Tower Capital arranged nearly $100 million in construction financing for the development of two Build-to-Rent (BTR) communities, the Village at Borgata in Phoenix and a to-be-named community in Dallas. Tower Capital’s Kyle McDonough, Managing Partner and Co-Founder, George Maravilla, Partner, David Stull, Vice President, and Noah Schott, Capital Advisor, arranged the financing on behalf of two separate sponsors.
McDonough said, “These financings are the latest in a series of successful transactions Tower Capital has arranged in the BTR space. We have closed roughly $2.0 billion in build-to-rent construction financing and joint venture equity for 46 communities encompassing more than 8,000 units across the country.”
The larger of the two projects is Village at Borgata, a 287-unit BTR community being developed by the Empire Group of Companies in Phoenix’s Queen Creek submarket. Tower Capital arranged $70.25 million in non-recourse construction financing via a debt fund. The community will be situated on roughly 27 acres of land at 3959 W. Hunt Hwy in San Tan Valley, with a portion of the site dedicated to amenities such as open recreational space, fitness center, leasing clubhouse, dog parks, and an outdoor walking path.
“The Empire Group is proud to be an industry leader in the build-to-rent space and we are excited to bring another project to the rapidly growing community of Queen Creek,” said Richard Felker, founder of The Empire Group of Companies. “We have worked with Tower Capital on a number of successful loan closings and their team did a great job representing us in this transaction.”
Empire Group is a highly experienced, Scottsdale-based development firm with a substantial track record in the BTR space spanning multiple states including Arizona, Colorado, Indiana, and Texas with plans for further expansion and a robust pipeline set for 2025.
The units at Village at Borgata will feature solid surface quartz countertops, stainless steel appliances, premium kitchen backsplashes, full-size washers and dryers, and upgraded smart-home features and technology. The site is located near the LG battery plant in Queen Creek, which is set to bring thousands of jobs to the immediate area and serve as a significant economic driver for the entire Phoenix MSA. Village at Borgata will provide much-needed housing for the future employment base for LG and its related businesses.
Maravilla said, “The non-recourse construction loan arranged by the Tower team was structured with multiple attractive features including a rate burn down and an earn out. The rate burn down allows the sponsor to lower their interest rate spread at final certificate of occupancy and the earn out allows the sponsor to draw incremental proceeds from the loan once construction is complete. These features allow the sponsor to lower project capital expense and increase project returns. We were able to secure the financing despite persistent challenging market conditions, as many lenders halted funding construction loans leading up to the close of 2024. Tower Capital was able to get lenders comfortable with the project financing and secure multiple competitive term sheets for Empire Group, who we have arranged financing for 15 projects previously.”
The second transaction involves $29.5 million in non-recourse construction financing for a 118-unit build-to-rent townhome community being developed by a Dallas-based multifamily and BTR/SFR development and investment firm. The community will be situated on roughly 15.5 acres of land, with a portion of the site dedicated to amenities such as open recreational space and an outdoor walking path. The site is situated in Melissa, TX just north of Dallas proper, immediately off Sam Rayburn Highway (SH-121), and within a short distance of US-75.
Each home will have an average unit size of 1,655 square feet and will offer private patios or yard space. The overall community will also offer a swimming pool, clubhouse, fitness center, BBQ area, playground, and pickleball courts. In-unit features consist of LVP flooring, solid surface counters, stainless steel appliances, recessed lighting, flat pane cabinets, large windows, two-car attached garages, smart home tech, and EV chargers. The spacious three-bedroom units with attached garages and dense amenity base are expected to appeal to an array of potential residents.
McDonough said, “Due to its proximity to Dallas and other key surrounding submarkets experiencing significant job growth and net migration, Melissa is strategically situated in the heart of one of the fastest growing counties in the nation. The area has experienced a nearly tenfold increase in population in the past 20 years and is expected to grow 11% over the next five years, outpacing the forecasted growth of 4% for the overall Dallas market.”
The sponsorship group is an established, local investment firm with a strong presence in the North Dallas area through the development and investment in a range of multifamily properties, including apartments and townhomes. The sponsor has participated in transactions spanning more than 2,400 units, with acquisitions of exceeding $380 million in Texas, Florida and Georgia.
Maravilla said, “The non-recourse financing arranged by the Tower team via a debt fund for the project in Melissa provides the sponsor with pricing well inside of the competitive set with an attractive floor rate, allowing the sponsor to benefit in accordance with the downward trajectory of one month term SOFR throughout the construction period.”
