Continental Properties started construction on 320 apartments in Waukesha after securing lending from a trio of banks, and using money from a real estate investment fund the company created.
That Springs at Meadowbrook project covers 63 acres near Summit Avenue in Waukesha. With rents at $1,400 to $2,500 a month, it will be ready for move-ins by fall 2024, according to Continental Properties of Menomonee Falls.
For the construction loan, Old National Bank led a group that also includes Waterstone Bank and Pyramax Bank. Continental’s senior finance director Dan Sell discussed financing the project under the current lending environment.
“Limited lender appetite for construction loans, strict underwriting standards, and high-interest rates made it particularly challenging to obtain desirable financing terms for the project,” he said. “Ultimately, Continental’s close partnerships with the three banks involved allowed us to secure financing at satisfactory terms.”
That matches the experiences other local apartment developers are describing as they try to borrow money for projects this year. Even though there is demand for the apartments themselves, developers must often rely on established relationships with banks they’ve partnered with before, and say working with the cautious lending industry is a slower process.
Assembling money from multiple banks is becoming more common for large developments. Old National Bank was also among three lenders to an Elm Grove project by Mandel Group Inc. with 237 apartments. In that case, the scale of the project meant the loan amount exceeded any single bank’s current limits.
Each project also requires equity money from the developer group to match the loan. Continental Properties pulled from its Real Estate Development Fund II LP for the Springs at Meadowbrook project.
That is among several funds Continental has created to both finance its developments and acquire and hold them after they are completed and leased. The firm last year reported raising $346 million in four months for the Development Fund II that helped finance the Springs at Meadowbrook.
The Springs at Meadowbrook has townhome style apartments with separate walk-up entrances and attached garages. Erik Hahn, Continental vice president of acquisitions, said those features help set The Springs apartments apart from other recent projects in the Waukesha market.
“Springs at Meadowbrook’s proximity to (Interstate 94) and nearby employment nodes will help generate additional demand,” Hahn said.
Horizon Construction, Madison, is the lead builder for the Springs at Meadowbrook, and Zimmerman Architectural Studios of Milwaukee is its architect.