KeyBank is making a $250 million construction loan for apartment projects in five cities in the West and Southwest.

The two-year revolving credit facility for Simpson Housing LP, a Denver- based developer, will allow the company to develop 11 apartment projects with a total market value of more than $400 million.

Simpson is providing $112 million of its own equity for the projects, which broke ground earlier this year in Dallas, Denver, Phoenix, Portland, Ore., and Seattle.

Each has a 36-month note, so the developer has three years from the start date to complete the project.

Market sources said the pricing on the loan was competitive, and based on a performance matrix.

As the project moves from construction, to certificate of occupancy, to stabilization, the pricing falls along with the risk.

"Multifamily is a very competitive property sector, and margins are continuously under pressure," said George Emmons, executive vice president of Key Commercial Real Estate. He said he was pleased to be involved in the Simpson project.

KeyBank acted as administrative and syndication agent on the loan, and the Cleveland-based lender is holding a $75 million portion of it.

Managing co-agents included Fleet Bank and Guaranty Federal, which each bought $50 million pieces of the loan, and First Chicago NBD, which bought $25 million.

Co-agents were BankBoston Corp., which bought a $30 million piece and Colorado National, which bought a $20 million portion.

The facility was warmly received in the bank market, and about 15% oversubscribed, according to those involved in the transaction.

Indeed, real estate sources say that lending to multifamily projects has become particularly competitive as banks have swarmed back into real estate.

"There are only a finite number of transactions that are safe enough," said one real estate expert, adding that bankers are jockeying for assignments in which they can find the assurance that the developer can finish the project, that the project will retain its value, and that the interim financing will be replaced by permanent financing.

The markets in which Simpson is building have been thriving.

Due to the influx and expansion of high-tech companies in the area, particularly in Seattle and Portland, Ore., there has been significant population growth.

"There's a lot of growth in that area, but the bad news is there are an awful lot of multifamily projects, too," said Gary Griff, a director of real estate finance in the Pacific Northwest, at Cushman & Wakefield. "There is some vacancy, but we expect it to be absorbed very quickly."

In both Washington and Oregon, vacancy rates have hovered around 5% for the last four to five years, and rents have been escalating more than 5% annually for the last two or three, Mr. Griff said.

Lending to multifamily real estate is "relatively safe," but "overbuilding is overbuilding," Mr. Griff added. "But since leases are typically six to 12 months long, there can be a quick adjustment if a market gets saturated."

Jerome Siegman, Simpson's chief financial officer, said that though he discussed the loan with many major real estate banks, they went with Key because of the bank's "experience with larger developers," and their ability "to tailor their product to meet our needs in an extraordinarily creative way."

"Key also put together a very strong group of banks with national exposure for us," Mr. Siegman added."We've always had an excellent relationship with all our lenders, now we have the ability to deal with banks nationwide.

"Also, Key has a substantial presence in three of our key markets: Denver, Seattle, and Portland."

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