Capital Square, one of the nation's leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, and Greystar, a leading global development, investment, and property management firm, announced today that the company has secured $76.5 million of fixed-rate, permanent financing on behalf of the Otis, a 350-unit mixed-use multifamily development in the Scott's Addition opportunity zone in Richmond, Virginia.  

"We are pleased that Capital Square has closed on a permanent loan for the Otis and has made a special distribution to investors," said Louis Rogers, founder and co-chief executive officer of Capital Square. "This represents another major milestone in completing Capital Square's opportunity zone strategy of using a construction loan and investor equity to develop the Otis as an excellent Class A residential community, leasing the property with a view to stabilization, refinancing the construction loan with a permanent loan and distributing excess loan proceeds to investors several years before their taxes are due in 2026. This is a phenomenal result for investors despite unprecedented inflation, interest rate volatility and shortages of labor and material."

The Otis development is a joint venture among Capital Square and Greystar, the largest manager of multifamily properties in the world and one of the largest developers of multifamily units in the nation.

"This has been a challenging process with capital markets in disarray and the ten-year treasury at its highest level in sixteen years," said Whitson Huffman, co-chief executive officer of Capital Square. "Capital Square leveraged an existing relationship with NY Life Insurance Company to secure the permanent loan. As a result, investors in this project-specific opportunity zone fund will receive distributions that total approximately 33% of their invested equity."

In less than four years, Capital Square and Greystar planned, constructed, permanently financed and leased 81% of the apartments at the Otis. Rents being collected are among the highest in the market on a per-square-foot basis. The Otis has been delivered on budget, despite construction cost volatility and procurement challenges and has been exceptionally well received in the market.

The context is important. Capital Square's finance team was concerned that capital markets were highly volatile and that interest rates could increase dramatically before closing. Therefore, Capital Square executed an early interest rate lock at 6.32%. The strategy paid off when the 10-year treasury rate rose dramatically, saving investors over $3,300,000 in mortgage payments over the life of the loan.

Capital Square's opportunity zone strategy is to use special distributions to provide investors with funds to pay the taxes due in 2027 on their deferred gains as provided by the Tax Cuts & Jobs Act of 2017. This is Capital Square's fourth opportunity zone fund to make special distributions years in advance of the tax due date.

Since its formation in 2012, Capital Square has raised more than $3 billion in equity from investors for its tax-advantaged real estate investment offerings. The company has consistently ranked as one of the leading sponsors of Delaware statutory trust (DST) investment programs for investors seeking the advantages of Internal Revenue Code Section 1031 exchanges and is also an active sponsor of qualified opportunity zone funds, development LLC's and Capital Square Apartment REIT, a real estate investment trust that invests in multifamily communities throughout the Southeast.