Millegan Creek Apartments- Financial Analysis
The Millegan Creek Apartment case is an example of a commercial loan. The parties involved in the commercial loan are JP Multifamily Inc. and Fleet Bank. Real Estate group at Fleet Bank want to find out whether or not to accept JPI’s proposed $15,715,000 loan for a 390-unit apartment project in Austin, Texas. The details about the each party, market and financial analysis of the project is outlined below.
THE BORROWER -JP MULTIFAMILY INC.
The Development Expertise
JPI Multifamily Inc.(JPI) was founded in 1989 by John Carpenter and Frank Miller, who had worked together at Southland Financial. JPI, a first class developer, was known as a “merchant builder” meaning that they developed properties with the intention of selling rather than owning them.
JPI had begun seriously investigate in Austin market in 1991. They purchased their first site in early 1992, which was a “trophy property”, 210-unit project, located in the Southwest part of Austin. The second property JPI purchased in Austin was located in the North Central Area which was a 342-unit project. And, finally the third apartment development in the Austin for JPI would be a 390 unit the Millegan Creek Apartments project.
The investment Strategy
JPI tried to achieve at least a 150 basis point spread between the initial yield and the current market capitalization rates. JPI was seeking development opportunities which provide a going-in cap rate (or cash on cash return) of at least 10% on the total project cost. They had developed approximately 2800 apartment units and 1,640 apartments. This record was in line their investment strategy of targeting a “holding period for development projects of two to three years. In 1994, they had eight properties with 2,700 units under construction, four of which were under agreement to be sold upon completion.
THE LENDER-FLEET BANK
Fleet Bank is being considered as a lender of the project. The Austin Market is a new market for Fleet Bank. Fleet wants to
THE BORROWER -JP MULTIFAMILY INC.
The Development Expertise
JPI Multifamily Inc.(JPI) was founded in 1989 by John Carpenter and Frank Miller, who had worked together at Southland Financial. JPI, a first class developer, was known as a “merchant builder” meaning that they developed properties with the intention of selling rather than owning them.
JPI had begun seriously investigate in Austin market in 1991. They purchased their first site in early 1992, which was a “trophy property”, 210-unit project, located in the Southwest part of Austin. The second property JPI purchased in Austin was located in the North Central Area which was a 342-unit project. And, finally the third apartment development in the Austin for JPI would be a 390 unit the Millegan Creek Apartments project.
The investment Strategy
JPI tried to achieve at least a 150 basis point spread between the initial yield and the current market capitalization rates. JPI was seeking development opportunities which provide a going-in cap rate (or cash on cash return) of at least 10% on the total project cost. They had developed approximately 2800 apartment units and 1,640 apartments. This record was in line their investment strategy of targeting a “holding period for development projects of two to three years. In 1994, they had eight properties with 2,700 units under construction, four of which were under agreement to be sold upon completion.
THE LENDER-FLEET BANK
Fleet Bank is being considered as a lender of the project. The Austin Market is a new market for Fleet Bank. Fleet wants to