Financing commercial real estate in Alaska: seller's market takes hold.

• Author: Barbour, Tracy
• Position: FINANCIAL SERVICES

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Anchorage developer Glenn Gellert of Trapline LLC does more than just develop housing; he helps create affordable homes. Gellert, along with co-developer John McGrew and Volunteers of America, recently opened the first phase of Trailside Heights in South Anchorage.

The first stage of the affordable housing development features sixty-six two-and three-bedroom townhome style units. Amenities include washer and dryer hookups, single-car garages, recreation areas, a business center, computer lab, clubhouse, meeting room, community room, exercise facility, and on-site management.

Trailside Heights wouldn't have been possible without a grant from the Rasmuson Foundation and loans from Wells Fargo bank and Alaska Housing Finance Corporation (AHFC). Wells Fargo supplied Gellert with a much-needed $16 million construction loan. "Wells Fargo was very accommodating because the appraisal came in at a particular amount that translated into a loan amount that was less than what we needed," Gellert says. "But Wells Fargo adjusted its underwriting standards."

AHFC provided two permanent loans for the project: a first loan at a market rate of 6.5 percent with a thirty-year amortization and a "soft" second loan at a reduced interest rate of 1.5 percent with a flexible payment plan. The monthly payment is based on a percentage of the available cash flow after all expenses have been paid. "Getting flexible permanent loans is important to making these deals work," Gellert says. "Alaska Housing is good at providing what developers need."

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Gellert is also working with AHFC and Wells Fargo on the financing for the second phase of the Trailside project. It will include twenty additional units and is slated for completion in 2014.

Financing Options and Sources

Gellert is among the Alaskan borrowers who are taking advantage of commercial real estate loans. Commercial real estate generally constitutes any type of property used for business or investment purposes. It includes everything from affordable housing, like Gellert's Trailside project, to office buildings, retail space, restaurants, and car washes. In Alaska, commercial properties also involve multi-family housing, warehouses, hotels, medical facilities, marinas, and even cruise ship docks.

Commercial real estate falls into three main categories: owner-occupied, nonowner-occupied/investor (office, warehouse, and multi-tenant), and multifamily housing. Prospective...