Forest City lands $93M refi on massive resi complex near O’Hare

Forest City Realty Trust took out a $92.7 million refinancing on a giant residential complex near O’Hare International Airport.

The new loan from KeyBank will allow the Cleveland-based investment trust to pay off $47 million in old debt on the 1,114-unit Pavilion apartment complex and pull out another $45.8 million in cash, according to Crain’s.

The 10-year, interest-only loan carries a 4.05 percent interest rate. It was packaged with other apartment mortgages to secure a bond offering by Freddie Mac.

In taking out the loan, Forest City is pursuing a strategy growing in popularity among commercial real estate investors in many sectors. It involves refinancing instead of selling, in order to take advantage of rising property values without having to give up an investment property.

Refinancing loans accounted for 61 percent of U.S. loan volume in the first quarter of 2018, up from 45 percent in 2015, according to Real Capital Analytics.

The 50-year-old Pavilion complex at 5441 North East River Road was appraised at $186.2 million, according to a report by Fitch Ratings. It was 90.9 percent occupied in January, according to Fitch, and generated net operating income of $9.1 million over the prior 12 months.

Forest City developed the Central Station residential complex in the South Loop, where it also has two apartment towers.

The company is talking to Brookfield Asset Management about a sale for $25 to $25.50 per share. Three months ago, Forest City rejected a takeover offer of $25 per share from Brookfield and declared it would remain an independent company.  [Crain’s] — John O’Brien