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OVERVIEW

A Five-Year Loan Life That Tested Every Tool in RRA's Playbook

This deal began in December 2020 as a straightforward value-add acquisition in Montgomery, Alabama. It ended in May 2026 with a clean agency refinance and a fully stabilized 200-unit community. What happened in between is a case study in proactive asset management, creative structuring, and the practical value of deep borrower relationships.

When the original business plan ran into severe headwinds from rising interest rates, RRA did not sit back and watch a loan deteriorate. Instead, the team identified a trusted, market-experienced operator within their existing borrower network, negotiated a consensual ownership transfer, and restructured the loan to give the incoming sponsor the capital and runway to finish the job. Within 11 months, the property was above 95% occupancy and refinanced out of the bridge loan entirely.

THE PROPERTY

200 Units on 14 Acres in East Montgomery

Built in 1977, the property consists of 200 apartments spread across 25 two-story residential buildings on 14.39 acres in the Woodmere neighborhood of East Montgomery. The unit mix includes 96 one-bedroom, 72 two-bedroom, and 32 three-bedroom apartments, with amenities including a clubhouse, fitness center, laundry facilities, pool, and grill area.

At origination, the property had significant deferred maintenance. Thirty-three units were offline due to drainage and structural issues and occupancy stood at 82%. The investment thesis was straightforward: fix the physical plant, renovate the interiors, bring rents up to market, and exit to Fannie Mae or Freddie Mac financing once stabilized.

The property sits near the intersection of I-85 and Eastern Blvd., providing easy access throughout the city. Its location near Auburn University at Montgomery and major employers including Hyundai's manufacturing plant anchors the rental demand base.

THE ORIGINAL LOAN

A $9.66MM Acquisition Bridge with a $2.9MM CapEx Component

RRA originated a $9,660,000 first-position bridge loan in December 2020, funding the $9,150,000 acquisition and a $2,900,000 capital expenditure program. The CapEx budget covered structural and drainage remediation for the 33 down units, interior renovation of 107 additional units, electrical upgrades, exterior improvements, and amenity enhancements including a refreshed pool, dog park, and updated common areas.

The plan was to stabilize the property over 18 to 24 months and execute a refinance with an agency lender. At origination, this was a well-underwritten value-add play in a supply-constrained submarket with limited new construction and stable rental demand.

THE CHALLENGE

A Rate Environment That Changed the Math

The loan was originated prior to the most aggressive rate-hiking cycle in a generation. Beginning in 2022 and continuing through 2023, the Federal Reserve raised rates at a pace that materially increased borrowing costs across the market. For the original sponsor, the combination of higher debt service and capital constraints made it increasingly difficult to fund the remaining business plan and support the property through to stabilization.

By early 2025, the asset had become distressed. The loan had matured in December 2024. The original sponsor was no longer in a position to complete the work needed to bring the property to a refinanceable state.

RRA'S RESPONSE

Proactive Asset Management and a Consensual Path Forward

Rather than move toward enforcement, RRA's asset management team took a proactive approach: identify a capable replacement operator and negotiate a transaction that would preserve loan performance and give the property a genuine path to stabilization.

RRA leveraged its existing borrower relationships to identify an experienced multifamily operator with deep expertise in the Montgomery market as the incoming sponsor. The team negotiated a consensual ownership transfer that worked for both the outgoing and incoming parties, avoiding a prolonged foreclosure process and its associated costs and delays.

The loan modification closed in May 2025. The maturity was extended to May 19, 2026, and the loan balance was increased by approximately $2,540,000 to $12,000,000, with $1,000,000 earmarked specifically for deferred maintenance and capital improvements needed to stabilize operations. At closing, the loan was brought fully current and remained current throughout the remainder of the term.

EXECUTION

Sub-80% to 95%+ Occupancy in Under a Year

The incoming sponsor moved quickly. With deep familiarity in the Montgomery multifamily market, the team executed a focused program of targeted renovations, operational improvements, and accelerated leasing. Occupancy climbed from the sub-80% range at transfer to greater than 95% in a matter of months.

That level of stabilization unlocked the exit the original business plan had always anticipated: agency financing. The incoming sponsor achieved a cash-neutral refinance through a permanent lender within approximately 11 months of acquiring the asset, retiring RRA's bridge loan in full as of May 1, 2026.

TRANSACTION TIMELINE

Dec 2020

RRA originates $9,660,000 acquisition bridge loan

2022 – 2023

Federal Reserve rate hikes materially increase debt service costs for original sponsor

Early 2025

Asset becomes distressed; original sponsor unable to complete business plan

May 2025

RRA negotiates consensual ownership transfer to incoming sponsor; loan modification closes, balance increased to $12MM with $1MM reserved for deferred maintenance and capex

Mid 2025

Incoming sponsor executes targeted renovations and accelerated leasing; occupancy climbs from sub-80% to above 95%

May 2026

Loan pays off via agency/permanent refinance within ~11 months of acquisition