Goldstar Lands $83M Loan To Build Apartments On I-270 Biotech Corridor
A new multifamily project in Frederick has received an $83.7M construction loan as developers look to capture the multifamily demand that the area's booming life sciences cluster has created.
Commercial real estate lender Acres Capital Group provided the loan to developer Goldstar Group to fund the construction and stabilization of the planned Residences at East Church project.
Goldstar Group intends to build five multistory buildings on nearly 15 acres at 605 East Church St. near downtown Frederick. Once completed, the development will add 350 apartments to Frederick's multifamily inventory and 525 parking spaces.
Acres cited Frederick's job market's strength and proximity to Baltimore and Washington, D.C., as market fundamentals underpinning their confidence in the project.
"As home to one of the largest clusters of bioscience companies in Maryland, Frederick County has become a leading biotech and life sciences community," Acres President and CEO Mark Fogel said in a statement. "This county-wide employment growth, coupled with other area demand drivers, fuels the need for quality housing options like the Residences at East Church."
Commercial real estate services firm JLL's most recent Life Sciences Research Outlook and Cluster Rankings placed the combined Baltimore and D.C. region as that industry's No. 4 market nationwide.
The region benefits from robust National Institutes of Health funding that's translated into accelerating venture capital interest, according to JLL. Although, the same researchers found rising venture capital levels have yet to result in remarkably rapid growth.
Additionally, Frederick is located at the northern end of the I-270 life sciences corridor. The corridor, according to CBRE's year-end 2021 report on the market, posted a sub-1% vacancy level with 10.5M SF of supply. Developers expect to deliver nearly 1M SF of new life sciences assets by the end of 2022.
The report found Frederick had 2.2M SF of existing supply, the third-largest pool in the corridor, trailing Gaithersburg's 2.9M SF and Shady Grove's 3.8M SF. High demand for life sciences space resulted in an 8% rent growth year-over-year.
At the same time, Frederick's population has swelled in the last decade. It experienced a 7.3% rise in the number of people living in the county between 2010 and 2021. That population growth outpaces the statewide average of 6.5% during the same period.
Apartments represent an attractive investment in the Frederick area as the cost of buying a home there has steadily increased along with the population. According to online residential real estate firm Redfin, the average cost of a home in Frederick soared to $427K in October, up from $385K in the same month in 2021.
Apartment rents nationwide are expected to slow next year, according to third-quarter 2022 research by Newmark. In D.C. and Baltimore, Frederick's nearest metro areas, apartment rents have increased by roughly 10% in the past year, but Newmark's researchers project rent growth in 2023 to fall to about 6% in Baltimore and to less than 5% in D.C.
Yet rents in Frederick have continued to show strong growth through the end of 2022. The average rent in Frederick, according to Rent.com, ranged from $1,800 per month for a studio to $2,160 for a three-bedroom unit. While annual rent growth fell 14% for studio units, rents increased 8%, 13% and 27%, respectively, for units with one, two or three bedrooms.
