Grand Rapids, MI – January 19, 2021 – Red Oak Financial, a Michigan-based commercial real estate finance company, funded a nearly $3 million loan to acquire and renovate the Chesapeake Apartments, a 14-unit apartment community in Washington, D.C. The community is located at 400 Chesapeake SE, in an area where the sponsor already owns more than 20 multifamily properties.
The financing was structured as fixed-rate bridge loan with a 12-month term, with a full return of capital in 6-12 months based on the sponsor’s previous projects and is targeting an IRR exceeding 17%. The financing was used to acquire the asset and provide capital improvements that encompass the conversion of market-rate apartments to affordable housing.
This financing is part of Red Oak’s ESG (Environmental, Social, and Corporate Governance) initiatives. Renovations to the property include converting the existing units into 16-units of three-bedroom housing for the District of Columbia Housing Authority’s (DCHA) Housing Voucher Program. The improvements are expected to bring the appraisal value post-conversion to $4.4 million.
Red Oak’s Gary Bechtel said, “Red Oak is supportive of efforts to create more affordable housing in the D.C. Metro market as well as other similar markets around the country. This is a borrower for whom we have closed multiple transactions and we are confident in their ability to expand the asset via a conversion to three-bedrooms, which will qualify Chesapeake Apartments for DCHA’s Housing Voucher program that currently has a waiting list exceeding 10,500 people.”
Red Oak’s Ray Davis said, “Red Oak is actively looking for real estate lending opportunities that fit ESG guidelines. We are new to incorporating ESG initiatives, however we are excited to do more and believe it’s our responsibility as a successful company.”
The property was constructed in 1952 and consists of one building on a .12-acre site. The unit mix includes floorplans ranging from two to three bedrooms, with residences averaging 700 square feet in size. The property is located near transportation, job centers, parks, schools and shopping.