Lincoln refinances $112.5M through Fannie Mae

Lincoln Towers, the eight-building, 4,000-unit cooperative community on Manhattan's Upper West Side, announced that is has closed a landmark $112.5 million, 10-year refinancing.

One of the largest real estate cooperative refinancing ever, the transaction is the first of its kind supporting mortgage-backed securities guaranteed by the Federal National Mortgage Association (Fannie Mac).

"By tapping the capital markets through this very unusual transaction, the cooperatives have cut one to one-and-a-half percentage points from what a conventional mortgage financing would cost," said Paul R. Alter, a partner at Jones, Day, Reavis & Pogue, the law firm representing the cooperatives. "The reduced carrying costs ensure a strong financial outlook for the community over the next ten years and should greatly enhance the financial stability of this community and the value of individual cooperative apartments."

The refinancing, which closed December 15, consists of a package of eight separate loans to each of the cooperatives. Proceeds were used by the cooperatives to refinance their existing underlying mortgages, which included in each case a first mortgage held by The Aetna Life Insurance Company of Hartford, Connecticut and a second wrap-around mortgage held by the cooperatives' sponsor, a partnership consisting of the New York City developer Mendik Realty and The Equitable Life Assurance Society of New York.

The new loans carry 'an interest rate of 7.325 percent per annum, a significant reduction from the 9 percent rate under the previous financing and well below market rates available in a conventional mortgage financing. The loans are for ten years with amortization based upon a 30-year schedule.

The loans are intended to be backed by a guarantee from Fannie Mae and will be supported by securities to be issued by Fannie Mac. GMAC Mortgage Company of Pennsylvania will act as record owner of the mortgages and as servicing agent for Fannie Mac.

The transaction is the first instance of a group of cooperatives participating in a Fannie Mac enhanced mortgage-backed securities transaction to obtain terms significantly more favorable than are available to individual cooperative buildings from traditional lending sources.

Stephen L. Rabinowitz of Jones Day worked with Alter to represent the cooperatives in this transaction.

Nell Kreisel of Kreisel Company, Inc. acted as the principal representative of the cooperatives in negotiating the business terms of the transaction. Kreisel, whose company manages seven of the eight buildings, conceived of pre-paying the existing loans to take advantage of the current favorable rate environment and was instrumental in structuring the transaction both with the existing lender and the new lender.

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