly rent listings for nearby properties range from $790 for 485-square-foot studios to around $3,300 for 1,682-square-foot three-bedroom units, according to Apartments.com.
This story was updated to add more information from the city of Tacoma about the approval of the eight-year multifamily property tax exemption timeline that does not restrict a portion of a building’s rents as affordable.